Edgar Filing: MOSAIC CO

Form 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended May 31, 2006

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-32327

LOGO

The Mosaic Company

(Exact name of registrant as specified in its charter)

Delaware

20-0891589

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

3033 Campus Drive

Suite E490

Plymouth, Minnesota 55441

(800) 918-8270

(Address and zip code of principal executive offices and registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on which

registered

Common Stock, par value $0.01 per share

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one): Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of November 30, 2005, the aggregate market value of the registrant’s voting common stock held by non-affiliates was approximately $1.77 billion based upon the closing price of these shares on the New York Stock Exchange.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock: 437,310,048 shares of Common Stock, par value $0.01 per share, as of July 24, 2006.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement to be delivered in conjunction with the 2006 Annual Meeting of Stockholders (Part III)

2006 FORM 10-K CONTENTS


Part I:		Page

Item 1.	Business	1

	• Company Profile	1

	• Business Segment Information	4

	• Sales and Marketing Activities	21

	• Competition	23

	• Factors Affecting Demand	24

	• Other Matters	25

	• Executive Officers of the Registrant	26

	• Glossary of Industry Terms	29

Item 1A.	Risk Factors	32

Item 1B.	Unresolved Staff Comments	44

Item 2.	Properties	44

Item 3.	Legal Proceedings	44

Item 4.	Submission of Matters to a Vote of Security Holders	44

Part II:

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	45

Item 6.	Selected Financial Data	45

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	46

Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	46

Item 8.	Financial Statements and Supplementary Data	46

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	46

Item 9A.	Controls and Procedures	46

Item 9B.	Other Information	52

Part III:

Item 10.	Directors and Executive Officers of the Registrant	53

Item 11.	Executive Compensation	53

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	53

Item 13.	Certain Relationships and Related Transactions	53

Item 14.	Principal Accounting Fees and Services	53

Part IV:

Item 15.	Exhibits and Financial Statement Schedules	54

Signatures		S-1

Exhibit Index		E-1

Financial Table of Contents		—

PART I.

Item 1. Business.

COMPANY PROFILE

The Mosaic Company is the largest producer of phosphate and potash combined, as well as a nitrogen and animal feed supplier. The Mosaic Company is characterized by broad diversification, global reach and market expertise. The Mosaic Company is a Delaware corporation that was incorporated on January 23, 2004 in order to serve as the parent company of the business that was formed through the business combination (Combination) of IMC Global Inc. and the fertilizer businesses of Cargill, Incorporated on October 22, 2004. In this report:

•

“Mosaic” means The Mosaic Company.

•

“We,” “us” and “our” mean Mosaic and may also include Mosaic and its direct and indirect subsidiaries as a group.

•

IMC Global Inc. is referred to as “IMC.”

•

“Cargill” means Cargill, Incorporated and may also include its direct and indirect subsidiaries other than us.

•

“Cargill Crop Nutrition” or “CCN” means the fertilizer businesses of Cargill other than its retail fertilizer businesses.

•

References in this report to a particular fiscal year are to the year ended May 31 of that year.

We have included a glossary of industry terms at the end of this description of our business.

Immediately following the Combination, our stock was held as follows:

•

Cargill owned approximately 66.5% of our outstanding common stock and all 5,458,955 shares of our Class B Common Stock; and

•

The remaining 33.5% of our outstanding common stock and all 2,750,000 shares of our 7.50% Mandatory Convertible Preferred Shares were publicly held.

On July 1, 2006, the outstanding Convertible Preferred Shares were automatically converted into a total of 17,721,000 shares of our common stock and the outstanding shares of our Class B Common Stock were automatically converted into a total of 35,177,450 shares of our common stock. As a result of these conversions and other issuances by us of our common stock since the Combination, as of July 1, 2006, Cargill owned approximately 65.3% of our outstanding common stock.

Our Businesses

We conduct our business through wholly and majority owned subsidiaries as well as businesses in which we own less than a majority or a non-controlling equity interest. We are organized into four business segments that are engaged in producing, blending and distributing crop nutrient and animal feed products around the world.

Our Phosphates business segment, which we refer to as Phosphates, operates four mines and four concentrates plants in Florida that produce phosphate fertilizer and feed phosphate, and two concentrates plants in Louisiana that produce phosphate fertilizer. Phosphate fertilizer and feed phosphate are sold internationally and throughout North America. Phosphates also includes North American phosphate distribution activities for us and for unrelated parties.

Our Potash business segment, which we refer to as Potash, mines and processes potash in Canada and the United States. We have four mines in Canada within the Province of Saskatchewan and two in the United States located in New Mexico and Michigan. Each mine has related facilities that refine the mined potash. Potash is sold internationally and throughout North America, principally as fertilizer. Potash also includes North American potash distribution activities for us and unrelated parties and our own potash export activities.

Our Offshore business segment, which we refer to as Offshore, consists of sales offices, fertilizer blending and bagging facilities, port terminals and warehouses in several countries as well as production facilities in Brazil, China and Argentina. Our operations in Brazil make us one of the largest producers and distributors of blended fertilizers in that country. Our Brazilian operations include a one-third ownership in Fertifos S.A., which we refer to as Fertifos. Fertifos, in turn, owns 55.98% of Fosfertil S.A., which we refer to as Fosfertil. Fosfertil operates phosphate and nitrogen processing plants in Brazil. In China, we have a 35% equity ownership in a diammonium phosphate (DAP) granulation plant near Kunming in the Yunnan Province. We commenced operation of a granulated single superphosphate (GSSP) plant, located by our port facility in Quebracho, Argentina during the first quarter of fiscal 2007.

Our Nitrogen business segment, which we refer to as Nitrogen, includes activities related to the North American distribution of nitrogen products which are marketed for Saskferco Products Inc. (Saskferco), a Saskatchewan-based corporation, as well as nitrogen products purchased from third parties, and sold primarily through our owned or leased distribution facilities. Nitrogen also includes results from our 50% ownership interest in Saskferco. Saskferco produces anhydrous ammonia, granular urea, feed grade urea and urea ammonium nitrate (UAN) solution for shipment to nitrogen fertilizer customers in Canada and the northern tier of the United States.

Markets

Nitrogen, phosphorus and potassium are the three primary crop nutrients required for plant growth. Nitrogen is required for the formation of chlorophyll – the green substance that powers photosynthesis – and also is an essential element in amino acids, the building blocks for plant protein. Phosphorus plays a key role in photosynthesis, respiration, energy storage and transfer, cell division and other important plant processes and is particularly important for early root development and seed formation. Potassium is critical for plant metabolism and helps plants break down carbohydrates, resist or recover from diseases and efficiently utilize water. There are no substitutes for nitrogen, phosphorus and potassium.

Plants utilize large quantities of the three primary nutrients and soils quickly become depleted if these nutrients are not replenished after each harvest. As a result, farmers apply nitrogen, phosphorus and potassium to their land each year in order to replace the nutrients removed by crops and maintain soil fertility. The three primary nutrients are contained in more than a dozen widely used commercial fertilizer products just like carbohydrates, protein and fat are found in a variety of foods. The form of these fertilizer products differs significantly from natural gas to liquid to solid granules.

Each primary nutrient is a unique commodity and represents a separate market. The production of each primary nutrient utilizes different raw materials and processes. Nitrogen fertilizer is manufactured from a hydrocarbon feedstock such as natural gas. Phosphorus fertilizer is produced from phosphate rock, a mineral ore found in both marine sedimentary deposits as well as igneous formations. Potassium fertilizer also is produced from a mineral ore that is contained either in deposits below the surface of the earth or in natural brines such as those from the Dead Sea or the Great Salt Lake.

The natural resources required for the production of these nutrients are concentrated in different regions of the world. As a result, nutrient markets are global markets, and international trade accounts for a relatively high percentage of world use. In addition, fundamentals may differ markedly between nutrient markets depending on changes in relative raw materials costs as well as other factors such as economic, agricultural, industrial and trade policies in importing and exporting countries.

Population and income growth are the fundamental drivers of nutrient demand. Developing countries, particularly those in Asia and Latin America, are forecast to account for nearly all of the growth in world nutrient demand during the foreseeable future. Rapid per capita income growth in countries such as China and India is boosting food demand and ultimately nutrient use. Most developed regions such as North America and Europe are mature nutrient markets. However, the dramatic growth in bio-fuels production in the United States, Europe and elsewhere is expected to result in moderate crop nutrient demand growth over the next decade even in these large and mature markets.

Nutrient markets are global commodity markets and industry players compete based on delivered cost and to a lesser extent on differentiated customer service. Cost is a function of ore quality, mining and chemical processing technologies, raw materials sourcing, transportation rates, logistical infrastructure and operating practices and efficiencies.

Recent Developments

On December 1, 2005 and March 31, 2006, we closed previously announced transactions with U.S. Agri-Chemicals Corporation (USAC) and its parent company, Sinochem Corporation, comprising a global resolution of various commercial matters and disputes existing among the parties. We refer to these transactions as the USAC Transactions. We have included additional information regarding the USAC Transactions in Note 22 of our Consolidated Financial Statements that are included in this report in Part II, Item 8, “Financial Statements and Supplementary Data.”

On May 2, 2006, we announced the restructuring of the Phosphates business segment. This included the indefinite closing of three facilities in Florida, including our Fort Green phosphate rock mine, South Pierce’s granular triple superphosphate (GTSP) concentrates plant and Green Bay’s DAP/MAP concentrates plant in May 2006. We refer to these closures as the Phosphates Restructuring. The operations at these facilities ceased as of May 31, 2006. We have included additional information regarding the Phosphates Restructuring in Note 24 of our Consolidated Financial Statements that are included in this report in Part II, Item 8, “Financial Statements and Supplementary Data” and in the Management’s Discussion and Analysis of Financial Condition and Results of Operations that is included in this report in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We have included additional information about developments in our business during the 2006 fiscal year in the Management’s Discussion and Analysis of Financial Condition and Results of Operations that is included in this report in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Financial Information about our Operating Segments and Operations by Geographic Areas

We have included financial information on our operating segments and our operations by geographic area in Note 26 of our Consolidated Financial Statements that are included in this report in Part II, Item 8, “Financial Statements and Supplementary Data.”

Information Available on our Website

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments thereto, filed with the United States Securities and Exchange Commission, which we refer to in this report as the SEC, pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder are made available free of charge on our website, (www.mosaicco.com), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information contained on our website is not being incorporated in this report.

Basis of Information in our Financial Statements and this Report

Under generally accepted accounting principles, our financial statements that are included in our annual report to stockholders and information that was derived from the audited financial statements generally include the combined operations of the businesses acquired from CCN and IMC beginning October 23, 2004, but for periods prior to October 23, 2004 include only the businesses acquired from CCN and exclude the businesses acquired from IMC. In contrast, the operating and statistical measures in the remainder of Part I, Item 1, of this report generally reflect operations of the combined businesses on a proforma basis for the entire periods presented. These operating and statistical measures include information primarily related to unit volumes for production, sales and raw materials purchases.

BUSINESS SEGMENT INFORMATION

The discussion below of our business segment operations should be read in conjunction with the following information that we have included in our annual report to stockholders:

•

The Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our annual report to stockholders. This information is included in this report in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

•

The financial statements and supplementary financial information in our Consolidated Financial Statements. This information is included in this report in Part II, Item 8, “Financial Statements and Supplementary Data.”

Throughout the business segment information below, we measure units of production, sales and raw materials in tonnes. When we use the word “tonne” or “tonnes,” we mean a metric tonne or tonnes of 2,205 pounds each unless we specifically state than we mean short or long ton(s).

Phosphates

We produce phosphate fertilizer and feed phosphate which are used in crop nutrients and animal feed ingredients. The principal raw materials used in the production of concentrated phosphates are phosphate rock, sulfur and ammonia.

Phosphate Concentrates

We are the largest producer of concentrated phosphate fertilizer and animal feed ingredients in the world. We have capacity to produce approximately 4.9 million tonnes of phosphoric acid (P₂O₅) per year following our Phosphates Restructuring, or about 12% of world capacity and 46% of U.S. capacity. Our phosphoric acid is produced by reacting finely ground phosphate rock with sulfuric acid. Phosphoric acid is the key building block for the production of high analysis or concentrated phosphate fertilizer and animal feed products, and is the most comprehensive measure of phosphate capacity and production. Our phosphoric acid production totaled approximately 4.3 million tonnes during the fiscal year ended May 31, 2006, accounting for approximately 14% of global production and 47% of U.S. phosphoric acid output last year.

Our principal phosphate fertilizer products are:

•

Diammonium Phosphate (DAP). DAP is the most widely used high-analysis phosphate fertilizer worldwide. DAP is produced by combining phosphoric acid with anhydrous ammonia. This initial reaction creates a slurry that is then pumped into a granulation plant where it is reacted with additional ammonia to produce DAP. DAP is a solid granular product.

•

Monoammonium Phosphate (MAP). MAP is the second most widely used high-analysis phosphate fertilizer and the fastest growing phosphate product worldwide. MAP also is produced by first combining phosphoric acid with anhydrous ammonia in a reaction vessel. The resulting slurry is then pumped into the granulation plant where it is reacted with additional phosphoric acid to produce MAP. MAP also is a solid granular product.

In addition, prior to the Phosphates Restructuring, we produced Granular Triple Superphosphate (GTSP). GTSP is the third most widely used high-analysis phosphate fertilizer worldwide. Unlike DAP and MAP, it contains no nitrogen and is used mostly on crops such as legumes that require little or no nitrogen. GTSP is produced by reacting or neutralizing phosphoric acid with additional high-grade phosphate rock and then granulating the resulting slurry into a solid fertilizer product. Following the Phosphates Restructuring, we will no longer produce GTSP but will source our needs from other third party producers.

Our DAP and MAP products include MicroEssentials^™ (ME), which is a value-added DAP or MAP product that features a patented process that creates very thin platelets of sulfur and other micronutrients on the product. Over time, these sulfur platelets break down in the soil and are absorbed by plants. In addition, micronutrients such as boron, copper, manganese, and zinc can be added in separate but parallel processes.

Our concentrated phosphate products are marketed worldwide to crop nutrient manufacturers, distributors and retailers. In addition, Phosphates is one of the largest producers and marketers of phosphate and potash-based animal feed ingredients in the world. We operate feed phosphate plants at our New Wales and Riverview facilities in Florida. The combined capacity of these facilities is one million tonnes per year. We market our feed phosphate under the leading brand names of Biofos^®, Dynafos^®, Monofos^® and Multifos^®. Phosphates also sources MicroGran^® urea from Saskferco and potassium raw materials from Potash and markets Dyna-K^®, Dyna-K White^® and Dynamate^® as potassium-based animal feed ingredients.

Our main phosphate fertilizer and feed phosphate facilities are located in central Florida and Louisiana. The following map shows the locations of each of our phosphate concentrates plants in the United States:

LOGO

Production volumes by plant for the fiscal year ended May 31, 2006 and annual capacities at May 31, 2006 after the Phosphates Restructuring are listed below:


(tonnes in thousands)	Phosphoric Acid		Processed Phosphate (DAP/MAP/ME)		Feed Phosphate		Triple Superphosphate
Facility	Capacity	Production	Capacity	Production	Capacity	Production	Capacity	Production
Florida:
Bartow	950	893	2,280	1,990	-	-	-	-
Green Bay ^(a)	-	-	-	724	-	-	-	-
New Wales	1,720	1,674	3,860	3,310	750	685	-	-
Riverview	860	733	1,880	1,366	250	226	-	-
South Pierce ^(a)	540	432	-	-	-	-	-	539

	4,070	3,732	8,020	7,390	1,000	911	-	539
Louisiana:
Faustina	-	-	1,920	1,144	-	-	-	-
Uncle Sam	870	547	-	-	-	-	-	-

	870	547	1,920	1,144	-	-	-	-

Total	4,940	4,279	9,940	8,534	1,000	911	-	539

^(a)

The Green Bay DAP/MAP concentrates plant and the South Pierce granular triple superphosphate concentrates plant have been closed indefinitely effective May 31, 2006 as part of the Phosphates Restructuring. We have included additional information regarding these closures in Note 24 of our Consolidated Financial Statements that are included in this report in Part II, Item 8, “Financial Statements and Supplementary Data” and in the Management’s Discussion and Analysis of Financial Condition and Results of Operations that is included in this report in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The phosphoric acid from Uncle Sam is shipped to Faustina where it is used to produce DAP and MAP. The Faustina plant also manufactures ammonia.

Our Riverview facility is subject to the mortgage granted under our senior secured credit facility. Our senior secured credit facility is described under “Capital Resources and Liquidity” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations that is included in this report in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Our production of 9.1 million tonnes of phosphate fertilizer for the fiscal year ended May 31, 2006 accounted for roughly 19% of world output and 63% of U.S. production. Our current phosphate fertilizer (DAP/MAP/ME) capacity following the Phosphates Restructuring totals approximately 10 million tonnes and accounts for about 15% of global capacity and 56% of U.S. phosphate fertilizer capacity.

Phosphate Rock

Phosphate rock is the key mineral used to produce phosphate fertilizer and feed phosphate. Our rock production totaled approximately 16.9 million tonnes in the fiscal year ended May 31, 2006 and accounted for approximately 11% of global output and 49% of U.S. production. From time to time, we also purchase phosphate rock from unrelated parties. We are one of the world’s leading miners of phosphate rock and currently operate four mines with a combined annual capacity of approximately 15 million tonnes.

All of our phosphate mines and related mining operations are located in central Florida. We currently operate four active mines: Four Corners, South Fort Meade, Hookers Prairie and Hopewell. We plan to develop two large mines at Ona/Pioneer and at Pine Level to replace mines that will be depleted during the middle of the next

decade. We idled our mine at Wingate in November 2005. We may utilize the Wingate mine in the future if demand for phosphate rock increases. During our 2006 fiscal year, we closed mines at Fort Meade (which was previously idled) and Kingsford and, as part of the Phosphates Restructuring, closed indefinitely our mine at Fort Green.

The following map shows the locations of each of our active, closed and future phosphate mines in the Florida:

LOGO

The phosphate deposits of Florida are of sedimentary origin and are part of a phosphate-bearing province that extends from southern Florida north along the Atlantic coast into southern Virginia. Our active phosphate mines are primarily in what is known as the Bone Valley Member of the Peace River Formation in the Central Florida Phosphate District. The southern portions of the Four Corners, Fort Green and Wingate mines are in what is referred to as the Undifferentiated Peace River Formation, in which our future Ona/Pioneer and Pine Level mines would also be located. Phosphate mining has been conducted in the Central Florida Phosphate District since the late 1800’s. The potentially mineable portion of the Central Florida Phosphate District encompasses an area approximately 80 miles in length in a north-south direction and approximately 40 miles in width.

Except at the Wingate mine, we extract phosphate ore using large surface mining machines that we own called “draglines.” Prior to extracting the ore, the draglines must first remove a 10 to 50 foot layer of sandy overburden. At the Wingate mine, we utilize dredges to strip the overburden and mine the ore. We then process the ore at beneficiation plants that we own at each active mine where the ore goes through washing, screening, sizing and flotation processes designed to separate the phosphate rock from sands, clays and other foreign materials. Prior to commencing operations at any of our planned future mines, we would need to acquire new draglines or move existing draglines to the mines and, unless the beneficiation plant at an existing mine were used, construct a beneficiation plant.

The following table shows, for each of our phosphate mines, capacities at May 31, 2006 after the Phosphates Restructuring and rock production volume and grade for the past three fiscal years:


(tonnes in thousands)		2006			2005			2004
Facility	Capacity	Production	Average BPL⁽⁴⁾	% P₂O₅	Production	Average BPL⁽⁴⁾	% P₂O₅	Production	Average BPL⁽⁴⁾	% P₂O₅
Four Corners	6,350	4,645	64.3	29.4	6,033	61.4	28.1	6,745	61.5	28.1
South Fort Meade	6,000	5,637	63.9	29.2	4,856	64.2	29.4	5,227	65.7	30.1
Fort Green ⁽¹⁾	-	3,655	59.2	27.1	4,859	60.5	27.7	4,870	61.2	28.0
Kingsford ⁽²⁾	-	533	65.3	29.9	2,520	66.9	30.6	2,418	66.1	30.2
Hookers Prairie	2,090	1,586	64.3	29.4	1,753	62.9	28.8	2,091	64.8	29.7
Wingate ⁽³⁾	-	450	63.2	28.9	358	64.5	29.5	-	-	-
Hopewell	550	420	68.0	31.1	544	67.3	30.8	745	68.6	31.4

Total	14,990	16,926	63.2	28.9	20,923	62.8	28.8	22,096	63.5	29.1

⁽¹⁾

Our Fort Green mine was closed indefinitely as part of the Phosphates Restructuring in May 2006. We have included additional information regarding this closure in Note 24 of our Consolidated Financial Statements that are included in this report in Part II, Item 8, “Financial Statements and Supplementary Data” and in the Management’s Discussion and Analysis of Financial Condition and Results of Operations that is included in this report in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

⁽²⁾	Our Kingsford mine was closed in September 2005.

⁽³⁾	Our Wingate mine was idled in November 2005.

⁽⁴⁾	BPL (Bone Phosphate of Lime) is a traditional reference to the amount (by weight percentage) of calcium phosphate contained in phosphate rock or a phosphate ore body. A higher BPL corresponds to a higher percentage of calcium phosphate.

We use phosphate rock internally in the production of our concentrated phosphates. Through August 15, 2005, we also sold approximately two million tonnes of phosphate rock per year to another crop nutrient manufacturer under a contract that was terminated as part of the USAC Transactions. We used internally, approximately 16 million, 19 million and 21 million tonnes representing 96%, 92% and 92%, respectively, of total rock tonnes shipped for each of the fiscal years ended May 31, 2006, 2005 and 2004, respectively.

Reserves

We estimate our phosphate rock reserves based upon exploration core drilling as well as technical and economic analyses to determine that reserves can be economically mined. Proven (measured) reserves are those resources of sufficient concentration to meet minimum physical, chemical and economic criteria related to our current product standards and mining and production practices. Our estimates of probable (indicated) reserves are based on information similar to that used for proven reserves, but sites for drilling are farther apart or are otherwise less adequately spaced than for proven reserves, although the degree of assurance is high enough to assume continuity between such sites. Proven reserves are determined using a minimum drill hole spacing of two sites per 40 acre block. Probable reserves have less than two drill holes per 40 acre block, but geological data provides a high degree of assurance that continuity exists between sites.

The following table sets forth our proven and probable phosphate reserves as of May 31, 2006:


Mine	Mineable Acres ^(a)	Reserve Tonnes			Average BPL ^(d)	% P₂O₅
		(in millions) ^(b) (c)
Active
Four Corners	13,665	64.6			63.6	29.10
South Fort Meade	10,949	74.8			63.8	29.20
Hookers Prairie	446	3.8			63.4	29.01
Hopewell	453	2.4	^(e	⁾	66.1	30.25

Total Active Mines	25,513	145.6			63.7	29.17
Future
Ona/Pioneer	18,974	153.9			65.6	30.02
Pine Level	24,586	148.0	^(f	⁾	64.8	29.65

Total Future Mines	43,560	301.9			65.2	29.83
Idled
Wingate	461	6.0			63.8	29.20
Closed ^(g)
Fort Meade	3,311	17.9			66.1	30.25
Fort Green	5,929	58.0			60.1	27.50

Total Closed Mines	9,240	75.9			61.5	28.15

Total Mines	78,774	529.4			64.2	29.40

^(a)

Mineable acres reflect that part of the total deeded or controlled acreage that is fully accessible for mining; is free of surface or subsurface encumbrance, legal setbacks, wetland preserves and other legal restrictions that preclude permittable access for mining; is believed by us to be permittable; and meet specified minimum physical, economic and chemical criteria related to current mining and production practices. Mineable acres exclude mined out acreage. All reported reserves are within the mineable acres.

^(b)

Reserve estimates are generally established by our personnel without a third party review. However, prior to the Combination, IMC retained an independent third party to prepare annual valuation analyses, primarily for tax purposes, that include valuations of the reserves consistent with the information shown in the table above. In addition, as part of CCN’s due diligence assessments of mining properties and phosphate reserves, CCN retained consultants to conduct analyses in connection with its acquisitions of the Wingate and Pioneer mines. We have taken these valuations and analyses into account in developing our calculations of reserves. The reserve estimates have been prepared in accordance with the standards set forth in Industry Guide 7 promulgated by the SEC.

^(c)	Of the reserves shown, approximately 502.7 million tonnes are proven reserves, while 0.5 million tonnes at Ona/Pioneer and 26.2 million tonnes at Pine Level are probable reserves.

^(d)	BPL ranges from 59% to 68%.

^(e)

We purchased approximately 2.0 million tonnes shown for Hopewell in December 2002 pursuant to agreements that provide for future payment of royalties of $78,000 per month through December 1, 2009 (which payments may be accelerated if production from such reserves exceeds 237,000 tonnes per calendar quarter). In addition, as part of this purchase, we purchased two clay settling ponds for payments of $63,000 per month through December 1, 2008 and lease certain plant and equipment for payments of $46,000 per month through December 1, 2009.

^(f)

In connection with the sale in 1994 of certain of the surface rights related to approximately 48.9 million tonnes of the reported Pine Level reserves, we agreed not to mine such reserves until at least 2014. Our current mining plans do not contemplate mining such reserves until at least that time. In addition, in connection with the purchase in 1996 of approximately 99.3 million tonnes of the reported Pine Level reserves, we have agreed to (i) pay royalties of between $0.50 and $0.90 per ton of rock mined based on future levels of DAP margins, (ii) pay to the seller lost income from the

loss of surface use to the extent we use the property for mining related purposes before January 1, 2015 and (iii) re-convey to the seller fee title to unminable portions of the property after a development order is issued in connection with the Development of Regional Impact process.

^(g)	The reserves reported for the Fort Green and Fort Meade mines will be mined through other mines, which include the Four Corners and South Fort Meade mines.

We generally own the reserves shown in the table above, with the only significant exceptions being approximately 6.6 million tonnes shown for the Fort Green mine, the reserves referred to in Note (e) to the above table, and the South Fort Meade reserves:

•

The 6.6 million tonnes for the Fort Green mine are under a lease that we have the right to extend through 2014 and for which we have prepaid substantially all royalties.

•

Our rights to the reserves referred to in Note (e) to the above table are held pursuant to mineral rights that expire in 2012, except for a portion that expire in 2017.

•

We own the above-ground assets of the South Fort Meade mine, including the beneficiation plant, rail track and clay settling areas. A limited partnership, the South Ft. Meade Partnership, L.P., which we refer to as SFMP, owns all of the mineable acres shown in the table for the South Fort Meade mine. SFMP capital was comprised of approximately 35% equity and 65% debt.

•

We own 35% of the SFMP equity with financial investors owning the remaining 65%. SFMP is included as a consolidated subsidiary in our financial statements for the fiscal years ended May 31, 2006 and 2005.

•

In addition to the equity, several financial investors purchased $76 million of debt instruments issued by SFMP to fund the acquisition of the land and mineral reserves.

•

A third entity, South Ft. Meade Land Management, Inc., which we refer to as SFMLM, owns and manages orange groves and other agricultural assets on the land. SFMLM is a wholly owned subsidiary of ours. SFMLM also has entered into an agricultural lease with SFMP and pays SFMP rental income for the land that it uses for agricultural purposes or subleases to local farmers or ranchers.

•

We have a long-term mineral lease with SFMP. This lease expires on December 31, 2025 or such date that we have completed mining and reclamation obligations associated with the leased property. Lease provisions include royalty payments and a commitment to give mining priority to the South Fort Meade phosphate reserves. We pay the partnership a royalty on each tonne mined and shipped from the areas that we lease from it. Royalty payments to SFMP total approximately $18 million annually at current production rates.

•

Through its arrangements with us, SFMP also earns income from mineral lease payments, agricultural lease payments and interest income and uses those proceeds to service debt and pay dividends to its equity owners.

•

The U.S. government owns the mineral rights beneath approximately 680 acres shown in the table above for the South Fort Meade mine. The surface rights to this land are owned by SFMP. We control the rights to mine these reserves under a mining lease agreement and pay royalties on the tonnage extracted. Royalties on the approved leases equal approximately 5% of the six-month rolling average mining cost of production when mining these reserves. Phosphate rock tonnage produced within the lease area to date is approximately 654,000 tonnes with corresponding royalties of approximately $0.8 million.

In light of the long-term nature of our rights to our reserves, we expect to be able to mine all reported reserves that are not currently owned prior to termination or expiration of our rights.

Sulfur

We use sulfur at our concentrates plants to produce sulfuric acid primarily for use in our production of phosphoric acid. We purchased approximately 4.3 million tonnes of sulfur in the fiscal year ended May 31, 2006.

We purchase most of this sulfur directly or indirectly from North American oil and natural gas producers who are required to remove or recover sulfur during the refining process. We own and contract for operation of two ocean-going barges that transport molten sulfur from refineries located in the Gulf of Mexico to phosphate plants in Florida. We also own and operate a sulfur terminal in Houston, Texas.

We also own a 50% equity interest in Gulf Sulphur Services Ltd., LLLP, which we refer to as Gulf Services, which is operated by our joint venture partner. Gulf Services has a large sulfur transportation and terminaling business in the Gulf of Mexico, and handles these functions for a substantial portion of our Florida sulfur volume. Our Louisiana operations are served by truck, rail and barge from nearby refineries. Although sulfur is readily available from many different suppliers and can be transported to our phosphate facilities by a variety of means, sulfur is an important raw material used in our business that has in the past been and may in the future be the subject of volatile pricing and availability, and alternative transportation and terminaling facilities might not have sufficient capacity to fully serve all of our facilities in the event of a disruption to current transportation or terminaling facilities. Changes in the price of sulfur or disruptions to sulfur transportation or terminaling facilities could have a material impact on our business.

Ammonia

We use ammonia together with phosphoric acid to produce both DAP and MAP. We used approximately 1.5 million tonnes of ammonia in the fiscal year ended May 31, 2006. Our Florida ammonia needs are supplied by offshore producers, primarily under multi-year contracts. Ammonia for our New Wales and Riverview plants is terminaled through an ammonia facility at Port Sutton, Florida that we lease for a term expiring in 2013 which we may extend for up to five additional years. We also load railcars of ammonia to third parties at this facility. Pursuant to contract, a third party operates the Port Sutton ammonia facility. The agreement expires in 2013 but we may extend it for an unlimited number of additional five year terms, as long as we or the third party is entitled to operate the ammonia facility. Ammonia for our Bartow plant is terminaled through another ammonia facility owned and operated by a third party at Port Sutton, Florida pursuant to a contract that expires in June 2015. Ammonia is transported by pipeline from the terminals to our production facilities. We have long-term service agreements with the pipeline provider. We produce ammonia at Faustina, Louisiana primarily for our own consumption. Our annual production is 500,000 tonnes and from time to time we may sell surplus ammonia to unrelated parties. Although ammonia is readily available from many different suppliers and can be transported to our phosphates facilities by a variety of means, ammonia is an important raw material used in our business that has in the past been and may in the future be the subject of volatile pricing, and alternative transportation and terminaling facilities might not have sufficient capacity to fully serve all of our facilities in the event of a disruption to existing transportation or terminaling facilities. Changes in the price of ammonia or disruptions to ammonia transportation or terminaling could have a material impact on our business.

In April 2006, we announced that Phosphates had entered into a non-binding letter of intent to enter into an ammonia offtake agreement with a project sponsor who is pursuing the development of a world-scale petroleum coke gasification project on a site adjacent to our Faustina, Louisiana phosphate fertilizer facility. Among other products, the gasification project would include the production of anhydrous ammonia, a key raw material in our Phosphates business. In June 2006, we entered in to an ammonia offtake agreement with the project sponsor. The agreement provides that we would market or purchase approximately 50% to 60% of the 1.3 million tonnes of anhydrous ammonia contemplated to be produced at the complex on an annual basis. The agreement is subject to various conditions, including the project sponsor’s ability to obtain financing within certain timeframes and the successful construction and startup of the gasification project. Should the conditions be satisfied, we anticipate that purchases of ammonia under this agreement would reduce the amount of ammonia that we currently purchase from existing suppliers, and would be a more economical way in which to source a significant amount of our overall ammonia needs.

Natural Gas

Natural gas is the primary raw material used to manufacture ammonia. At our Faustina facility, ammonia is manufactured on site. Natural gas accounted for 88% of the production cost of ammonia and 29% of the cost of our fertilizer production in Louisiana during this past fiscal year. The majority of natural gas is sourced through fixed priced physical contracts and use swap contracts and options to fix the price of an additional portion of future purchases. The remainder is purchased either on the domestic spot market or under short-term contracts.

Our ammonia requirements for our Florida operations are purchased rather than manufactured on site, therefore we use little natural gas in our Florida operations.

Sales and Marketing

For a discussion of Phosphates sales and marketing, see “Sales and Marketing Activities” later in this report.

Potash

We are one of the leading potash producers in the world. We mine and process potash in Canada and the United States and distribute potash in North America and internationally. The term “potash” applies generally to the common salts of potassium. Our potash products are marketed worldwide to crop nutrient manufacturers, distributors and retailers and are also used in the manufacture of mixed crop nutrients and, to a lesser extent, in animal feed ingredients. We also sell potash to customers for industrial use. In addition, our potash products are used for icemelter and water softener regenerant.

We operate four potash mines in Canada as well as two potash mines in the United States. We own related facilities at each of the mines, which we refer to as refineries, which refine the mined potash.

The map below shows the location of each of our potash mines.

LOGO

Our current potash capacity, excluding tonnage produced at Esterhazy for Potash Corporation of Saskatchewan (PCS) pursuant to a contract described below, totals 9.3 million tonnes of product per year and accounts for approximately 13% of world capacity and 35% of North American capacity. Production during the fiscal year ended May 31, 2006, excluding tonnage produced for PCS at Esterhazy, totaled 7.2 million tonnes and accounted for approximately 12% of world output and 40% of North American production.

The following table shows annual capacity at May 31, 2006 and mined ore, average grade and finished product output by mine for the past three fiscal years:


		2006			2005			2004
(tonnes in millions)	Annual Capacity ⁽¹⁾	Ore Mined	Grade % K₂O	Product	Ore Mined	Grade % K₂O	Product	Ore Mined	Grade % K₂O	Product
Canada
Belle Plaine - MOP	2.8	8.1	18.0	2.2	9.7	18.0	2.4	9.0	18.0	2.5
Colonsay - MOP	1.8	3.5	26.8	1.2	3.8	26.5	1.5	3.4	26.4	1.4
Esterhazy - MOP	3.9	9.8	24.2	3.4	11.7	23.9	4.0	10.7	24.1	3.7

Canadian Total	8.5	21.4	22.3	6.8	25.2	22.0	7.9	23.1	22.1	7.6
United States
Carlsbad - MOP	0.5	3.4	11.9	0.5	3.7	12.5	0.5	3.2	12.6	0.4
Carlsbad - K-Mag	1.2	2.8	6.8	0.7	3.3	7.4	0.9	3.1	7.4	0.6

Carlsbad Total	1.7	6.2	9.6	1.2	7.0	10.1	1.4	6.3	10.0	1.0
Hersey - MOP	0.1	0.2	26.7	0.1	0.3	26.7	0.1	0.3	26.7	0.1

United States Total	1.8	6.4		1.3	7.3		1.5	6.6		1.1

Totals	10.3	27.8	19.5	8.1	32.5	19.5	9.4	29.7	19.6	8.7

Total excluding PCS	9.3	25.1		7.2	29.8		8.5	26.9		7.8

⁽¹⁾	Finished product (KCl)

Reserves

Our estimates of our potash reserves and non-reserve potash mineralization are based on exploration drill hole data, seismic data and actual mining results over more than 35 years (more than 15 years in the case of Hersey). Proven reserves are estimated by identifying material in place that is delineated on at least two sides and material in place within a half-mile radius or distance from an existing sampled mine entry or exploration core hole. Probable reserves are estimated by identifying material in place within a one mile radius or distance from an existing sampled mine entry or exploration core hole. Historical extraction ratios from the many years of mining results are then applied to both types of material to estimate the proven and probable reserves. We believe that all reserves and non-reserve potash mineralization reported below are potentially recoverable using existing production shaft and refinery locations.

Our estimated recoverable potash reserves and non-reserve potash mineralization as of May 31, 2006 for each of our mines is as follows:


	*Reserves*⁽¹⁾⁽²⁾		Potash Mineralization ⁽¹⁾⁽³⁾
(tonnes in millions)	Millions of Recoverable Tonnes	Average Grade (% K₂O)	Millions of Potentially Recoverable Tonnes
*Canadian Operations*
Belle Plaine	687	18.0	1,921
Colonsay	275	26.4	173
Esterhazy	571	24.5	408

sub-totals	1,533	21.9	2,502
*United States Operations*
Carlsbad	107	9.2	-
Hersey	40	26.7	-

sub-totals	147	14.0	-

Totals	1,680	21.2	2,502

⁽¹⁾	There has been no third party review of reserve estimates within the last three years. The reserve estimates have been prepared in accordance with the standards set forth in Industry Guide 7 promulgated by the SEC.

⁽²⁾	Includes both proven and probable reserves.

⁽³⁾	The non-reserve potash mineralization reported in the table in some cases extends to the boundaries of the mineral rights we own or lease. Such boundaries are up to 16 miles from the closest existing sampled mine entry or exploration core hole.

As discussed more fully below, we either own the reserves and mineralization shown above or lease them pursuant to mineral leases that generally remain in effect or are renewable at our option, or are long-term leases. Accordingly, we expect to be able to mine all reported reserves that are leased prior to termination or expiration of the existing leases.

Canadian Mines

We have three Canadian potash facilities containing four mines, all located in the southern half of the Province of Saskatchewan, including our mine at Belle Plaine, two interconnected shaft mines at Esterhazy and our mine at Colonsay.

Extensive potash deposits are found in the southern half of the Province of Saskatchewan. The potash ore is contained in a predominantly rock salt formation known as the Prairie Evaporites. The evaporite deposits are bounded by limestone formations and contain the potash beds. Three potash deposits of economic importance occur in Saskatchewan: the Esterhazy, Belle Plaine and Patience Lake members. The Patience Lake member is mined at Colonsay, and the Esterhazy member at Esterhazy. At Belle Plaine all three members are mined. The major potash members each contain several potash beds of different thicknesses and grades. The particular beds mined at Colonsay and Esterhazy have a mining height of 11 and 8 feet, respectively. At Belle Plaine several beds of different thicknesses are mined.

Our four potash mines in Canada produce muriate of potash (MOP) exclusively. Esterhazy and Colonsay utilize shaft mining while Belle Plaine utilizes solution mining technology. Traditional potash shaft mining takes place underground at depths of over 3,000 feet where continuous mining machines cut out the ore face and load it on to conveyor belts. The ore is then crushed, moved to storage bins and then hoisted to refineries above ground. In contrast, our solution mining process involves heated water, which is pumped through a “cluster” to dissolve the potash in the ore beds at a depth of approximately 5,000 feet. A cluster consists of a series of boreholes drilled into the potash ore by a portable, all-weather, electric drilling rig. A separate distribution center at each cluster controls the brine flow. The solution containing dissolved potash and salt is pumped to a refinery where sodium chloride, a co-product of this process, is separated from the potash through the use of evaporation and crystallization techniques. Concurrently, solution is pumped into a 130 acre cooling pond where additional crystallization occurs and the resulting product is recovered via a floating dredge. Refined potash is dewatered, dried and sized. Our Canadian operations produce 23 different potash products, including industrial grades, many through proprietary processes.

Under a long-term contract with PCS, we mine and refine PCS reserves at the Esterhazy mine for a fee plus a pro rata share of production costs. The specified quantities of potash to be produced for PCS may, at the option of PCS, amount to an annual maximum of approximately 0.9 million tonnes and a minimum of approximately 0.45 million tonnes per year. The current contract extends through December 31, 2011 and is renewable at the option of PCS for three additional five-year periods, provided that PCS has not received all of its available reserves under the contract.

Our potash mineral rights in the Province of Saskatchewan consist of the following:


	Belle Plaine	Colonsay	Esterhazy	Total
Acres under control
Owned in fee	12,733	10,057	109,205	131,995
Leased from Province	47,840	62,997	135,986	246,823
Leased from others	-	320	22,837	23,157

Total under control	60,573	73,374	268,028	401,975

We believe that our mineral rights in Saskatchewan are sufficient to support current operations for more than a century. Leases are generally renewable at our option for successive terms, generally 21 years each, except that certain of the acres shown above as “Leased from others” are leased under long-term leases with terms (including renewals at our option) that expire from 2094 to 2142.

Saskatchewan potash production is taxed at the provincial level under The Mineral Taxation Act, 1983 (Saskatchewan). This tax consists of a base payment and a profits tax, which we refer to as the Potash Production Tax. In addition to the Potash Production Tax, rental fees, taxes and royalties are payable to the Province of Saskatchewan and municipalities by potash producers in respect of potash reserves or production of potash. Our taxes, fees and royalty expenses were $90.1 million for the fiscal year ended May 31, 2006, including $74.2 million of Saskatchewan resource taxes. We also pay the greater of (i) a capital tax on our paid-up capital (as defined in The Corporation Capital Tax Act of Saskatchewan) and (ii) a corporate capital tax surtax based on the value of Saskatchewan resource sales. This surtax is only payable to the extent that it exceeds the regular capital tax. In the fiscal year ended May 31, 2006, we recorded capital surtax of $28.3 million. These taxes, fees and royalties are recorded in our cost of goods sold.

The Belle Plaine and Colonsay facilities, including owned and leased mineral rights, respectively, are subject to the mortgage granted under our senior secured credit facility. Our senior secured credit facility is described under “Capital Resources and Liquidity” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations that is included in this report in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Since December 1985, we have experienced an inflow of water into one of our two interconnected potash mines at Esterhazy. As a result, we have incurred expenditures, certain of which have been capitalized while others have been charged to expense, to control the inflow. Since the initial discovery of the inflow, we have been able to meet all sales obligations from production at the mines. We have considered alternatives to the operational methods employed at Esterhazy. However, the procedures we utilize to control the water inflow have proven successful to date, and we currently intend to continue conventional shaft mining. Despite the relative success of these measures, there can be no assurance that the amounts required for remedial efforts will not increase in future years or that the water inflow or remediation costs will not increase to a level which would cause us to change our mining process or abandon the mines. While shaft mining, in general, poses safety risks to employees, it is our opinion and that of our independent advisors that the water inflow at Esterhazy does not create an unacceptable or unmanageable risk to employees. The current operating approach and related risks are reviewed on a regular basis.

Due to the ongoing water inflow problem at Esterhazy, underground operations at this facility are currently not insurable for water incursion problems. Like other potash producers’ shaft mines in Saskatchewan, our Colonsay mine is also subject to the risks of inflow of water as a result of its shaft mining operations.

United States Mines

In the United States, we have two potash facilities, including a shaft mine located in Carlsbad, New Mexico and a solution mine located in Hersey, Michigan.

Our potash mineral rights in the United States consist of the following:


	Carlsbad	Hersey	Total
Acres under control
Owned in fee	-	581	581
Long-term leases	65,635	1,799	67,434

Total under control	65,635	2,380	68,015

The Carlsbad ore reserves are of two types: (1) sylvinite, a mixture of potassium chloride and sodium chloride, the same as the ore mined in Saskatchewan, and (2) langbeinite, a double sulfate of potassium and magnesium. These two types of potash reserves occur in a predominantly rock salt formation known as the Salado Formation. The McNutt Member of this formation consists of eleven units of economic importance, of which we mine three. The McNutt Member’s evaporite deposits are interlayered with anhydrite, polyhalite, potassium salts, clay, and minor amounts of sandstone and siltstone.

Continuous underground mining methods are utilized for the ore to be extracted. In the mining sections, drum type mining machines are used to cut the sylvinite and langbeinite ores from the face. Mining heights are as low as four and one-half feet. Ore from the continuous sections is loaded onto conveyors, transported to storage areas, and then hoisted to the surface for further processing at the refinery.

Two types of potash are produced at the Carlsbad refinery. MOP is the primary source of potassium for the crop nutrient industry. Double sulfate of potash magnesia is the second type of potash marketed under our brand name K-Mag^® brand, and contains significant amounts of sulfur, potassium and magnesium, with low levels of chloride.

At the Carlsbad facility, we mine and refine potash from 65,635 acres of mineral rights. We control these reserves pursuant to either (i) various leases from the U.S. government that, in general, continue in effect at our option (subject to readjustment by the U.S. government every 20 years) or (ii) leases from the State of New Mexico that continue as long as we continue to produce from them. These reserves contain an estimated total of 107 million tonnes of potash mineralization (calculated after estimated extraction losses) in three mining beds evaluated at thickness ranging from 4.5 feet to in excess of 11 feet. At average refinery rates, these ore reserves are estimated to be sufficient to yield 6.6 million tonnes of concentrates from sylvinite with an average grade of approximately 60% K₂O and 19.7 million tonnes of langbeinite concentrates with an average grade of approximately 22% K₂O. At projected rates of production, we estimate that Carlsbad’s reserves of sylvinite and langbeinite are sufficient to support operations for more than 10 years and 15 years, respectively.

At Hersey, Michigan, we operate a solution mining facility which produces salt and potash. Mining occurs in the Michigan Basin in a predominantly rock salt formation called the Salina Group Evaporite. This formation is a clean salt deposit with interlayered beds of sylvinite and carbonate. At the Hersey facility, our mineral rights consist of 581 acres owned in fee and 1,799 acres controlled under leases that, in general, continue in effect at our option as long as we continue our operations at Hersey. These lands contain an estimated 40 million tonnes of potash mineralization contained in two beds ranging in thickness from 14 to 30 feet. We are currently evaluating whether to continue to mine the potash reserves at this site.

The Hersey facility, including owned and leased mineral rights, is subject to the mortgage granted under our senior secured credit facility. Our senior secured credit facility is described under “Capital Resources and Liquidity” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations that is included in this report in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Royalties for the U.S. operations, which are established by the U.S. Department of the Interior, Bureau of Land Management, in the case of the Carlsbad leases from the U.S. government, and pursuant to provisions set forth in the leases, in the case of the Carlsbad state leases and the Hersey leases, amounted to approximately $5.7 million for the fiscal year ended May 31, 2006.

Natural Gas

Natural gas is a significant raw material used in the potash solution mining process. The purchase, transportation and storage of natural gas amounted to approximately 18% of Potash’s production costs for 2006. Our two solution mines accounted for approximately 77% of Potash’s total natural gas requirements for potash

production. We purchase a portion of our requirements through fixed price physical contracts and use swap contracts and options to fix the price of an additional portion of future purchases. The remainder of our requirements is purchased either on the domestic spot market or under short-term contracts.

Sales and Marketing

For a discussion of Potash sales and marketing, see “Sales and Marketing Activities” later in this report.

Offshore

Offshore is comprised of port facilities, blending and distribution operations in several countries throughout the world and includes our ownership interest in production facilities in Brazil, China and Argentina. Offshore serves as a market for Phosphates and Potash but also purchases and markets products from other suppliers worldwide. Offshore operates both bulk blending facilities and NPK plants to meet our customers’ needs. A NPK plant combines varying amounts of nitrogen, phosphorous and potassium into a single granule as compared to a bulk blending plant, which combines several products of different analysis to make a mixture. A NPK granule will consistently deliver all the nutrients to the plant uniformly without concern about segregation of the individual products.

Offshore markets fertilizer products and provides other ancillary services to wholesalers, cooperatives, independent retailers, and farmers in South America, Europe, and the Asia-Pacific regions through blending and bagging facilities, NPK plants, port terminals, warehouses and sales and technical offices.

The following map shows the locations of our Offshore operations in South America and Asia:

LOGO

Brazil

We are one of the largest producers and distributors of blended fertilizers for agricultural use in Brazil. Our fertilizer operations, together with our investments in other Brazilian fertilizer companies, allows us to be vertically integrated and gives us a significant presence in the Brazilian fertilizer market.

We operate bulk blending plants in eight locations in Brazil. We have two SSP plants and a feed phosphate plant at Cubatao. Together these plants annually distribute approximately 2.0 million tonnes of fertilizer in Brazil. We also operate an import terminal that handles approximately 1.8 million tonnes of imported fertilizers.

Our Brazilian operations include a 62.05% ownership interest in Fospar, S.A., which we refer to as Fospar, and a 45% ownership interest in IFC, S.A., which we refer to as IFC. Fospar operates two major assets located in

Paranagua, including a SSP granulation plant and a deep-water fertilizer port and throughput warehouse terminal facility, which serves the state of Parana and the West Central Region of Brazil. IFC’s operations include a blending and storage facility in Cubatao.

We also own an approximate one-third ownership interest in Fertifos. Fertifos is a Brazilian holding company that controls 55.98% of Fosfertil, a Brazilian publicly traded company. Fosfertil owns 100% of Ultrafertil, S.A. Fosfertil is the largest phosphate based fertilizer manufacturer in Brazil, operating a phosphate rock mine and a phosphate processing facility. Ultrafertil is a significant nitrogen company in Brazil that operates two nitrogen plants, a modern port facility at Santos, a phosphate rock mine and two smaller phosphate processing facilities. In addition to our ownership interest in these entities, we have an offtake agreement to purchase phosphate rock, finished nitrogen and phosphate products totaling approximately 466,000 tonnes from Fosfertil and Ultrafertil for use in our Brazilian bulk-blending operations.

Argentina

Our subsidiary, Mosaic Argentina S.A., supplies products and services to wholesale, retail and large farmer customers. We distribute approximately 360,000 tonnes of nitrogen, phosphate and blended fertilizers in Argentina. In addition, we provide agency services for Phosphates for sales to other importers.

Our largest asset is the port facility and warehouse in Quebracho, which is located near Rosario on the Parana River. In addition to supporting our own fertilizer operations, the facility also provides logistics services to third parties and provided throughput services for approximately 340,000 tonnes of product for third parties in fiscal year 2006. We also lease space at Necochea and Bahia Blanca to serve customers in the southern region of Argentina.

In May 2005, we announced the expansion of our Quebracho facility with the construction of a new SSP plant that will produce up to 240,000 tonnes of GSSP per year. This plant began operating in the first quarter of fiscal year 2007.

Chile

In Chile, we market bulk blended and straight fertilizer products to retail dealers with a small percentage of sales made directly to farmers. Our sales total approximately 250,000 tonnes per year. Straight products such as urea, DAP, MAP and GTSP account for approximately 60% of sales and bulk blends, tailored to meet specific soil and crop requirements, make up the rest. Most of our nitrogen products are imported from Argentina and Venezuela.

Our key assets in Chile include warehouse and bulk blending facilities at Conception Bay and San Antonio. Our Conception Bay facility mainly serves dealers in central Chile. The bulk blending plant at Conception Bay (also known as Cosmito) includes a 24,000 tonne warehouse. We also lease warehouse space at the Lirquen port at Conception Bay, where straight materials are imported and bagged. Our San Antonio facility, having similar capacity as Cosmito, serves retailers in northern Chile. We also lease a facility at Puerto Montt that includes a 25,000 tonne warehouse and bulk blender to serve customers in southern Chile.

China

Since the mid-1990s, we have developed and expanded our fertilizer distribution business in the world’s largest phosphate market through wholly owned businesses as well as through alliances with local strategic partners.

Yunnan Three Circles Sinochem Cargill Fertilizers Co., Ltd.

We own a 35% equity stake in Yunnan Three Circles Sinochem Cargill Fertilizers Co., Ltd., which we refer to as Yunnan. Yunnan’s state-of-the-art phosphate granulation facility is located near Kunming in the Yunnan province in south central China. Yunnan’s phosphate granulation plant brings together our technical expertise

and that of Yunnan Three Circles Chemical Co., with the importing capabilities of Sinochem Corporation, the local distribution network of Yantai Municipal Agricultural Means of Production, and the product quality and brand recognition of Cargill.

Yunnan commenced production in August 2002, and currently has an annual DAP production capacity of approximately 600,000 tonnes. The company began marketing DAP under the Cargill brand in February 2003. In connection with the Combination, we were granted a five year royalty-free trademark license which allows us to use Cargill’s brand to market our products. We continue to build the Mosaic brand in China as well as in other countries.

Yunnan produces DAP for shipment to north and northwest China, and Sinochem is among its largest customers. Phosphoric acid used in the production of DAP at Yunnan is purchased from Yunnan Three Circles Chemical Co. Ammonia used in production of DAP is sourced from local producers.

Bonded Warehouse Program

Acting as agents, we handle up to 400,000 tonnes of DAP annually through bonded warehouse programs. Chinese importers are able to purchase fertilizer products from strategically located bonded warehouses at Chinese ports. The bonded warehouse program is attractive to Chinese importers because it permits customers to purchase product on a just-in-time basis, reducing market risks from both large vessel purchases and long ocean voyages. As a customer and quality assurance service, we handle and manage the supply chain deliveries for fertilizer vessels until discharged in China, and also act as a bagging, warehousing and dispatch liaison in moving fertilizer products onto trucks or railcars. We operate bonded warehouses at five ports throughout mainland China.

Mosaic Fertilizers (Yantai) Co. Ltd.

Mosaic Fertilizers (Yantai) Co., Ltd., which we refer to as Yantai, owns and operates a 200,000 tonne per year bulk blending facility in the port of Yantai, China. We produce and sell bulk blend fertilizers tailored to specific soil and crop requirements and provide agricultural services mainly in the Shandong Province of China. We also act as a sales agent for other Mosaic operations in China as well as for other foreign owned fertilizer plants. Our agency volume is approximately 30,000 tonnes per year. Primary raw materials for our blended fertilizer production are granular urea, DAP, MAP, and potash.

Jiangsu Mosaic Agricultural Means of Production Co. Ltd.

Jiangsu Mosaic Agricultural Means of Production Co. Ltd., which we refer to as Jiangsu, owns and operates a 170,000 tonne per year NPK compound fertilizer production facility in the Jiangsu Province of China. We own a 60% interest in Jiangsu.

Jiangsu is strategically located along the Yangtze River, produces and sells NPK compounds to customers in the seven China provinces along the Yangtze River and to customers in northern China through Mosaic’s operations. Jiangsu uses urea, MAP, potash, ammonium chloride and other fertilizers in the production of its NPK compounds. Most of the raw materials are sourced locally.

Mosaic Fertilizers (Qinhuangdao) Co., Ltd.

Our subsidiary, Mosaic Fertilizers (Qinhuangdao) Co. Ltd., which we refer to as Qinhuangdao, owns and operates a 200,000 tonne per year bulk blending facility in the port of Qinhuangdao, China. The plant started production in March 2005. We produce and sell bulk blend fertilizers tailored to specific soil and crop requirements and provide agricultural services in the northeast, northwest and northern parts of China. We also act as a sales agent for other Mosaic operations in China as well as for other foreign owned fertilizer plants. Primary raw materials for our blended fertilizer production are granular urea, DAP, MAP and potash.

India

Our subsidiary, Mosaic India Private Ltd., operates distribution facilities and a deep-water port facility where we import fertilizers into India. We also serve as marketing agent for Phosphates in India. Our port facility is a marine terminal at Rozy, Jamnagar on the west coast of India and we are the wholesale distributor of the leading brand of DAP. We are in the process of transitioning from the Cargill brand to the Mosaic brand in India.

In fiscal year 2006, we marketed approximately 1.8 million tonnes of phosphate products in the Indian market to three customer segments, including national account customers who typically are large established fertilizer producers or marketers, a joint marketing program in which we jointly distribute fertilizer through a retail network owned by Tata Chemicals and under Tata Chemical’s brand name, and in-country distribution of branded fertilizers, mainly Mosaic branded DAP, to farmers through a network of wholesale and retail distributors in the northern and western states of India. Our Rozy port operations has annual throughput of approximately 485,000 tonnes.

The Indian government puts a uniform cap on the price of DAP sold in the country. This price is below imported and domestic production costs. The difference is made up to importers and local fabricators in the form of a subsidy from the government. The subsidy is determined by the government quarterly, but may not be announced until well after the quarter’s end.

Thailand

Our subsidiary, Mosaic International Thailand Ltd., distributes fertilizer in Thailand through a 50,000 tonne warehouse and 240,000 tonne bulk blending facility at Sriracha, Thailand. We produce and sell approximately 170,000 tonnes of bulk blends and distribute another 100,000 tonnes of straight fertilizers in Thailand each year.

We market bulk blended products, ranging from standard blends to premium brands, to various segments in the Thai market. Materials for blending include urea, DAP, potash, ammonium sulphate and other micronutrients. These raw materials typically are imported from Australia, Canada, China, Indonesia, Malaysia, and the United States.

Other Offshore Operations

In addition to our Offshore locations described above, we also maintain operations and/or sales offices in Australia, France, Hong Kong, Mexico, Russia, Ukraine and Vietnam.

Sales and Marketing

For a discussion of Offshore sales and marketing, see “Sales and Marketing Activities” later in this report.

Nitrogen

Nitrogen consists of our equity interest in the net income of Saskferco and our nitrogen sales and distribution activities. The distribution activities include marketing activities for Saskferco and the sales of nitrogen products purchased from unrelated parties. We are the exclusive marketing agent for nitrogen products produced by Saskferco. Saskferco is a world-scale and energy-efficient Saskatchewan-based nitrogen corporation in which we have a 50% ownership interest.

Principal Products

Saskferco’s principal products include the following:

Anhydrous Ammonia. Anhydrous ammonia is a high analysis nitrogen product that is used both as a direct application fertilizer mostly in North America as well as the building block for most other nitrogen products,

such as urea. Ammonia, a natural gas at normal temperatures and pressures, is stored and transported as a liquid either under pressure or in refrigerated vessels. Farmers inject ammonia into the soil as a natural gas. Ammonia is a low cost source of nitrogen in markets with well-developed distribution infrastructures and specialized application equipment. Rapidly escalating costs for regulatory compliance and liability insurance have diminished the advantage of ammonia over other nitrogen products during the past few years in North America.

Urea and Feed Grade Urea. Solid urea is the most widely used nitrogen product in the world. Urea solution first is produced by reacting anhydrous ammonia with carbon dioxide (CO₂) at high pressure. We then form solid, granular urea using standard granulation processes. Granular urea often is physically mixed with phosphate and potash products to make blends that meet specific soil and crop requirements. We also produce a feed grade urea marketed under the MicroGran^™ brand.

Urea Ammonium Nitrate (UAN) Solution. UAN solution is the most widely used liquid fertilizer worldwide. UAN solution is produced by combining urea solution, ammonium nitrate solution and water. It contains between 28% and 32% nitrogen. The distribution of UAN solution requires specialized infrastructure and equipment for the storage, transportation and application of liquid product.

Production and Properties

Saskferco’s nitrogen plant, located near Belle Plaine, Saskatchewan, has the capacity to produce approximately 1,860 tonnes of anhydrous ammonia, 2,850 tonnes of granular urea solution, and 650 tonnes of UAN liquid fertilizer solution per day. Saskferco produces granular urea, feed grade urea, 28% and 32% UAN solution and anhydrous ammonia for customers primarily in western Canada and the northern tier of the United States.

The growth in nitrogen demand in western Canada and northern tier states of the United States since 1992 has enabled us to market an increasing share of Saskferco’s output into core markets that are located within a few hundred miles of the facility.

Sales and Marketing

For a discussion of Nitrogen sales and marketing, see “Sales and Marketing Activities” below.

SALES AND MARKETING ACTIVITIES

United States and Canada

Mosaic has a sales and marketing team that serves our Phosphates, Potash and Nitrogen business segments and sells products purchased from unrelated third parties. We sell to wholesalers, cooperatives, independent retailers and national accounts. To service the needs of our customers, we own and operate a network of warehouse distribution facilities strategically located along or near the Mississippi and Ohio Rivers as well as in other key geographic regions of the United States. From these facilities, we market nitrogen (typically in the form of urea or UAN solution), phosphate (typically in the form of DAP, MAP, ME or GTSP) and potash to customers who in turn resell the product to U.S. farmers.

We own the Port Cargill fertilizer operations in Savage, Minnesota, with approximately 109,000 tonnes of dry product storage capacity, as well as warehouse distribution facilities in Pekin, Illinois (dry storage capacity of approximately 73,000 tonnes), Louisville, Kentucky (both dry and liquid storage capacity of approximately 40,000 tonnes), Henderson, Kentucky (both dry and liquid storage capacity of approximately 68,000 tonnes), Melbourne, Kentucky (dry storage capacity of approximately 24,000 tonnes) and Houston, Texas (dry storage capacity of approximately 54,000 tonnes), which has a deep water berth providing access to the Gulf of Mexico. In addition, we are a 50% owner of River Bend Ag, LLC, a wholesale distribution company located in New Madrid, Missouri with storage capacity of approximately 24,000 tonnes for dry products and 19,000 tonnes for liquid products.

In addition to the geographically situated facilities that we own, our U.S. wholesale distribution operations also include leased distribution space or contractual throughput agreements for dry or liquid storage in other key geographical areas such as California, Florida, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Minnesota, Nebraska, New York, North Dakota, Ohio, Pennsylvania and Texas.

Our Canadian customers include independent dealers, national accounts and Cargill AgHorizons, a retail fertilizer business segment owned by Cargill. We also lease a warehouse facility in Clavet, Saskatchewan and own a facility in Belle Plaine, Saskatchewan.

International

Internationally, we market our Phosphates products through the Phosphate Chemicals Export Association, Inc., which we refer to as PhosChem. We also market Phosphates’ products through Offshore. Our Saskatchewan potash products are sold through Canpotex Limited, which we refer to as Canpotex. Canpotex sales are generally allocated among the producer members based on production capacity. We currently supply approximately 36% of Canpotex’s requirements. Our exports from Carlsbad are sold through our own sales force. The Offshore operations also purchase phosphate, potash and nitrogen products from, or market these products for, unrelated third parties. These operations focus on providing quality crop nutrients as well as innovative and customized solutions to crop nutrient manufacturers, distributors and retailers. To service the needs of customers, we own and operate a network of warehouse distribution facilities strategically located in key geographic areas throughout several countries. During the fiscal year ended May 31, 2006, Offshore sold approximately 11% of Mosaic’s sales of phosphate crop nutrients produced in North America and 2% of Mosaic’s sales of potash crop nutrients produced in North America.

During the fiscal year ended May 31, 2006, approximately 86% of our export sales of phosphate crop nutrients were marketed through PhosChem. We administer PhosChem on behalf of ourselves and two other member companies. We estimate that PhosChem’s sales represent approximately 71% of total U.S. exports of concentrated phosphates. The countries that account for the largest amount of PhosChem’s sales of concentrated phosphates include India, China, Australia and Pakistan. During the fiscal year ended May 31, 2006, PhosChem’s concentrated phosphates exports to Asia were 65% of total shipments by volume, with India representing 26% and China representing 18% of export shipments.

Our potash is sold throughout the world, with the largest amount of sales outside of North America made to China, Japan, Korea, Taiwan, South East Asia, Australia, Europe and Latin America, principally through Canpotex. In fiscal year 2006, 82% of the potash we produced was sold as crop nutrients, while 18% was sold for nonagricultural uses.

Other Products

With a strong brand position in a multi-billion dollar feed ingredients global market, Phosphates also supplies feed ingredients for poultry and livestock to markets in North America, Latin America and Asia. Potash’s sales to non-agricultural users are primarily to large industrial accounts and the animal feed industry. Additionally, potash is sold as an ingredient in icemelter as well as a water softener regenerant.

Shipments

The table below shows our shipments of concentrated phosphates in thousands of dry product tonnes, primarily DAP:


	2006			2005			2004
	Tonnes	%		Tonnes	%		Tonnes	%
Domestic	2,661	28	%	3,428	32	%	3,254	31	%
Export	6,993	72	%	7,325	68	%	7,240	69	%

Total shipments	9,654	100	%	10,753	100	%	10,494	100	%

As of May 31, 2006, we had contractual commitments for the fiscal year ending May 31, 2007 from non-affiliated customers for the shipment of approximately 2.5 million tonnes of concentrated phosphates.

The table below shows our shipments of phosphate feed products in thousands of tonnes:


	2006			2005			2004
	Tonnes	%		Tonnes	%		Tonnes	%
Domestic	642	70	%	519	69	%	128	58	%
Export	271	30	%	235	31	%	94	42	%

Total shipments	913	100	%	754	100	%	222	100	%

As of May 31, 2006, we had contractual commitments from non-affiliated customers for the shipment of phosphate feed products amounting to approximately 0.6 million tonnes for the fiscal year ending May 31, 2007.

The table below shows our shipments of potash in thousands of tonnes:


	2006			2005			2004
	Tonnes	%		Tonnes	%		Tonnes	%
Domestic
Customers	3,033	47	%	4,682	55	%	5,210	60	%
Captive	739	11	%	397	5	%	484	6	%

	3,772	58	%	5,079	59	%	5,694	66	%
Export	2,726	42	%	3,496	41	%	2,951	34	%

Total shipments	6,498	100	%	8,575	100	%	8,645	100	%

As of May 31, 2006, we had contractual commitments for the fiscal year ending May 31, 2007 from non-affiliated customers for the shipment of potash amounting to approximately 1.5 million tonnes.

COMPETITION

Because fertilizers are global commodities available from numerous sources, fertilizer companies compete primarily on the basis of delivered price. Other competitive factors include product quality, procurement of raw materials, customer service, plant efficiency and availability of product. As a result, markets for our products are highly competitive. We compete with a broad range of domestic and international producers, including farmer cooperatives, subsidiaries of larger companies, integrated energy companies, and independent fertilizer companies. Foreign competitors often have access to cheaper raw materials, are required to comply with less stringent regulatory requirement or are owned or subsidized by their governments and, as a result, may have cost advantages over U.S. companies. Additionally, foreign competitors are frequently motivated by non-market factors such as the need for hard currency.

Phosphates

Phosphates operates in a highly competitive global market. Among the competitors in the global phosphate crop are domestic and foreign companies, as well as foreign government-supported producers in Asia and Morocco. Phosphate producers compete primarily based on price and, to a lesser extent, product quality and innovation. Major integrated producers of feed phosphates and feed grade potassium are located in the United States, Europe and China. Many smaller producers are located in emerging markets around the world. Many of these smaller producers are not manufacturers of phosphoric acid and are required to purchase this raw material on the open market. Competition in this global market is also driven by price, quality and service.

As the largest miner of phosphate rock in the United States, and the world’s largest producer of concentrated phosphates, we maintain an advantage over some competitors as the scale of operations effectively reduces production costs per unit. We are also vertically integrated to captively supply one of our key raw materials, phosphate rock, to our phosphate production facilities. In addition, we produce another raw material, ammonia, to captively supply our Faustina concentrates facility. With our own sulfur transportation barges and our 50% ownership interest in Gulf Services, we are well-positioned to source an adequate, flexible and cost-effective supply of sulfur, our third key raw material.

With production facilities in both Central Florida near the Port of Tampa and in Louisiana on the Mississippi River, we are logistically positioned to supply both domestic and international customers. In addition, those multiple production points afford us the flexibility to optimally balance supply and demand.

With no captive ammonia production in Florida, we are subject to significant volatility in our purchase price of ammonia from world markets. In addition, we are subject to many environmental laws and regulations in the State of Florida that are often more stringent than those which producers in other states or foreign countries must comply.

Potash

Potash is a commodity available from several geographical regions and around the world and, consequently, the market is highly competitive. Through our participation in Canpotex, we compete outside of North America with various independent potash producers and consortia as well as other export organizations, including state-owned organizations. Our principal methods of competition with respect to the sale of potash include product pricing, and offering consistent, high-quality products and superior service.

Offshore

Offshore generally operates in highly competitive business environments in each of its markets, competing with local businesses and with products that are available from many other sources. We believe that Offshore’s vertical integration with our own production businesses and our focus on product innovation and customer solutions positions us with a competitive advantage over many of our competitors. In addition, our relationships with other Cargill agricultural operations provide us with additional sales opportunities. We have a strong brand in several of the countries in which we operate, both through the license we have to use Cargill’s name, as well as the Mosaic brand which we are building. In addition to having access to our own production, we have the capability to supply all three nutrients to our dealer/farmer customer base.

Nitrogen

Nitrogen is a global commodity with production throughout the world. Approximately half of the urea and ammonia used in the United States annually is imported from multiple offshore sources. Natural gas is the primary raw material used in nitrogen production and may represent as much as 90% of the cost of a tonne of nitrogen-based fertilizer. With high North American natural gas costs, many offshore producers have a nitrogen production cost advantage and have used this to increase capacity and sales into key markets like North America. Saskferco is able to secure Canadian natural gas, which has historically traded at a small discount compared to United States prices. Additionally, Saskferco has one of the most modern and efficient plants in North America. Saskferco’s products are marketed within close proximity of its plant which is geographically removed from imports. Saskferco’s cost of delivering its product to customers is significantly lower than that of offshore competitors and helps offset the natural gas cost differential.

FACTORS AFFECTING DEMAND

Our results of operations historically have reflected the effects of several external factors, which are beyond our control and have in the past produced significant downward and upward swings in operating results. Revenues

are highly dependent upon conditions in the agriculture industry and can be affected by crop failure, changes in agricultural production practices, government policies and weather. Furthermore, our crop nutrients business is seasonal to the extent farmers and agricultural enterprises in the markets in which we compete purchase more crop nutrient products during the Spring and Fall. The international scope of our business, spanning the northern and southern hemispheres, reduces to some extent the seasonal impact on our business. During the fiscal year ended May 31, 2006, we experienced a more pronounced level of seasonality than in prior years. We believe that the more pronounced level of seasonality is due to high natural gas and raw materials prices that affected the selling price of our products, leading our customers to delay purchases, and a lessening of our international sales that we believe is to a significant degree due to an increasing Chinese self-sufficiency in phosphate fertilizers as well as ongoing weak farm economics in Brazil. The seasonal nature of our businesses requires significant working capital for inventory in advance of the planting seasons.

We sell products throughout the world. Unfavorable changes in trade protection laws, policies and measures, and other regulatory requirements affecting trade; unexpected changes in tax and trade treaties; strengthening or weakening of foreign economies as well as political relations with the United States may cause sales trends to customers in one or more foreign countries to differ from sales trends in the United States.

Our foreign operations are subject to risks from changes in foreign currencies. The costs of our Canadian operations are principally denominated in the Canadian dollar while its sales are principally denominated in the U.S. dollar. As a result, significant changes in the exchange rate of these two currencies can have a significant effect on our business and results of operations. We have included additional detail under “Market Risk” in Part II, Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” of this report.

OTHER MATTERS

Environmental, Health and Safety Matters

Environmental matters are an important aspect of our business, results of operations, financial condition and cash flows. We have included information regarding environmental matters under “Environmental, Health and Safety Matters” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our annual report to stockholders that is included in this report in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Employees

We had approximately 7,600 employees as of May 31, 2006, consisting of approximately 3,000 salaried and 4,600 hourly employees. As part of the Phosphates Restructuring we expect to eliminate approximately 625 of these positions in fiscal 2007.

Labor Relations

As of May 31, 2006:

•

We had 11 collective bargaining agreements with unions, covering approximately 85% of our hourly employees in North America. Of these employees, approximately 27% are covered under collective bargaining agreements scheduled to expire in fiscal 2007.

•

One of these collective bargaining agreements, covering employees at our Colonsay, Saskatchewan, potash mine that comprise approximately 10% of total hourly employees in North America, had expired on April 20, 2006 and has not yet been renewed. Negotiations are ongoing although no new agreement has been reached. Employees covered under this collective bargaining agreement have continued to operate under the terms of the contract.

•

Agreements with nine unions covered all employees in Brazil, representing 58% of our international employees. More than one agreement may govern our relations with each of these unions. In general, the agreements are renewable on an annual basis.

•

We also had collective bargaining agreements with unions covering employees in several other countries.

Failure to renew any of our union agreements, including the contract at our Colonsay, Saskatchewan, potash mine, could result in a strike or labor stoppage that could materially adversely affect our operations. However, we have not experienced a significant work stoppage in many years and consider our labor relations to be good.

EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding our executive officers as of July 31, 2006 is set forth below. Each of our executive officers has served in the positions listed in the table below since the Combination, except as expressly indicated below:


Name	Age	Position
Norman B. Beug	54	Vice President—Potash Operations
Anthony T. Brausen	47	Vice President—Finance and Chief Accounting Officer
Fredric W. Corrigan	63	Chief Executive Officer, President and Director
Richard L. Mack	38	Senior Vice President, General Counsel and Corporate Secretary
Steven L. Pinney	52	Senior Vice President—Phosphates Operations
James T. Prokopanko	53	Executive Vice President and Chief Operating Officer
Lawrence W. Stranghoener	52	Executive Vice President and Chief Financial Officer
James T. Thompson	55	Executive Vice President
Linda Thrasher	40	Vice President—Public Affairs
David W. Wessling	45	Vice President—Human Resources

Norman B. Beug. Prior to the Combination, Mr. Beug was the Vice President and General Manager of IMC’s Potash Business Segment from February 2003 through October 2004. In addition, Mr. Beug became Vice President—Potash Operations of Mosaic on June 14, 2004. Mr. Beug joined a predecessor of IMC in 1977. Mr. Beug’s prior service for IMC and its predecessor companies included a variety of supervisory and management positions in the potash business.

Anthony T. Brausen. Mr. Brausen became Vice President – Finance and Chief Accounting Officer of Mosaic on April 20, 2006. Prior to joining Mosaic as an employee in February 2006, Mr. Brausen had been Vice President and Chief Financial Officer of Tennant Company since March 2000.

Fredric W. Corrigan. Prior to the Combination, Mr. Corrigan served as Executive Vice President of Cargill from November 1999 through October 2004, Chairman of the Board of Cargill Fertilizer, Inc. from September 1994 through October 2004 and Chairman of the Cargill Corporate Business Excellence Committee from August 2000 through October 2004. Mr. Corrigan also served on Cargill’s Corporate Leadership Team and Corporate Public Affairs Committee, as well as the board of directors of several Cargill joint ventures. In addition, until October 21, 2004, the day before the Combination, Mr. Corrigan was Chief Executive Officer, President, Chief Financial Officer, Secretary, Treasurer and a director of Mosaic from January 26, 2004. Mr. Corrigan joined Cargill in 1966. His prior service for Cargill included various executive positions for its fertilizer and other agricultural businesses, including President of Cargill’s Fertilizer Division and President of Cargill Worldwide Fertilizer.

Richard L. Mack. Prior to the Combination, Mr. Mack served as an attorney in Cargill’s worldwide law department since 1994, serving most recently as a Senior Attorney since 2000. In addition, prior to October 21, 2004, the day before the Combination, Mr. Mack was Senior Vice President and General Counsel of Mosaic from June 14, 2004. Upon joining Cargill in 1994, Mr. Mack’s responsibilities included working with Cargill’s worldwide crop nutrition businesses and counseling several additional business segments and shared service organizations within Cargill.

Steven L. Pinney. Prior to the Combination, Mr. Pinney served as a Senior Vice President and then President of Cargill Fertilizer, Inc., a subsidiary of Cargill, and Business Segment Leader of Cargill’s Phosphates Production Business Segment from 1999 to October 2004. In addition, Mr. Pinney became Senior Vice President -Phosphates Operations of Mosaic on June 14, 2004. Mr. Pinney joined Cargill in 1976 and previously held various management and engineering positions in its fertilizer and other agricultural businesses.

James T. Prokopanko. Until joining us as Executive Vice President and Chief Operating Officer on July 31, 2006, Mr. Prokopanko was a Corporate Vice President of Cargill since 2004. He was Cargill’s Corporate Vice President with executive responsibility for procurement since 2002 and a platform leader responsible for its Ag Producer Services Platform since 1999. After joining Cargill in 1978, Mr. Prokopanko served in a wide range of leadership positions, including being named Vice President of North American crop inputs business in 1995. During his Cargill career, Mr. Prokopanko was engaged in retail agriculture businesses in the United States, Canada, Brazil, Argentina and the United Kingdom. Mr. Prokopanko resigned from all of his current positions with Cargill and its subsidiaries (other than Mosaic) in connection with his election as Executive Vice President and Chief Operating Officer of Mosaic. Mr. Prokopanko has served as a director of Mosaic since October 2004 and served as a member of the Corporate Governance and Nominating Committee and the Environmental, Health and Safety Committee of the Company’s Board of Directors since his election to the Board through July 31, 2006.

Lawrence W. Stranghoener. Mr. Stranghoener joined us as Executive Vice President and Chief Financial Officer in October 2004. He previously served as Executive Vice President and Chief Financial Officer of Thrivent Financial for Lutherans and its predecessor organization from January 1, 2001 until October 2004, where he had responsibility over the organization’s investments, finance and related functions. Prior to that, from 1983 through December 1999, Mr. Stranghoener worked in various senior management positions with Honeywell, Inc. in the United States and Europe, including Vice President and Chief Financial Officer, Vice President of Business Development, Vice President of Finance, Director of Corporate Financial Planning and Analysis and Director of Investor Relations. In December 1999, following the Honeywell-AlliedSignal merger, Mr. Stranghoener joined Techies.com of Edina, Minnesota, as Executive Vice President and Chief Financial Officer. Mr. Stranghoener also serves as a member of the board of directors of Kennametal Inc.

James T. Thompson. Prior to the Combination, Mr. Thompson served as president of Cargill Steel from January 1996 through October 2004, with responsibility for North Star Steel Company, North Star Recycling Company, Cargill Steel Service Centers and Cargill Wire. In addition, Mr. Thompson became an Executive Vice President of Mosaic on June 14, 2004. Mr. Thompson was a member of Cargill’s Corporate Center and the Business Conduct Committee. Previously, Mr. Thompson had served Cargill in a variety of positions since 1974.

Linda Thrasher. Prior to the Combination, Ms. Thrasher was the Director of Public Policy for Cargill’s Washington, D.C. office since joining Cargill in 1994. In addition, Ms. Thrasher became Vice President - Public Affairs of Mosaic on June 14, 2004. Ms. Thrasher handled extensive legislative and regulatory issues for Cargill’s fertilizer, salt and steel businesses and spent significant time working on environmental and trade issues.

David W. Wessling. Prior to joining us in January 2005 as our Vice President - Human Resources, Mr. Wessling worked at Cargill since 1984 serving most recently as Vice President - Global Human Resource Shared Services and Vice President - North American Human Resources. From 1984 to 2001, Mr. Wessling served Cargill’s meat

and poultry processing businesses in a variety of plant, divisional office, international and corporate human resource assignments. Mr. Wessling served Cargill Meat Solutions as Vice President - Human Resources from 1996 to 2001.

Pursuant to the Investor Rights Agreement dated as of January 26, 2004, as amended, between Cargill and Mosaic, during the four year period that commenced on the October 22, 2004 effective date of the Combination, Cargill and Mosaic have agreed to, among other things, take (and cause to be taken, including, without limitation, in the case of Cargill, to the extent permitted by applicable law, causing its representatives or designees on the Board of Directors to take) all commercially reasonable actions and agree to exercise all authority under applicable law to cause such individual as designated by Cargill for such purpose to be elected as our Chief Executive Officer and President. Pursuant to such provisions, Mr. Corrigan has been elected as our Chief Executive Officer and President.

Our executive officers are generally elected to serve until their respective successors are elected and qualified or until their earlier death, resignation or removal. No “family relationships,” as that term is defined in Item 401(d) of Regulation S-K, exist among any of the listed officers.

GLOSSARY OF INDUSTRY TERMS

Nutrient Analysis

Normally expressed as a series of three numbers, the nutrient analysis represents the content of a crop nutrient material or fertilizer in terms of its percent (by weight) of nitrogen, phosphate and potash (represented by the letters N-P-K). Our primary phosphate products (DAP, MAP and GTSP) are commonly referred to as “high analysis” fertilizers, containing the highest phosphate analysis of any crop nutrients.

Examples:

Diammonium Phosphate (DAP)

18-46-0

18% (N) Nitrogen

46% (P) Phosphate

0% (K) Potash

Muriate of Potash (MOP)

0-0-60

0% (N) Nitrogen

0% (P) Phosphate

60% (K) Potash

NPK

“NPK” or “N-P-K” is a term commonly used to describe a fertilizer granule that includes a combination of nitrogen, phosphate and potassium. An NPK plant is a granulation plant that produces NPK fertilizer. We use two processes for granulation. Chemical granulation uses sulfuric acid, phosphoric acid and ammonia along with other dry raw materials to granulate the product. Steam granulation uses steam and water along with dry raw materials to granulate the product.

Tons

In this report, “tonne” or “tonnes” means metric tonnes unless we specify otherwise.

A short ton is equal to 2,000 pounds.

A long ton is equal to 2,240 pounds. Long tons = 1.120 x short tons.

A metric tonne is equal to 2,205 pounds. Metric tonnes = 1.102 x short tons.

Phosphates Terms

BPL (Bone Phosphate of Lime)

BPL is a traditional reference to the amount (by weight percentage) of calcium phosphate contained in phosphate rock or a phosphate ore body. A higher BPL corresponds to a higher percentage of calcium phosphate.

DAP (Diammonium Phosphate) and MAP (Monoammonium Phosphate)

These compounds represent the chemical make-up of our most common granular crop nutrient products. DAP and MAP are the most widely-used and fastest-growing phosphate crop nutrients in the world.

Chemically, the DAP structure consists of one phosphate molecule attached to two ammonium molecules and has a nutrient analysis of 18-46-0 (18% nitrogen, 46% phosphate, 0% potash). The MAP structure consists of one phosphate molecule attached to one ammonium molecule and has a nutrient analysis of 11-52-0 (11% nitrogen, 52% phosphate, 0% potash).

DAP and MAP are normally applied to fields in the spring or fall as a primary source of phosphate nutrients and a secondary source of nitrogen.

Feed Phosphates

Feed-grade phosphates are essential feed ingredients used for mineral supplementation in animal diets. Our major products are in the form of monocalcium, dicalcium and tricalcium phosphates and used primarily in feeds for beef, dairy, swine and poultry industries. All feed phosphates must be defluorinated to reduce their fluorine content to levels that are non-toxic to animals.

GSSP/SSP

GSSP (granulated single superphosphate) and SSP (powdered form) are manufactured by mixing sulfuric acid with phosphate rock, which produces SSP. SSP powder can either be combined with other nutrients to produce NPK or can be granulated into GSSP.

GTSP (Granular Triple Superphosphate)

GTSP is a granular phosphate crop nutrient that does not contain any nitrogen, and has a nutrient analysis of 0-46-0 (0% nitrogen, 46% phosphate, 0% potash). This product is normally used in crop nutrient applications where a high phosphate analysis is required but where nitrogen is either not desired or not necessary. GTSP also has a small but growing application in certain industrial and environmental uses where a clean source of readily-available phosphate is needed.

MicroEssentials^™ (ME)

MicroEssentials^™ is a value-added DAP or MAP product that features a patented process that creates very thin platelets of sulfur on the product. Over time, these sulfur platelets break down in the soil and are absorbed by plants.

P₂O₅ (Phosphorous Pentoxide)

This expression for phosphorous pentoxide represents the chemical form of phosphate that exists in fertilizers and crop nutrients. A fertilizer with the analysis of 0-46-0 (granular triple superphosphate, or GTSP) would contain 46% P₂O₅. For simplicity, this term is usually replaced by the letter “P” and the terms “P₂O₅” and “P” are used somewhat interchangeably.

Phosphate Chemicals Export Association, Inc. (PhosChem)

PhosChem, formed in 1974 under the Webb-Pomerene Act, is responsible for export marketing of concentrated phosphates produced in the United States by its member companies. We manage PhosChem’s dry product sales and marketing efforts on behalf of the other members. Our financial statements include PhosChem as a consolidated subsidiary.

Phosphate Rock

Phosphate rock is the naturally occurring deposit of phosphate-rich minerals that we mine and process for use as a feed stock in the manufacture of high-analysis granular crop nutrients.

Phosphoric Acid

Phosphoric acid is a dark brown, viscous liquid produced by reacting refined phosphate ore with concentrated sulfuric acid. This intermediate product is used as a feed stock in the production of almost all granular crop nutrients including DAP, MAP and GTSP.

Phosphorus (P)

Phosphorus is one of the three primary crop nutrients required for plant growth. Phosphorus plays a role in many physiological processes in the plant, such as the utilization of sugar and starch, photosynthesis and the transfer of energy.

Potash Terms

Canpotex Limited (Canpotex)

Canpotex Limited, formed in 1970 is an export association of the Saskatchewan potash producers responsible for offshore marketing of potassium chloride produced in Saskatchewan. Our investment in Canpotex is accounted for using the equity method.

Feed potassium

Feed potassium products are mineral supplements produced specifically for animal feeds. They include potassium chloride and double sulphate of potassium and magnesium.

K₂O (Potassium Oxide)

Since the amount of potassium in the common salts of potassium varies, the industry has established a common standard of measurement by defining a product’s potassium content, or grade, in terms of equivalent percentages of K₂O (potassium oxide). A K₂O equivalent of 60% and 22% is the customary minimum standard for muriate of potash and double sulphate of potash magnesia products, respectively.

KCl or MOP (Potassium Chloride)

Potassium chloride (KCl), or muriate of potash (MOP), contains 60% to 62.5% K₂O and is the most widely used potassium fertilizer. The product varies in color from white to red. White potash typically contains 62.5% K₂O. It is used in agriculture, but its unique properties (lower insolubles and higher analysis) make it the product of choice in the industrial market as an icemelter and in liquid fertilizers. Mosaic is the global leader in the production of white potash, and white potash generally commands a premium price over competitive forms of MOP. Coarse and granular red potash are suited to bulk blending with the standard grade primarily sold to export customers.

K-Mag^® (Potassium Magnesium Sulphate)

Potassium magnesium sulphate (K-Mag^®) is produced from langbeinite ore near Carlsbad, New Mexico. It contains 21% to 22% K₂O, 11% magnesium and 22% sulfur and is used on chloride-sensitive crops that are grown on soils deficient in these three nutrients. It is essentially chloride-free and is a neutral salt that does not change the pH at any application rate, which is advantageous for many crops.

Potash

Potash is a generic term used to describe potassium fertilizers containing 22% to 62% K₂O. Potash is sold on its oxide or K₂O content. A fertilizer with the analysis of 0-0-62 would contain 62% K₂O by weight. Shaft (conventional) and solution mining are the two primary techniques employed to produce potash. Conventional (shaft) mining undercuts the face, drills and blasts. Solution mining uses hot salt brine that is pumped down to the potash bed, dissolving mainly potassium salts, and returns the potash brine to the surface for refining.

Potassium (K)

Potassium is one of the three primary crop nutrients required for plant growth. It is required for several physiological functions in the plant, including carbohydrate metabolism, the synthesis of proteins and the activation of enzymes.

Nitrogen Terms

Ammonia

Ammonia is produced primarily from natural gas and atmospheric nitrogen as the first step in nitrogen fertilizer production. It can also be applied directly to soils. Anhydrous ammonia (NH3) is a natural gas with 82% nitrogen. Ammonia is condensed by pressure and cooling, and stored and transported in this liquid form.

Nitrogen (N)

Nitrogen is a natural gas that makes up 80% of the atmosphere. Essential for plant growth, it is present in chlorophyll and protein. Some plants can obtain nitrogen from the atmosphere, but most get it from soil solutions. Its nutritional value is consumed during each growing season so it must be applied to soil annually.

Urea

Urea (46% nitrogen), the most commonly produced and widely traded nitrogen product, is manufactured by reacting ammonia with carbon dioxide under high pressure. It is used as fertilizer and as a feedstock for industrial and feed purposes.

UAN (Urea ammonium nitrate)

Urea ammonium nitrate (UAN) is a liquid fertilizer solution made by dissolving ammonium nitrate and urea in water. The nitrogen content of these solutions will vary from 28% to 32%, depending on the amount of ammonium nitrate, urea and water in the solution. UAN solution is nonflammable. UAN can be handled as a liquid at atmospheric pressure and temperature.

Item 1A. Risk Factors

Our business, financial condition or results of operations could be materially adversely affected by any of the risks and uncertainties described below. Additional risks not presently known to us, or that we currently deem immaterial, may also impair our business, financial condition or results of operations.

Our operating results are highly dependent upon and fluctuate based upon business and economic conditions and governmental policies affecting the agricultural industry where we or our customers operate. These factors are outside of our control and may significantly affect our profitability.

Our operating results are highly dependent upon conditions and governmental policies in the agricultural industry, which we cannot control. The agricultural products business can be affected by a number of factors, the

most important of which, for U.S. markets, are weather patterns and field conditions (particularly during periods of traditionally high crop nutrients consumption), quantities of crop nutrients imported to and exported from North America and current and projected grain inventories and prices, which are heavily influenced by U.S. exports and world-wide grain markets. U.S. governmental policies may directly or indirectly influence the number of acres planted, the level of grain inventories, the mix of crops planted or crop prices.

International market conditions, which are also outside of our control, may also significantly influence our operating results. The international market for crop nutrients is influenced by such factors as the relative value of the U.S. dollar and its impact upon the cost of importing crop nutrients, foreign agricultural policies, the existence of, or changes in, import or foreign currency exchange barriers in certain foreign markets, changes in the hard currency demands of certain countries and other regulatory policies of foreign governments, as well as the laws and policies of the U.S. affecting foreign trade and investment. Among the important policies that can significantly impact our business is the Indian government’s subsidy program for diammonium phosphate fertilizer. Under its current program, the Indian government places a uniform cap on the selling price of DAP to our customers that is below imported and domestic production costs. The Indian government then makes additional subsidy payments to the sellers. Because the Indian government does not make its final determination of the amount of the subsidy until after the sale has been made, we do not know our profitability on sales of DAP in India at the time of sale, and we may be required to refund estimated subsidy payments that we have received if the Indian government’s final determination of the subsidy is less than the estimated subsidies that we have received.

Our crop nutrients and other products are subject to price and demand volatility resulting from periodic imbalances of supply and demand, which may cause our results of operations to fluctuate.

Historically, the market for crop nutrients has been cyclical, and prices and demand for our products have fluctuated to a significant extent, particularly for phosphates and nitrogen and, to a lesser extent, potash. Periods of high demand, increasing profits and high capacity utilization tend to lead to new plant investment and increased production. This growth increases supply until the market is over-saturated, leading to declining prices and declining capacity utilization until the cycle repeats. As a result, crop nutrients prices and volumes have been volatile. This price and volume volatility may cause our results of operations to fluctuate and potentially deteriorate. The price at which we sell our crop nutrients products and our sales volumes could fall in the event of industry oversupply conditions, which could have a material adverse effect on our business, financial condition and results of operations. In contrast, high prices may lead our customers and farmers to delay purchasing decisions in anticipation of future lower prices, thus impacting our sales volumes.

Due to reduced market demand and a depressed agricultural economy, we and our predecessors have at various times suspended production at some of our facilities. The extent to which we utilize available capacity at our facilities will cause fluctuations in our results of operations, as we will incur costs for any temporary or permanent shutdowns of our facilities and lower sales tends to lead to higher fixed costs as a percentage of sales.

Our crop nutrient business is increasingly seasonal, which may result in carrying significant amounts of inventory and seasonal variations in working capital, and our inability to predict future seasonal crop nutrient demand accurately may result in excess inventory or product shortages.

The crop nutrient business is seasonal. The strongest demand for our products typically occurs during the spring planting season, with a second period of strong demand following the fall harvest. We and/or our customers generally build inventories during the low demand periods of the year in order to ensure timely product availability during the peak sales seasons. The seasonality of crop nutrient demand results in our sales volumes and net sales typically being the highest during the North American spring season and our working capital requirements typically being the highest just prior to the start of the spring season. Our quarterly financial results can vary significantly from one year to the next due to weather-related shifts in planting schedules and purchasing patterns.

If seasonal demand exceeds our projections, our customers may acquire products from our competitors, and our profitability will be negatively impacted. If seasonal demand is less than we expect, we will be left with excess inventory and higher working capital and liquidity requirements.

During the fiscal year ended May 31, 2006, we experienced a more pronounced level of seasonality in our business than in prior years. We believe that the more pronounced level of seasonality was due to:

•

high natural gas and raw material prices that affected the selling price of our products which led our domestic customers to delay purchases; and

•

some lessening in our international sales that has historically reduced to some extent the effects on us of the seasonality of North American agriculture. We believe that the lessening of international sales is, to a significant degree, due to China’s increasing self-sufficiency in phosphate fertilizers as well as ongoing weak farm economic conditions in Brazil.

Important raw materials and energy used in our businesses in the past have been and may in the future be the subject of volatile pricing. In addition, in the event of a disruption to existing transportation or terminaling facilities, alternative transportation and terminaling facilities might not have sufficient capacity to fully serve all of our facilities. Changes in the price of our raw materials or disruptions to supply could have a material impact on our businesses.

Natural gas, ammonia and sulfur are key raw materials used in the manufacture of phosphate crop nutrient products. Natural gas is used as both a chemical feedstock and a fuel to produce anhydrous ammonia, which is a raw material used in the production of diammonium phosphate (DAP) and monoammonium phosphate (MAP). Natural gas is also a significant energy source used in the potash solution mining process. From time to time, our profitability has been and may in the future be impacted by the price and availability of these raw materials and other energy costs. In addition, in the event of a disruption of existing transportation or terminaling facilities for raw materials, alternative transportation and terminaling facilities might not have sufficient capacity to fully serve all of our facilities. A significant increase in the price of natural gas, ammonia, sulfur or energy costs that is not recovered through an increase in the price of our related crop nutrients products or an extended interruption in the supply of natural gas, ammonia or sulfur to our production facilities could have a material adverse effect on our business, financial condition or results of operations.

We are subject to risks associated with our international operations, which could negatively affect our sales to customers in foreign countries as well as our operations and assets in foreign countries.

For the year ended May 31, 2006, we derived approximately 70% of our net sales from customers located outside of the United States. As a result, we are subject to numerous risks and uncertainties relating to international sales and operations, including:

•

difficulties and costs associated with complying with a wide variety of complex laws, treaties and regulations;

•

unexpected changes in regulatory environments;

•

increased government ownership and regulation of the economy in the markets we serve;

•

political and economic instability, including the possibility for civil unrest, inflation and adverse economic conditions resulting from governmental attempts to reduce inflation, such as imposition of higher interest rates and wage and price controls;

•

nationalization of properties by foreign governments;

•

tax rates that may exceed those in the United States and earnings that may be subject to withholding requirements;

•

the imposition of tariffs, exchange controls, trade barriers or other restrictions; and

•

the impact of currency exchange rate fluctuations between the U.S. dollar and foreign currencies, particularly the Brazilian real, the Canadian dollar and the Argentine peso.

The occurrence of any of the events above in the markets in which we operate or in other developing markets could jeopardize or limit our ability to transact business in those markets and could adversely affect our revenues and operating results and the value of our assets located outside of the United States.

Our international assets are located in countries with volatile conditions, which could subject us and our assets to significant risks.

Mosaic is a global business with substantial assets located outside of the United States and Canada. Our operations in Brazil, Argentina, Chile, China and India are a fundamental part of our business. Volatile economic, political and market conditions in these and other emerging market countries may have a negative impact on our operations, operating results and financial condition.

Adverse weather conditions, including the impact of potential hurricanes and excess rainfall, have in the past and may in the future adversely affect our operations, particularly our Phosphates business. We experienced minor physical damage to our facilities in Florida and Louisiana from the hurricanes in 2004 and 2005. In addition, we paid a civil fine of $0.3 million resulting from releases of phosphoric acid process wastewater at our Riverview, Florida facility, are involved in a class action lawsuit arising out of the releases, and governmental agencies have asserted claims for natural resource damages. More significantly, water treatment costs, particularly at our Florida operations, due to high water balances tend to increase significantly following excess rainfall from hurricanes and other adverse weather. Some of our Florida facilities continue to have high water levels that may, from time to time, require treatment. The high water balances at phosphate facilities in Florida has also resulted in adoption by the Florida Department of Environmental Protection of new rules requiring phosphate production facilities to meet more stringent process water management objectives within their phosphogypsum management systems. We are assessing the impact of the new rules; however, compliance with the rule could require us to take additional measures to manage process water, and such measures could potentially have a material effect on our business and financial condition. If additional excess rainfall or hurricanes continue to occur in coming years, the facilities may be required to take additional measures to manage process water and these measures could potentially have a material effect on our business and financial condition.

Adverse weather may also cause a loss of production due to disruptions in our supply chain. For example, following the impact of Hurricane Katrina in Louisiana in 2005, oil refineries that supply sulfur to us were closed and incoming shipments of ammonia were delayed, disrupting production at our Louisiana facilities.

Our operations are dependent on having received the required permits and approvals from governmental authorities. A decision by a government agency to deny any of our permits and approvals or to impose restrictive conditions on us with respect to these permits and approvals may impair our business and operations.

We hold numerous governmental environmental, mining and other permits and approvals authorizing operations at each of our facilities. Expansion of our operations also is predicated upon securing the necessary environmental or other permits or approvals. A decision by a government agency to deny or delay issuing a new

or renewed permit or approval, or to revoke or substantially modify an existing permit or approval, could have a material adverse effect on our ability to continue operations at the affected facility.

Over the next several years, we and our subsidiaries will be continuing our efforts to obtain permits in support of our anticipated Florida mining operations at certain of our properties. In Florida, local community participation has become an important factor in the permitting process for mining companies. A denial of these permits or the issuance of permits with cost-prohibitive conditions could prevent us from mining at these properties and thereby have a material adverse effect on our business, financial condition or results of operations.

In many cases, as a condition to procuring permits and approvals, we are required to comply with financial assurance regulatory requirements. The purpose of these requirements is to provide comfort to the government that sufficient company funds will be available for the ultimate closure, post-closure care and/or reclamation of our facilities. These financial assurance requirements can be satisfied without the need for any expenditure of corporate funds to the extent our financial statements meet certain balance sheet/income statement criteria, referred to as the financial tests. In the event that we are unable to satisfy these financial tests, we must utilize alternative methods of complying with the financial assurance requirements or could be subject to enforcement proceedings brought by relevant governmental agencies. This may require negotiation of a consent decree that imposes alternative financial assurance or other conditions. Alternatively, we may need to provide credit support in the form of surety bonds from insurance companies, letters of credit from banks, or other forms of financial instruments or collateral to satisfy the financial assurance requirements. Use of these alternative means of financial assurance imposes additional expense on us. Some of them, such as letters of credit, also use a portion of our available liquidity. Other alternative means of financial assurance, such as surety bonds, in some cases require collateral and generally require us to obtain a discharge of the bonds or to post additional collateral (typically in the form of cash or letters of credit) at the request of the issuer of the bonds. Collateral that is required may be in many forms including letters of credit or other financial instruments that utilize a portion of our available liquidity, or in the form of assets such as real estate, which reduces our flexibility to manage or sell assets. In the future, there can be no assurance that we will be able to pass the applicable tests of financial strength, negotiate consent decrees, or obtain letters of credit, surety bonds or other financial instruments on acceptable terms and conditions or at a reasonable cost. It is possible that we will not be able to comply with such regulations in the future or that the costs of compliance could increase, which could materially adversely affect our business, results of operations or financial condition.

Currently, because of a change in our corporate structure resulting from the Combination, we do not meet the financial responsibility tests under Louisiana’s applicable regulations. After consulting with the Louisiana Department of Environmental Quality, we requested an exemption. The exemption would include an alternate financial responsibility test with revised tangible net worth and U.S. asset requirements. Our request for an exemption was initially denied in May 2006. We have reopened discussions on the subject with the Louisiana Department of Environmental Quality. There can be no assurance that the Louisiana Department of Environmental Quality will grant the exemption or that we will be able to meet its terms. If we do not receive an exemption, we may be required to enter into a consent order with the agency or may need to provide credit support, such as surety bonds or letters of credit, to fulfill our financial responsibility obligations in Louisiana.

Some of our competitors have greater resources than we do, which may place us at a competitive disadvantage and adversely affect our sales and profitability. These competitors include state-owned and government subsidized entities in other countries.

We compete with a number of producers in North America and throughout the world, including state-owned and government subsidized entities. Some of these entities are less highly leveraged than we are, may have greater total resources than we do, may have investment grade bond ratings, and may be less dependent on earnings from crop nutrients sales than we are. In addition, some of these entities may have access to lower cost or government-subsidized natural gas supplies, placing us at a competitive disadvantage. Furthermore, governments as owners of some of our competitors may be willing to accept lower prices and profitability on their products in order to

support domestic employment or other political or social goals. To the extent other producers of crop nutrients enjoy competitive advantages or are willing to accept lower profit levels, the price of our products, our sales volumes and our profits may be adversely affected.

The environmental regulations to which we are subject, as well as our potential environmental liabilities, may have a material adverse effect on our business, financial condition and results of operations.

We are subject to numerous environmental, health and safety laws and regulations in the U.S., Canada, China, Brazil and other international jurisdictions where we operate, including laws and regulations relating to land reclamation and remediation of hazardous substance releases. For example, the U.S. Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA, imposes liability, without regard to fault or to the legality of a party’s conduct, on certain categories of persons (known as “potentially responsible parties”) who are considered to have contributed to the release of “hazardous substances” into the environment. As a crop nutrient company working with chemicals and other hazardous substances, we will periodically incur liabilities, under CERCLA and other environmental cleanup laws, with regard to our current or former facilities, adjacent or nearby third party facilities or offsite disposal locations. In addition to liabilities arising out of our current and future operations for which we have ongoing processes to manage compliance with environmental obligations, we are subject to liabilities for past operations at current facilities and in some cases to liabilities for past operations by us, our predecessor companies and subsidiaries that our predecessors have sold at facilities that we and our subsidiaries no longer own or operate. Under CERCLA, or various state analogues, one party may, under certain circumstances, be required to bear more than its proportional share of cleanup costs at a site where it has liability if payments cannot be obtained from other responsible parties. Liability under these laws involves inherent uncertainties. Violations of environmental, health and safety laws are subject to civil, and, in some cases, criminal sanctions. Laws similar to those in the United States may be applicable to international jurisdictions where we operate. In some international jurisdictions, environmental laws change rapidly and it may be difficult for us to determine if we are in compliance with all material environmental laws at any given time. As a result of these uncertainties, we may incur unexpected interruptions to operations, fines, penalties or other reductions in income which would negatively impact our financial condition and results of operations.

Continued government and public emphasis on environmental issues can be expected to result in increased future investments for environmental controls at ongoing operations, which will be charged against income from future operations. Present and future environmental laws and regulations applicable to our operations may require substantial capital expenditures and may have a material adverse effect on our business, financial condition and results of operations.

We have identified material weaknesses in our internal control over financial reporting for our fiscal year ended May 31, 2006. The material weaknesses in internal control over financial reporting could result in a material error in our financial statements.

As discussed more fully in Item 9A of Part I of this report, we have identified material weaknesses in our internal control over financial reporting. The material weaknesses are:

•

Management did not sufficiently monitor the internal control over financial reporting at the Phosphates business segment to ensure they were operating effectively.

•

The Company had inadequate segregation of duties related to North American computer software applications.

•

The Company did not maintain adequate oversight and review of our accounting for income taxes.

The material weaknesses in our internal control over financial reporting could result in a material error in our financial statements. A more detailed description of these material weaknesses is included in Item 9A, “Controls and Procedures,” of this report.

We are implementing a new enterprise resource planning system with additional controls. Failure to fully implement the new system in an effective and a timely fashion will delay our ability to fully correct the material weaknesses we have identified in our internal controls.

We are implementing a new enterprise resource planning system. The new system includes additional controls that are part of our efforts to remediate the material weakness in our internal controls. Failure to fully implement the new system in an effective and a timely fashion will delay our ability to fully correct the material weakness we have identified in our internal controls. In addition, the new system includes implementation of improved business processes that we expect to improve our efficiency and our ability to manage our business, realize synergies from the Combination and reduce our costs. Failure to fully implement the new system in an effective and timely fashion could adversely affect our implementation of these improved business processes and the achievement of our goals. In some cases, the current business processes that are being replaced or improved will no longer be operational once the new system is implemented, and any failure of the new system to function effectively upon initial implementation could adversely affect our ongoing business processes and efficiency. For example, we will depend on the new system for functions such as order entry, invoicing and logistics, and a failure of the new system to perform these functions effectively could materially adversely affect our sales to customers, receipt of payment for our sales or other matters that could materially adversely affect our results of operations.

Our indebtedness could adversely affect our financial health and prevent us from fulfilling our obligations under our outstanding indebtedness.

As of May 31, 2006, we had outstanding indebtedness of approximately $2.6 billion. Our indebtedness, which is a significant factor leading to our current non-investment grade credit rating, could have important consequences. For example, it could:

•

make it difficult for us to satisfy our obligations with respect to outstanding indebtedness;

•

increase our vulnerability to general adverse economic and industry conditions;

•

require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes;

•

make it difficult for us to optimally capitalize and manage the cash flow for our businesses;

•

limit our flexibility in planning for, or reacting to, changes in our businesses and the markets in which we operate;

•

place us at a competitive disadvantage compared to our competitors that have less debt; and

•

limit our ability to borrow additional funds.

In addition, it is possible that we may need to incur additional indebtedness in the future in the ordinary course of business. The terms of our credit facilities and other agreements governing our indebtedness allow us to incur additional debt subject to certain limitations. If new debt is added to current debt levels, the risks described above could intensify. Furthermore, if future debt financing is not available to us when required or is not available on acceptable terms, we may be unable to grow our business, take advantage of business opportunities, respond to competitive pressures or refinance maturing debt, any of which could have a material adverse effect on our operating results and financial condition.

We need significant amounts of cash to service our indebtedness. If we are unable to generate a sufficient amount of cash to service our indebtedness, our financial condition and results of operations could be negatively impacted.

We need significant amounts of cash in order to service and repay our indebtedness. Our ability to generate cash in the future will be, to a certain extent, subject to general economic, financial, competitive and other factors that may be beyond our control. If we are not able to generate cash flow from operations in an amount sufficient to enable us to service and repay our indebtedness, we will need to refinance our indebtedness or be in default under the agreements governing our indebtedness. Such refinancing may not be available on favorable terms or at all. The inability to service, repay and/or refinance our indebtedness could negatively impact our financial condition and results of operations.

The agreements governing our indebtedness contain various covenants that limit our discretion in the operation of our business and also require us to meet financial maintenance tests and other covenants. The failure to comply with such tests and covenants could have a material adverse effect on us.

The agreements governing our indebtedness contain various covenants, including those that restrict our ability to:

•

borrow money, and guarantee or provide other support for indebtedness of third parties including guarantees to finance purchases of our products;

•

pay dividends on, redeem or repurchase our capital stock;

•

make monetary acquisitions of new subsidiaries;

•

make investments in entities that we do not control, including joint ventures;

•

fund our Offshore business segment from our North American operations;

•

make capital expenditures in excess of certain annual amounts;

•

transact business with Cargill except under certain circumstances;

•

engage in transactions, particularly outside of the ordinary course of business, between Mosaic Global Holdings (formerly IMC) and its subsidiaries, on the one hand, and us and our other subsidiaries, on the other hand;

•

use assets as security in other transactions;

•

sell assets, other than sales of inventory in the ordinary course of business, except in compliance with specified limits and up to specified dollar amounts, or merge with or into other companies;

•

enter into sale and leaseback transactions; and

•

enter into unrelated businesses.

These covenants may limit our ability to effectively operate our businesses, including our ability to operate the predecessor businesses of IMC and fertilizer businesses of Cargill Crop Nutrition involved in the Combination in an integrated manner.

In addition, our credit facilities require that we meet certain financial tests, including an interest expense coverage ratio test and a leverage ratio test. The financial tests become more stringent over time pursuant to the terms of the Credit Agreement. During periods in which product prices or volumes, raw material prices or

availability, or other conditions reflect the adverse impact of cyclical market trends or other factors (including trends and factors disclosed in the risk factors discussed in this Item 1A), or when the financial tests become more stringent, we may not be able to comply with the applicable financial covenants.

In addition, an Event of Default would occur under our senior secured bank credit facility unless, prior to November 30, 2007, one of the following occurs:

•

the Mosaic Global Holdings 10.875% Senior Notes due 2008 have been refinanced on specified terms, repurchased or redeemed; or

•

the Company meets a specified financial “leverage” ratio; or

•

our senior secured credit facility has been fully repaid.

A more detailed description of the events summarized above is incorporated by reference to Note 13 of our Consolidated Financial Statements included in this report in Part II, Item 8, “Financial Statements and Supplementary Data.” There can be no assurance that one of these events will occur prior to November 30, 2007.

Any failure to comply with the restrictions of our credit facilities or any agreement governing our other indebtedness may result in an event of default under those agreements. Such default may allow the creditors to accelerate the related debt, which acceleration may trigger cross-acceleration or cross-default provisions in other debt. In addition, lenders may be able to terminate any commitments they had made to supply us with further funds (including periodic rollovers of existing borrowings).

We do not own a controlling equity interest in our non-consolidated companies, some of which are foreign companies, and therefore our operating results and cash flow may be materially affected by how the governing boards and majority owners operate such businesses. There may also be limitations on monetary distributions from these companies that are outside of our control. Together, these factors may lower our equity earnings or cash flow from such businesses and negatively impact our results of operations.

We hold several ownership interests in fertilizer manufacturing or distribution companies that are not controlled by Mosaic, whether through less than majority representation on the applicable governing board or though a minority equity ownership interest in such entities. As these companies are significant to Mosaic, their results of operations materially affect our equity earnings. Because we do not control these companies either at the board or shareholder level and because local laws in foreign jurisdictions may place restrictions on monetary distributions by these companies, we cannot ensure that these companies will operate efficiently, pay dividends, or generally follow the desires of our management by virtue of our board or shareholder representation. As a result, these companies may contribute significantly less than anticipated to our equity earnings and cash flow, negatively impacting our results of operations and liquidity.

Strikes or other forms of work stoppage or slowdown could disrupt our business and lead to increased costs.

Our financial performance is dependent on a reliable and productive work force. A significant portion of our workforce is covered by collective bargaining agreements with unions. Unsuccessful contract negotiations or adverse labor relations could result in strikes or slowdowns. Any disruptions may decrease our production and sales or impose additional costs to resolve disputes. The risk of adverse labor relations may increase as our profitability increases because labor unions’ expectations and demands generally rise at those times.

Our Esterhazy mine has experienced an inflow of water for more than 20 years. We are not insured against the risk of floods and water inflow at that mine and the costs to control the water inflow could increase in future years. The water inflow, risk to employees or remediation costs could also cause us to change our mining process or abandon the mines, which in turn could significantly negatively impact our results of operations.

Since December 1985, we have experienced an inflow of water into one of our two interconnected potash mines at Esterhazy, Saskatchewan. In order to control inflow, we have incurred expenditures, certain of which, due to their nature, have been capitalized, while others have been charged to expense. Because procedures utilized to control the water inflow have proven successful to date, we will likely continue conventional shaft mining at Esterhazy. It is possible that the costs of remedial efforts at Esterhazy may increase in future years or that the water inflow, risk to employees or remediation costs may increase to a level which would cause us to change our mining process or abandon the mines. Due to the ongoing water inflow problem at Esterhazy, underground operations at this facility are currently not insurable for water incursion problems. Our Colonsay mine is also subject to the risks of inflow of water as a result of our shaft mining operations.

Deliberate, malicious acts, including terrorism, could damage our facilities, disrupt our operations or injure employees, contractors, customers or the public and result in liability to us.

Intentional acts of destruction could hinder our sales or production and disrupt our supply chain. Our facilities could be damaged or destroyed, reducing our operational production capacity and requiring us to repair or replace our facilities at substantial cost. Employees, contractors and the public could suffer substantial physical injury for which we could be liable. Governmental authorities may impose security or other requirements that could make our operations more difficult or costly. The consequences of any such actions could adversely affect our operating results and financial condition.

We may be adversely affected by changing antitrust laws to which we are subject.

We are subject to antitrust and competition laws in various countries throughout the world. We cannot predict how these laws or their interpretation, administration and enforcement will change over time. Changes in antitrust laws globally, or the interpretation, administration or enforcement thereof, may limit our existing or future operations and growth, or the operations of Canpotex and PhosChem, which serve as export associations for our Potash and Phosphates businesses.

Our competitive position could be adversely affected if we are unable to participate in continuing industry consolidation.

Most of our products are readily available from a number of competitors, and price and other competition in the fertilizer industry is intense. In addition, fertilizer production facilities and distribution activities frequently benefit from economies of scale. As a result, particularly during pronounced cyclical troughs, the fertilizer industry has a long history of consolidation. Mosaic itself is the result of a number of industry consolidations. We expect consolidation among fertilizer producers could continue. Our competitive position could suffer to the extent we are not able to expand our own resources either through consolidations, acquisitions, joint ventures or partnerships. In the future, we may not be able to find suitable companies to combine with, assets to purchase or joint venture or partnership opportunities to pursue. Even if we are able to locate desirable opportunities, we may not be able to enter into transactions on economically acceptable terms. If we do not successfully participate in continuing industry consolidation, our ability to compete successfully could be adversely affected and result in the loss of customers or an uncompetitive cost structure, which could adversely affect our sales and profitability.

Our risk management strategy may not be effective.

Our businesses are affected by fluctuations in market prices for our products, the purchase price of natural gas, ammonia and sulfur consumed in operations, freight and shipping costs, interest rates and foreign currency

exchange rates. We periodically enter into derivatives to mitigate these risks. However, our derivatives strategy may not be successful in minimizing our exposure to these fluctuations. See Note 17 of our Consolidated Financial Statements that are included in this report in Part II, Item 8, “Financial Statements and Supplementary Data.”

Our recent closures of several facilities in our Florida Phosphates operations may cost more than we estimate, result in less benefits than we expect or require us to obtain waivers of financial assurance requirements from governmental regulatory agencies.

On May 31, 2006, we closed indefinitely our South Pierce and Green Bay phosphate fertilizer production plants and Fort Green phosphate mine in central Florida. Our financial statements include charges reflecting our estimates of the costs of closure. Like other estimates of events that will occur in the future, our estimates are based upon judgments about uncertain future events that may prove to be different than our estimates. These differences could result in the need to revise our estimates, affecting our results of operations, financial condition or cash flows. In addition, we anticipate that the closures of these facilities will reduce our raw material and operating costs, reduce our capital expenditures and improve our cash flows. A failure to substantially realize our expectations about the benefits of the closures could materially affect our future results of operations. In addition, the recent closures could require us to obtain waivers of financial assurance requirements from governmental regulatory agencies, and any failure to obtain any required waivers or conditions imposed by the regulatory agencies in connection with any such waivers could adversely affect the benefits we expect from the closures and our results of operations or financial condition.

Cargill’s status as a significant stockholder and its representation on our Board of Directors may create conflicts of interest with our other stockholders and could cause us to take actions that our other stockholders do not support.

Cargill owns 65.3% of the outstanding shares of our common stock. In addition, seven Cargill nominees are members of our Board of Directors. Accordingly, Cargill effectively controls our strategic direction and significant corporate transactions, and its interests in these matters may conflict with the interests of other stockholders of Mosaic. As a result, Cargill could cause us to take actions that our other stockholders do not support.

Cargill’s significant ownership interest in Mosaic and our classified Board of Directors and other anti-takeover provisions could deter an acquisition proposal for Mosaic that other stockholders may consider favorable.

As the owner of a majority of the shares of our common stock, a third party will not be able to acquire control of us without Cargill’s consent because Cargill could vote its shares of our common stock against any takeover proposal submitted for stockholder approval. In addition, we have a classified Board of Directors and other takeover defenses in our certificate of incorporation and bylaws. Cargill’s ownership interest in us and these other anti-takeover provisions could discourage potential acquisition proposals for us and could delay or prevent a change of control of Mosaic. These deterrents could make it very difficult for non-Cargill holders to remove or replace members of our Board of Directors or management, which could be detrimental to our other stockholders.

Our stockholders may be adversely affected by the expiration of the lockup and standstill restrictions in our Investor Rights Agreement with Cargill, which would enable Cargill to, among other things, transfer all or a significant percentage of its interest in our common stock to a third party, increase its ownership percentage of the our common stock above 65.3% or seek additional representation on our Board of Directors, any of which could have an impact on the price of our common stock.

Standstill provisions in our Investor Rights Agreement with Cargill restrict Cargill from acquiring additional shares of our common stock from our public stockholders and taking other specified actions as a stockholder of

Mosaic. These restrictions will expire on October 22, 2008. Following the expiration of the standstill period, Cargill will be free to increase its ownership interest in our common stock. Purchases of additional shares of our common stock by Cargill could result in lower trading volumes for our common stock and make it difficult for stockholders to sell shares of our common stock.

In addition, the Investor Rights Agreement prohibits Cargill from transferring or selling its shares of Mosaic common stock until October 22, 2007. Once this transfer restriction is terminated, Cargill will be permitted to sell its shares of our common stock. Cargill’s sale or transfer of a significant number of shares of our common stock could create a decline in the price of our common stock. Furthermore, if Cargill’s sales or transfers were made to a single buyer or group of buyers, it could result in a third party acquiring effective control of Mosaic.

Until the end of the standstill period, the Investor Rights Agreement also requires that Cargill vote its shares of Mosaic common stock for the slate of director nominees recommended by the Mosaic Board of Directors, and that Cargill cause its nominees on the Mosaic Board of Directors to recommend the four directors designated by the former representatives of IMC. After the standstill period, Cargill will be free to seek to increase its representation on the Mosaic Board of Directors above seven members. This action could further increase Cargill’s control over Mosaic and deter or delay an acquisition of Mosaic thereby having a negative impact on the price of our common stock.

We may experience difficulty in establishing a separate brand identity from Cargill, which could negatively affect our sales and operating results.

Our results of operations will be impacted by our ability to establish our own brand identity and our ability to ensure that our products are recognized in the marketplace. To that end, Cargill has licensed its brand to Mosaic on a royalty-free basis until October 2009 in conjunction with the sale of fertilizers, including in certain international jurisdictions where Cargill traditionally attracted premiums from customers. It is important for our management to develop a brand identity for our products and services separate from the Cargill brand while the license remains in effect. Our failure to do so could result in lower sales and negatively affect our revenues and operating results if Cargill did not extend the license. There can be no assurance that Cargill would extend the license if we requested it to do so.

Our success will depend on key personnel, the loss of whom could harm our businesses.

We believe our continued success depends on the collective abilities and efforts of our senior management. The loss of one or more key personnel could have a material adverse effect on our results of operations. Additionally, if we are unable to find, hire and retain needed key personnel in the future, our results of operations could be materially and adversely affected.

A shortage of railcars, barges and ships for carrying our products and the raw materials we use in our business could result in customer dissatisfaction, loss of production or sales, and higher transportation or equipment costs.

We rely heavily upon truck, rail, barge and ocean freight transportation to obtain the raw materials we need and to deliver our products to our customers. In addition, the cost of transportation is an important part of the final sale price of our products. Finding affordable and dependable transportation is important in obtaining our raw materials and to supply our customers. Higher costs for these transportation services or an interruption or slowdown due to factors including high demand, labor disputes, adverse weather or other environmental events, or changes to rail, barge or ocean freight systems, could negatively affect our ability to produce our products or deliver them to our customers, which could affect our performance and results of operations.

Strong demand for grain and other products and a strong world economy increase the demand for and reduce the availability of transportation, both domestically and internationally. Shortages of railcars, barges and ocean transport for carrying product and increased transit time may result in customer dissatisfaction, loss of sales and

higher equipment and transportation costs. The shipping industry has a shortage of ships and the substantial time frame needed to build new ships prevents rapid market response. Delays and missed shipments due to transportation shortages, including vessels, barges, railcars and trucks, could result in customer dissatisfaction or loss of sales potential, which could negatively affect our performance and results of operations.

We extend trade credit to our customers and guarantee the financing that some of our customers use to purchase our products. Our results of operations may be adversely affected if these customers are unable to repay the trade credit from us or their financing from their banks.

We extend trade credit to our customers in the United States and throughout the world, in some cases for extended periods of time. In Brazil, where there are fewer third-party financing sources available to farmers, we also have several programs under which we guarantee customers’ financing from financial institutions that they use to purchase our products. As our exposure to longer trade credit extended throughout the world and use of guarantees in Brazil increases, we will be increasingly exposed to the risk that some of our customers will not pay us or the amounts we have guaranteed, and we become increasingly exposed to risk due to weather and crop growing conditions, fluctuations in commodity prices or foreign currencies, and other factors that influence the price, supply and demand for agricultural commodities. Significant defaults by our customers could adversely affect our financial condition and results of operations.

Our current corporate organizational structure results in a high effective tax rate and does not optimize our ability to utilize cash generated by our profitable Canadian potash operations.

We generate the largest portion of our net income and cash flow from our successful Canadian potash business. In contrast, The Mosaic Company and Mosaic Global Holdings Inc., which are the primary obligors on most of our outstanding indebtedness, are organized under the laws of the State of Delaware in the United States. We historically have not obtained a deduction for Canadian income tax purposes for the interest expense of The Mosaic Company or Mosaic Global Holdings Inc., nor are we permitted to deduct any losses in the rest of our businesses for purposes of Canadian income taxes. As a result, we have incurred a high reported effective tax rate on our pre-tax income. Moreover, because of potential taxes or tax withholding, it may be economically unattractive to distribute or transfer cash generated by our Canadian potash operations to The Mosaic Company or Mosaic Global Holdings Inc. in order to make payments on our indebtedness or for other corporate purposes. We may not be readily able to restructure or take other actions that would reduce our high effective tax rate or improve our ability to use cash generated by our Canadian potash operations, or might incur significant costs in order to achieve a more efficient structure.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Information regarding our plant and properties is included in Part I, Item 1, “Business,” of this report.

Item 3. Legal Proceedings.

We have included information about legal and environmental proceedings in Note 23 of our Consolidated Financial Statements that is included in this report in Part II, Item 8, “Financial Statements and Supplementary Data.”

Item 4. Submission of Matters to a Vote of Security Holders.

There were no matters submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the three months ended May 31, 2006.

PART II.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

We have included information about the market price of, dividends on and the number of holders of our common stock under “Quarterly Results (Unaudited)” in the financial information that is included in this report in Part II, Item 8, “Financial Statements and Supplementary Data.”

We have included information on dividend restrictions in Note 13 of our Consolidated Financial Statements that are included in this report in Part II, Item 8, “Financial Statements and Supplementary Data”.

The principal stock exchange on which our common stock is traded is The New York Stock Exchange.

The following provides information related to equity compensation plans.


Plan category	Number of shares to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights		Number of shares remaining available for future issuance under equity compensation plans (excluding shares reflected in first column)
Equity compensation plans approved by stockholders	8,046,216	$	17.76	6,924,073
Equity compensation plans not approved by stockholders	—		—	—

Total	8,046,216	$	17.76	6,924,073

Pursuant to our employee stock plans relating to the grant of employee stock options, stock appreciation rights and restricted stock awards, we have granted and may in the future grant employee stock options to purchase shares of common stock of Mosaic for which the purchase price may be paid by means of delivery to us by the optionee of shares of common stock of Mosaic that are already owned by the optionee (at a value equal to market value on the date of the option exercise). During the period covered by this report, no options to purchase shares of common stock of Mosaic were exercised for which the purchase price was so paid.

Information regarding a sale of 455,581 shares of our common stock on March 31, 2006 as part of the USAC Transactions is incorporated herein by reference to Note 22 of our Consolidated Financial Statements that are included in this report in Part II, Item 8, “Financial Statements and Supplementary Data.” Such sale was made without registration under the Securities Act of 1933, as amended (the Act), in reliance on the exemption provided in Section 4(2) of the Act for transactions by an issuer not involving any public offering. The transaction involved a privately negotiated sale to an entity that is a sophisticated investor with knowledge and experience in business and financial matters, is able to bear the economic risk and lack of liquidity inherent in holding the shares and an “accredited investor” as that term is defined under Rule 501 of the Act; the purchaser agreed not to sell such stock without our consent until June 1, 2007; the stock certificates include a legend restricting transfer; the purchaser received certain information concerning us and had the opportunity to obtain additional information as desired in order to evaluate the merits and the risks inherent in holding the shares; and the purchaser acquired the shares solely for its own account for investment purposes, and not with a view to the distribution thereof.

Item 6. Selected Financial Data.

We have included selected financial data for our fiscal years 2002 through 2006 under “Five Year Comparison,” in the financial information that is included in this report in Part II, Item 8, “Financial Statements and Supplementary Data.” This information is incorporated herein by reference.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

The Management’s Discussion and Analysis of Financial Condition and Results of Operations listed in the Financial Table of Contents included in this report is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

We have included a discussion about market risks under “Market Risk” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations that is included in this report in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation.” This information is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data.

Our Consolidated Financial Statements, the Notes to Consolidated Financial Statements, the report of KPMG LLP, and the information under “Quarterly Results” listed in the Financial Table of Contents included in this report are incorporated herein by reference.

The following Consolidated Financial Statement Schedule of Mosaic and Report of Independent Registered Public Accounting Firm on Financial Statement Schedule listed in the Financial Table of Contents included in this report are incorporated herein by reference:

•

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule

•

Schedule II – Valuation and Qualifying Accounts

All other schedules for which provision is made in the applicable accounting regulation of the SEC are not required under the related instructions or are inapplicable, and therefore, have been omitted.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

(a) Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934 (Exchange Act) is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to management, including our principal executive officer and our principal financial officer, to allow timely decisions regarding required disclosures. Our management, with the participation of our principal executive officer and our principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Our principal executive officer and our principal financial officer have concluded, based on such evaluations, that our disclosure controls and procedures were not effective for the purpose for which they were designed as of the end of such period, because of the material weaknesses in our internal control over financial reporting described in section (b) below.

A material weakness in internal control over financial reporting is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statement will not be prevented or detected. In light of the material weaknesses described in section (b) below, in preparing our consolidated financial statements, we performed additional analyses and other post-closing procedures to ensure that our consolidated financial statements included in this Annual Report on

Form 10-K have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). We believe our financial statements in this Annual Report on Form 10-K fairly present, in all material respects, our financial position, results of operations and cash flows as of the dates and for the periods presented.

As a result of the Combination on October 22, 2004, we have been migrating from two internal control structures that previously existed at CCN and IMC. We inherited multiple legacy computer systems in North America and were not able to achieve adequate segregation of duties within these applications. Additionally, our Phosphates business segment was significantly impacted by the Combination which resulted in a complex integration process of the phosphate businesses of IMC and CCN. The Phosphates business segment has continued to operate with the disparate systems and internal controls are still maturing in line with our overall integration process following the Combination. As a result, we have material weaknesses in internal control over financial reporting which are outlined in section (b) below. Management’s plan to remediate these material weaknesses is described in detail in section (d) below.

(b) Management’s Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is identified in Exchange Act Rule 13a-15(f). The Company’s internal control system is a process designed to provide reasonable assurance to our management, Board of Directors and stockholders regarding the reliability of financial reporting and the preparation and fair presentation of our consolidated financial statements for external reporting purposes in accordance with U.S. GAAP, and includes those policies and procedures that:

•

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

•

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in conformity with U.S. GAAP, and that receipts and expenditures are being made only in accordance with authorizations from our management and directors; and

•

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of May 31, 2006. In making this assessment, management used the control criteria framework of the Committee of Sponsoring Organizations (COSO) of the Treadway Commission published in its report entitled Internal Control - Integrated Framework. As a result of this assessment, management identified the material weaknesses in the internal control over our financial reporting described below. Based on these material weaknesses, management concluded that the Company’s internal control over financial reporting was not effective as of May 31, 2006.

Ineffective monitoring of the internal controls of the Phosphates business segment. Management did not sufficiently monitor the internal control over financial reporting at the Phosphates business segment to ensure internal controls were operating effectively. This material weakness is the result of the following deficiencies:

•

The Company had inadequate monitoring controls to ensure that certain corporate policies and procedures were consistently followed at the Phosphates business segment. Additionally, there was lack of discipline around monitoring the effectiveness of identified controls and remediation of deficiencies at the Phosphates business segment; and

•

The Company did not maintain a sufficient complement of personnel with the appropriate level of knowledge, experience and training in the application of U.S. GAAP and in internal control over financial reporting at the Phosphates business segment.

These deficiencies resulted in ineffective review and monitoring procedures over account reconciliations and journal entries at the Phosphates business segment. Additionally, there were inadequate controls related to completeness, accuracy and validity of inventory transactions at the Phosphates business segment.

This control deficiency resulted in errors in the interim and annual consolidated financial statements and more than a remote likelihood that a material misstatement in the Company’s consolidated financial statements would not be prevented or detected.

Inadequate segregation of duties. The Company had inadequate segregation of duties related to North American computer software applications. Management has concluded that this control deficiency resulted in more than a remote likelihood that a material misstatement in the Company’s interim or annual consolidated financial statements would not be prevented or detected.

Ineffective controls over the accounting for income taxes. The Company did not maintain adequate oversight and review of its accounting for income taxes. Specifically, the Company did not have adequate supervisory review over the preparation of the year-end tax provision and over the process of reconciling and analyzing income tax-related accounts. This control deficiency resulted in errors in the interim and annual consolidated financial statements and more than a remote likelihood that a material misstatement in the Company’s consolidated financial statements would not be prevented or detected.

KPMG LLP, an independent registered public accounting firm, has issued an auditors’ report on management’s assessment of the Company’s internal control over financial reporting as of May 31, 2006.

(c) Changes in Internal Control Over Financial Reporting

Management, with the participation of our principal executive officer and our principal financial officer, has evaluated any change in internal control over financial reporting that occurred during each of the fiscal quarters in the fiscal year ended May 31, 2006 in accordance with the requirements of Rule 13a-15(e) promulgated by the SEC under the Exchange Act. We have made significant improvements and changes to our internal control over financial reporting during the three months ended May 31, 2006, including hiring an executive with responsibility for the global controllers’ organization, adding and upgrading resources in our corporate financial reporting and accounting groups, and hiring an accounting research manager in the corporate financial reporting area to improve our accounting research capabilities. However, our Vice President - Tax accepted a position with another company in early June 2006, prior to the completion of our year-end tax provision procedures. In the interim, we have engaged external tax specialists and our Vice President - Finance is providing additional oversight in tax matters. There were no other changes in internal control over financial reporting identified in connection with management’s evaluation that occurred during the three months ended May 31, 2006 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

(d) Remediation of Material Weaknesses

Remediation of Previously Reported Material Weaknesses and Other Items

As discussed in “Controls and Procedures” in Part II, Item 9A in our Annual Report on Form 10-K for the fiscal year ended May 31, 2005 (2005 Form 10-K), management concluded that, for the periods covered by such report, a material weakness in our internal control over financial reporting existed. Management’s conclusion set forth in the 2005 Form 10-K resulted from the identification of our lack of a sufficient number of adequately trained

finance and accounting personnel in our field operations with appropriate U.S. GAAP expertise. Additionally, we reported the existence of a material weakness in Part I, Item 4 in our Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 2005, November 30, 2005 and February 28, 2006 (2006 Form 10-Q Reports) noting an entity level control weakness that was the result of the following contributing factors: a lack of a sufficient number of adequately trained finance and accounting personnel, a lack of adherence to defined policies and procedures, and a lack of a fully developed compliance and control structure.

We have remediated the material weaknesses identified in our 2005 Form 10-K and 2006 Form 10-Q Reports, except as such material weakness relates to ineffective monitoring of the internal controls of the Phosphates business segment, as discussed above. We completed the following remediation measures related to the material weaknesses set forth in our 2005 Form 10-K and 2006 Form 10-Q Reports:

•

Established a quarterly business review process, which ensures in-depth senior leadership review of business segment results and prospects on a regular basis.

•

Adopted internal policies related to accounting, financial risk management, tax, credit and investments.

•

Increased internal audit staff to independently monitor and evaluate the adequacy and effectiveness of internal controls.

•

Emphasized the active participation of our Disclosure Committee, which meets regularly to discuss performance trends and issues, controls, and other matters to ensure that our disclosure controls and procedures are functioning as designed.

•

Initiated several internal changes in our accounting organization designed to enhance our internal control structure:

•

Hired an executive with responsibility for the global controllers’ organization. This executive is reinforcing and, where necessary, establishing appropriate processes and procedures to help ensure a strong and effective control structure.

•

Added and upgraded resources in our corporate financial reporting, accounting and financial planning and analysis groups.

•

Hired an accounting research manager in the corporate financial reporting area to improve our accounting research capabilities.

•

Appointed a controller with public accounting experience for our commercial operations.

•

We are monitoring and assessing the structure of our finance and accounting teams and the necessity for hiring additional U.S. GAAP trained finance and accounting personnel beyond those positions described above.

•

We have undertaken several initiatives to educate our management team on key financial and internal control issues. We also conducted training sessions for most salaried employees to create additional awareness about our financial reporting requirements.

•

We have implemented education programs within Mosaic designed to ensure that all finance and accounting employees are adequately trained and supervised in the application of U.S. GAAP. We have developed and conducted, and expect to continue to develop and conduct, training sessions related to key accounting issues, including U.S. GAAP and SEC accounting and reporting requirements.

•

We have strengthened our communication protocols and relationships between our commercial management and our finance and accounting personnel. These protocols are designed to ensure that transactions are identified for proper accounting analysis and treatment.

Additionally, as discussed in “Controls and Procedures” in Part I, Item 4 in our Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2006, management identified other areas where potential deficiencies or material weaknesses could be identified related to effective controls in our corporate financial statement close and consolidation areas. We believe we have effective controls and processes in these areas as of May 31, 2006.

Remediation Plan Related to 2006 10-K Material Weaknesses

Management is committed to improving the overall internal control over financial reporting within our organization to remediate the material weaknesses identified in section (b) above, and ensure mitigating controls are in place where necessary. Therefore, in response to the foregoing and as part of our remediation and integration plans, we, with the oversight of our Audit Committee, plan to adopt the following measures:

•

We anticipate implementing a new enterprise resource planning (ERP) system for North American operations in the first half of fiscal 2007. We have recently evaluated our North American finance and accounting functions and are in process of realigning them and related personnel with our new structure under the ERP. One common computer system in North America will enhance the internal control over financial reporting as it will allow management to focus on consistent processes and maximize reliance on automated controls within the ERP system.

•

We are evaluating segregation of duties as it relates to our ERP. Such evaluation includes internal audit oversight and assistance from external consultants and is anticipated to greatly reduce segregation of duties conflicts.

•

We are seeking additional accounting personnel with strong public accounting experience for our Phosphates business segment to be based in Florida. We expect these new hires to perform accounting research and oversee internal control matters within the Phosphates business segment.

•

We will utilize recently added key corporate financial accounting and accounting research resources to supplement the Phosphates business segment financial accounting and financial reporting expertise.

•

We will implement monthly business segment financial reviews within the controllers’ organization that encompass analysis of actual results by business segment and quarterly business segment balance sheet reviews.

•

We will enhance internal audit procedures at the Phosphates business segment to independently monitor and evaluate the adequacy and effectiveness of internal controls.

•

We are conducting an outside search for a Vice President - Tax. In the interim, we have engaged external tax specialists and our Vice President - Finance is providing additional oversight in tax matters. We also plan to enhance our procedures and reviews over reconciling and analyzing income tax-related accounts.

While we are implementing remediation plans to address the material weaknesses noted above, we will not consider the material weaknesses remediated until the new internal controls operate for a sufficient period of time, are tested, and management concludes that these controls are operating effectively.

(e) Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

The Mosaic Company:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting (Item 9A(b)), that the Mosaic Company (the Company) did not maintain effective internal control over financial reporting as of May 31, 2006, because of the effect of material weaknesses identified in management’s assessment, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The following material weaknesses have been identified and included in management’s assessment as of May 31, 2006:

•

The Company had inadequate monitoring controls to ensure that certain corporate policies and procedures were consistently followed at the Phosphates business segment. Additionally, there was

lack of discipline around monitoring the effectiveness of identified controls and remediation of deficiencies at the Phosphates business segment; and

•

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company and subsidiaries as of May 31, 2006 and 2005, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years in the three-year period ended May 31, 2006. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the fiscal 2006 consolidated financial statements, and this report does not affect our report dated August 11, 2006, which expressed an unqualified opinion on those consolidated financial statements.

In our opinion, management’s assessment that the Company did not maintain effective internal control over financial reporting as of May 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, because of the effect of the material weaknesses described above on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of May 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

/s/ KPMG LLP

Minneapolis, Minnesota

August 11, 2006

Item 9B. Other Information

None.

PART III.

Item 10. Directors and Executive Officers of the Registrant.

The information contained under the headings “Proposal No. 1 – Election of Directors,” “Corporate Governance—Committees of the Board of Directors,” “Corporate Governance—Policies Relating to the Board of Directors—Nomination and Selection of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,” and “Stockholder Proposals and Nominations for the 2007 Annual Meeting of Stockholders” included in our definitive proxy statement for our 2006 annual meeting of stockholders and the information contained under “Executive Officers of the Registrant,” in Part I, Item 1, “Business,” in this report is incorporated herein by reference.

We have a Code of Business Conduct and Ethics within the meaning of Item 406 of Regulation S-K adopted by the SEC under the Exchange Act that applies to our principal executive officer, principal financial officer and principal accounting officer. Our Code of Business Conduct and Ethics is available on Mosaic’s website (www.mosaicco.com), and we intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding any amendment to, or waiver from, a provision of our code of ethics by posting such information on our website. The information contained on Mosaic’s website is not being incorporated herein.

Item 11. Executive Compensation.

The information under the heading “Corporate Governance—Policies Relating to the Board of Directors—Compensation of Directors” “Executive Compensation” (other than the section entitled “—Report of the Compensation Committee”), included in our definitive proxy statement for our 2006 annual meeting of stockholders is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information under the headings “Beneficial Ownership of Securities,” “Certain Relationships and Related Transactions—Investor Rights Agreement,” and “Certain Relationships and Related Transactions—Registration Rights Agreement” included in our definitive proxy statement for our 2006 annual meeting of stockholders is incorporated herein by reference. The table set forth in Part II, Item 5, “Market for Registrant’s Common Stock and Related Stockholder Matters,” of this report is also incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions.

The information under the headings “Executive Compensation” “ (other than the section entitled “—Report of the Compensation Committee”) and “Certain Relationships and Related Transactions” included in our definitive proxy statement for our 2006 annual meeting of stockholders is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services.

The information included under “Audit Committee Report and Payment of Fees to Independent Registered Public Accounting Firm—Fees Paid to Independent Registered Public Accounting Firm” and “Audit Committee Report and Payment of Fees to Independent Registered Public Accounting Firm—Preapproval of Independent Registered Public Accounting Firm Services” included in our definitive proxy statement for our 2006 annual meeting of stockholders is incorporated herein by reference.

PART IV.

Item 15. Exhibits and Financial Statement Schedules

(a) (1)

Consolidated Financial Statements filed as part of this report are listed in the Financial Table of Contents included in this report in Part II, Item 8, “Financial Statements and Supplementary Data.”

(2)

All schedules for which provision is made in the applicable accounting regulations of the SEC are listed in this report in Part II, Item 8, “Financial Statements and Supplementary Data.”

(3)

Reference is made to the Exhibit Index beginning on page E-1 hereof.

(b)

Exhibits

Reference is made to the Exhibit Index beginning on page E-1 hereof.

(c)

Summarized financial information of 50% or less owned persons is included in Note 11 of Notes to Consolidated Financial Statements included in this report in Part II, Item 8, “Financial Statements and Supplementary Data.” Financial statements and schedules are omitted as none of such persons are significant under the tests specified in Regulation S-X under Article 3.09 of general instructions to the financial statements.

*********************************************

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

THE MOSAIC COMPANY

(Registrant)

/s/ Fredric W. Corrigan

Fredric W. Corrigan

Chief Executive Officer and President

Date: August 11, 2006

S-1

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:


Name	Title	Date
/s/ Fredric W. Corrigan Fredric W. Corrigan	Chief Executive Officer and President (principal executive officer)	August 11, 2006

/s/ Lawrence W. Stranghoener Lawrence W. Stranghoener	Executive Vice President and Chief Financial Officer (principal financial officer)	August 11, 2006

/s/ Anthony T. Brausen Anthony T. Brausen	Vice President - Finance and Chief Accounting Officer (principal accounting officer)	August 11, 2006

* Robert L. Lumpkins	Chairman of the Board of Directors	August 11, 2006

* F. Guillaume Bastiaens	Director	August 11, 2006

* Raymond F. Bentele	Director	August 11, 2006

* William R. Graber	Director	August 11, 2006

* Harold H. MacKay	Director	August 11, 2006

* David B. Mathis	Director	August 11, 2006

* Bernard M. Michel	Director	August 11, 2006

* William T. Monahan	Director	August 11, 2006

* James T. Prokopanko	Director	August 11, 2006

* Steven M. Seibert	Director	August 11, 2006


*By:
		/s/ Lawrence W. Stranghoener
		Lawrence W. Stranghoener Attorney-in-fact

S-2

Exhibit Index


Exhibit No.	Description	Incorporated Herein by Reference to	Filed with Electronic Submission
2.i.	Agreement and Plan of Merger and Contribution, dated as of January 26, 2004, by and among IMC Global Inc. (now known as Mosaic Global Holdings Inc.), Global Nutrition Solutions, Inc. (now known as The Mosaic Company), GNS Acquisition Corp., Cargill, Incorporated and Cargill Fertilizer, Inc., as amended by Amendment No. 1 to Agreement and Plan of Merger and Contribution, dated as of June 15, 2004 and as further amended by Amendment No. 2 to Agreement and Plan of Merger and Contribution, dated as of October 18, 2004*	Exhibit 2.1 to the Current Report on Form 8-K of The Mosaic Company (“Mosaic”) for October 22, 2004**

2.ii.	Letter Agreement dated April 11, 2005 to Agreement and Plan of Merger and Contribution, dated as of January 26, 2004, by and among IMC Global Inc., Global Nutrition Solutions, Inc., Cargill, Incorporated and Cargill Fertilizer, Inc., as amended by Amendment No. 1 to Agreement and Plan of Merger and Contribution, dated as of June 15, 2004 and as further amended by Amendment No. 2 to Agreement and Plan of Merger and Contribution, dated as of October 18, 2004	Exhibit 2 to the Quarterly Report on Form 10-Q of Mosaic for the Quarterly Period ended February 28, 2005**

3.i.a.	Restated Certificate of Incorporation of Mosaic	Exhibit 3.1 to Mosaic’s Registration Statement on Form 8-A dated October 22, 2004**

3.ii.	Amended and Restated Bylaws of Mosaic	Exhibit 3.3 to Mosaic’s Registration Statement on Form 8-A dated October 22, 2004**

4.ii.a.	Indenture dated as of May 17, 2001 between Mosaic Global Holdings Inc. (formerly known as IMC Global Inc.), the Guarantors named therein and The Bank of New York relating to the issuance of 10.875% Senior Notes due 2008	Exhibit 4.ii.(b) to the Current Report on Form 8-K of Mosaic Global Holdings Inc. for May 17, 2001****

4.ii.b.	Indenture dated as of May 17, 2001 between Mosaic Global Holdings Inc., the Guarantors named therein and The Bank of New York relating to the issuance of 11.250% Senior Notes due 2011	Exhibit 4.ii.(c) to the Current Report on Form 8-K of Mosaic Global Holdings Inc. for May 17, 2001****

E-1


Exhibit No.	Description	Incorporated Herein by Reference to	Filed with Electronic Submission
4.ii.c.	Supplemental Indenture dated as of May 31, 2001 among FMRP Inc., Mosaic Global Holdings Inc. and The Bank of New York to the Indentures dated as of May 17, 2001 between Mosaic Global Holdings Inc., the Guarantors named therein and The Bank of New York relating to the issuance of 10.875% Senior Notes due 2008 and 11.250% Senior Notes due 2011	Exhibit 4.ii.(a) to Amendment No. 1 to Registration Statement No. 333-71510

4.ii.d.	Supplemental Indenture dated as of August 2, 2001 between Mosaic Global Netherlands B.V., Mosaic Global Holdings Inc. and The Bank of New York to the Indentures dated as of May 17, 2001 between Mosaic Global Holdings Inc., the Guarantors named therein and The Bank of New York relating to the issuance of 10.875% Senior Notes due 2008 and 11.250% Senior Notes due 2011	Exhibit 4.ii.(b) to Amendment No. 1 to Registration Statement No. 333-71510

4.ii.e.	Supplemental Indenture dated as of November 6, 2001 between Mosaic Phosphates MP Inc. (formerly known as IMC Phosphates MP Inc.), Mosaic Global Holdings Inc. and The Bank of New York to the Indentures dated as of May 17, 2001 between Mosaic Global Holdings Inc., the Guarantors named therein and The Bank of New York relating to the issuance of 10.875% Senior Notes due 2008 and 11.250% Senior Notes due 2011	Exhibit 4.ii.(c) to Amendment No. 1 to Registration Statement No. 333-71510

4.ii.f.	Supplemental Indenture dated as of November 26, 2001 between Mosaic USA LLC (formerly known as IMC USA Inc. LLC), Mosaic Global Holdings Inc. and The Bank of New York to the Indentures dated as of May 17, 2001 between Mosaic Global Holdings Inc., the Guarantors named therein and The Bank of New York relating to the issuance of 10.875% Senior Notes due 2008 and 11.250% Senior Notes due 2011	Exhibit 4.ii.(a) to Amendment No. 1 to Registration Statement No. 333-103362

4.iig.	Supplemental Indenture dated as of January 1, 2002 between Mosaic Potash Colonsay ULC (formerly known as IMC Potash Colonsay ULC), Mosaic Global Holdings Inc. and The Bank of New York	Exhibit 4.ii.(h) to the Annual Report on Form 10-K of Mosaic Global Holdings Inc. for the Fiscal Year Ended December 31, 2001****

E-2


Exhibit No.	Description	Incorporated Herein by Reference to	Filed with Electronic Submission
	to the Indentures dated as of May 17, 2001 between Mosaic Global Holdings Inc., the Guarantors named therein and The Bank of New York relating to the issuance of 10.875% Senior Notes due 2008 and 11.250% Senior Notes due 2011

4.ii.h.	Supplemental Indenture dated as of July 1, 2002 between Mosaic Sulphur Holdings LLC (formerly known as IMC Sulphur Holdings LLC), Mosaic Global Holdings Inc. and The Bank of New York to the Indentures dated as of May 17, 2001 between Mosaic Global Holdings Inc., the Guarantors named therein and The Bank of New York relating to the issuance of 10.875% Senior Notes due 2008 and 11.250% Senior Notes due 2011	Exhibit 4.ii.(c) to Amendment No. 1 to Registration Statement No. 333-103362

4.ii.i.	Supplemental Indenture dated as of July 1, 2002 between Mosaic Global Dutch Holdings B.V., Mosaic Global Holdings Inc. and The Bank of New York to the Indentures dated as of May 17, 2001 between Mosaic Global Holdings Inc., the Guarantors named therein and The Bank of New York relating to the issuance of 10.875% Senior Notes due 2008 and 11.250% Senior Notes due 2011	Exhibit 4.ii.(d) to Amendment No. 1 to Registration Statement No. 333-103362

4.ii.j.	Supplemental Indenture dated as of July 3, 2003 between Mosaic Global Holdings Inc. and The Bank of New York to the Indentures dated as of May 17, 2001 between Mosaic Global Holdings Inc., the Guarantors named therein and The Bank of New York relating to the issuance of 10.875% Senior Notes due 2008 and 11.250% Senior Notes due 2011	Exhibit 4.ii.(a) to the Quarterly Report on Form 10-Q of Mosaic Global Holdings Inc. for the Quarterly Period Ended June 30, 2003****

4.ii.k.	Indenture dated as of August 1, 2003 between Mosaic Global Holdings Inc., the Guarantors named therein and BNY Midwest Trust Company relating to the issuance of 10.875% Senior Notes due 2013	Exhibit 4.ii.(a) to the Quarterly Report on Form 10-Q of Mosaic Global Holdings Inc. for the Quarterly Period Ended September 30, 2003****

4.ii.l.	Supplemental Indenture dated as of October 21, 2003 between PRP-GP LLC and The Bank of New York to the Indentures dated as of May 17, 2001 between Mosaic Global Holdings Inc., the Guarantors named therein and The Bank	Exhibit 4.ii.(b) to the Quarterly Report on Form 10-Q of Mosaic Global Holdings Inc. for the Quarterly Period Ended September 30, 2003****

E-3


Exhibit No.	Description	Incorporated Herein by Reference to	Filed with Electronic Submission
	of New York relating to the issuance of 10.875% Senior Notes due 2008 and 11.250% Senior Notes due 2011

4.ii.m.	Supplemental Indenture dated as of October 21, 2003 between PRP-GP LLC and BNY Midwest Trust Company to the Indenture dated as of August 1, 2003 between Mosaic Global Holdings Inc., the Guarantors named therein and BNY Midwest Trust Company relating to the issuance of 10.875% Senior Notes due 2013	Exhibit 4.ii.(c) to the Quarterly Report on Form 10-Q of Mosaic Global Holdings Inc. for the Quarterly Period Ended September 30, 2003****

4.ii.n.	Supplemental Indenture, dated as of February 29, 2004, between Mosaic Canada ULC (formerly known as IMC Canada Ltd.), 3086146 Nova Scotia Company, Mosaic Global Holdings Inc. and The Bank of New York to the Indentures dated as of May 17, 2001 between Mosaic Global Holdings Inc., the Guarantors named therein and The Bank of New York relating to the issuance of 10.875% Senior Notes due 2008 and 11.250% Senior Notes due 2011	Exhibit 4.ii.(a) to the Quarterly Report on Form 10-Q, as amended by Amendment No. 1 on Form 10-Q/A, of Mosaic Global Holdings Inc. for the Quarterly Period Ended March 31, 2004****

4.ii.o.	Supplemental Indenture, dated as of February 29, 2004, between Mosaic Canada ULC (formerly known as IMC Canada Ltd.), 3086146 Nova Scotia Company, IMC Global Inc. and The Bank of New York to the Indenture dated as of August 1, 2003 between Mosaic Global Holdings Inc., the Guarantors named therein and BNY Midwest Trust Company relating to the issuance of 10.875% Senior Notes due 2013	Exhibit 4.ii.(b) to the Quarterly Report on Form 10-Q, as amended by Amendment No. 1 on Form 10-Q/A, of Mosaic Global Holdings Inc. for the Quarterly Period Ended March 31, 2004****

4.ii.p.	Supplemental Indenture, dated as of May 27, 2004, among Phosphate Acquisition Partners L.P., Mosaic Global Holdings Inc. and The Bank of New York to the Indentures dated as of May 17, 2001 between Mosaic Global Holdings Inc., the Guarantors named therein and The Bank of New York relating to the issuance of 10.875% Senior Notes due 2008 and 11.250% Senior Notes due 2011	Exhibit 4.1 to the Quarterly Report on Form 10-Q, as amended by Amendment No. 1 on Form 10-Q/A, of Mosaic Global Holdings Inc. for the Quarterly Period Ended June 30, 2004****

E-4


Exhibit No.	Description	Incorporated Herein by Reference to	Filed with Electronic Submission
4.ii.q.	Supplemental Indenture, dated as of May 27, 2004, among Phosphate Acquisition Partners L.P., Mosaic Global Holdings Inc. and BNY Midwest Trust Company to the Indenture dated as of August 1, 2003 between Mosaic Global Holdings Inc., the Guarantors named therein and BNY Midwest Trust Company relating to the issuance of 10.875% Senior Notes due 2013	Exhibit 4.2 to the Quarterly Report on Form 10-Q, as amended by Amendment No. 1 on Form 10-Q/A, of Mosaic Global Holdings Inc. for the Quarterly Period Ended June 30, 2004****

4.ii.r.	Supplemental Indenture dated as of January 4, 2005 among Mosaic Global Holdings Inc. (formerly known as IMC Global Inc.), Mosaic, Mosaic Fertilizer, LLC, Mosaic Crop Nutrition, LLC and The Bank of New York to the Indenture, dated as of May 17, 2001, between IMC Global Inc., the Guarantors named therein and The Bank of New York relating to the issuance of 10.875% Senior Notes due 2008	Exhibit 10.i.g. to the Quarterly Report on Form 10-Q of Mosaic for the Quarterly Period Ended November 30, 2004**

4.ii.s.	Supplemental Indenture dated as of January 4, 2005 among Mosaic Global Holdings Inc. (formerly known as IMC Global Inc.), Mosaic, Mosaic Fertilizer, LLC, Mosaic Crop Nutrition, LLC and The Bank of New York to the Indenture, dated as of May 17, 2001, between IMC Global Inc., the Guarantors named therein and The Bank of New York relating to the issuance of 11.250% Senior Notes due 2011	Exhibit 10.i.h. to the Quarterly Report on Form 10-Q of Mosaic for the Quarterly Period Ended November 30, 2004**

4.ii.t.	Supplemental Indenture dated as of January 4, 2005 among Mosaic Global Holdings Inc. (formerly known as IMC Global Inc.), Mosaic, Mosaic Fertilizer, LLC, Mosaic Crop Nutrition, LLC and BNY Midwest Trust Company to the Indenture, dated as of August 1, 2003, between IMC Global Inc., the Guarantors named therein and BNY Midwest Trust Company relating to the issuance of 10.875% Senior Notes due 2013	Exhibit 10.i.i. to the Quarterly Report on Form 10-Q of Mosaic for the Quarterly Period Ended November 30, 2004**

4.ii.u.	Credit Agreement dated as of February 18, 2005 among Mosaic, Mosaic Fertilizer, LLC, Mosaic Global Holdings Inc., Mosaic Potash Colonsay ULC, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto	Exhibit 4.v. to the Current Report on Form 8-K of Mosaic for February 18, 2005**

E-5


Exhibit No.	Description	Incorporated Herein by Reference to	Filed with Electronic Submission
4.ii.v.	Form of amendment, dated as of July 29, 2005, to Credit Agreement dated as of February 18, 2005 among The Mosaic Company, Mosaic Fertilizer, LLC, Mosaic Global Holdings Inc., Mosaic Potash Colonsay ULC, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto	Exhibit 4 to the Current Report on Form 8-K of Mosaic for July 29, 2005**

4.ii.w.	Form of amendment, dated as of December 13, 2005, to Credit Agreement dated as of February 18, 2005 among The Mosaic Company, Mosaic Fertilizer, LLC, Mosaic Global Holdings Inc., Mosaic Potash Colonsay ULC, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto, as amended	Exhibit 4 to the Current Report on Form 8-K of Mosaic for December 13, 2005**

4.ii.x	Form of amendment and waiver dated as of January 13, 2006 to the Credit Agreement dated as of February 18, 2005 among The Mosaic Company, Mosaic Fertilizer, LLC, Mosaic Global Holdings Inc., Mosaic Potash Colonsay ULC, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto, as amended	Exhibit 99.1 to the Current Report on Form 8-K of Mosaic for January 6, 2006**

4.ii.y	Form of amendment and waiver to the Credit Agreement dated as of May 31, 2006 among The Mosaic Company, Mosaic Fertilizer, LLC, Mosaic Global Holdings Inc., Mosaic Potash Colonsay ULC, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto, as amended	Exhibit 99.1 to the Current Report on Form 8-K of Mosaic for May 19, 2006**

4.iii.	Registrant hereby agrees to furnish to the Commission, upon request, with all other instruments defining the rights of holders of each issue of long-term debt of the Registrant and its consolidated subsidiaries

10.i.a.	Global Resolution Agreement dated as of October 13, 2005 between The Mosaic Company, U.S. Agri-Chemicals Corporation and Sinochem Corporation	Exhibit 10.1.a to the Quarterly Report on Form 10-Q of Mosaic for the Quarterly Period Ended November 30, 2005.

10.i.b.	Registration Rights Agreement dated as of December 1, 2005 between The Mosaic Company and U.S. Agri-Chemicals Corporation	Exhibit 10.1.b to the Quarterly Report on Form 10-Q of Mosaic for the Quarterly Period Ended November 30, 2005

E-6


Exhibit No.	Description	Incorporated Herein by Reference to	Filed with Electronic Submission
10.i.c.	Amendment No. 1 dated as of March 31, 2006 to Registration Rights Agreement dated as of December 1, 2005 between The Mosaic Company and U.S. Agri-Chemicals Corporation		X

10.ii.a.	Investor Rights Agreement dated as of January 26, 2004 and amended October 22, 2004, by and between Cargill and Mosaic	Exhibit 10.1 to the Registration Statement on Form 8-A filed by Mosaic with the Securities and Exchange Commission on October 22, 2004**

10.ii.b.	Registration Rights Agreement, dated as of January 26, 2004, by and between Cargill and Mosaic	Annex C to the proxy statement/prospectus forming a part of Registration Statement No. 333-114300

10.ii.c.	Master Transition Services Agreement, dated as of October 22, 2004, by and between Registrant and Cargill*	Exhibit 10.2 to Mosaic’s Current Report on Form 8-K for October 22, 2004**

10.ii.d.	Master Agency Agreement—Convertibility Enhanced Note Issuance Program dated August 8, 2002 between Mosaic Fertilizantes do Brazil S.A. (formerly known as Cargill Fertilizantes SA) and Cargill Financial Services International, Inc.*	Exhibit 10.ii.d. to the Quarterly Report on Form 10-Q of Mosaic for the Quarterly Period Ended November 30, 2004**

10.ii.e.	Amendment Agreement dated October 30, 2002 to Master Agency Agreement—Convertibility Enhanced Note Issuance Program dated August 8, 2002 between Mosaic Fertilizantes do Brazil S.A. (formerly known as Cargill Fertilizantes SA) and Cargill Financial Services International, Inc.*	Exhibit 10.ii.e. to the Quarterly Report on Form 10-Q of Mosaic for the Quarterly Period Ended November 30, 2004**

10.ii.f.	Second Amendment Agreement dated October 8, 2004 to Master Agency Agreement—Convertibility Enhanced Note Issuance Program dated August 8, 2002 between Mosaic Fertilizantes do Brazil S.A. (formerly known as Cargill Fertilizantes SA) and Cargill Financial Services International, Inc.	Exhibit 10.ii.f. to the Quarterly Report on Form 10-Q of Mosaic for the Quarterly Period Ended November 30, 2004**

10.ii.g.	Fertilizer Agency Agreement dated October 22, 2004 (effective July 7, 2005) between Cargill Limited and Mosaic (Canada) L.P.	Exhibit 10.ii.a. to the Quarterly Report on Form 10-Q of Mosaic for the Quarterly Period Ended August 31, 2005**

E-7


Exhibit No.	Description	Incorporated Herein by Reference to	Filed with Electronic Submission
10.ii.h.	Service Agreement dated July 11, 2005 (effective July 7, 2005) between Mosaic Fertilizer, LLC and Cargill International SA, Ocean Transportation Division	Exhibit 10.ii.b. to the Quarterly Report on Form 10-Q of Mosaic for the Quarterly Period Ended August 31, 2005**

10.ii.i.	Barge Freight and Sales Agreement between Mosaic Fertilizer, LLC and Cargo Carriers Division of Cargill Marine and Terminal, Inc. dated July 5, 2005	Exhibit 10.ii.c. to the Quarterly Report on Form 10-Q of Mosaic for the Quarterly Period Ended August 31, 2005**

10.ii.j.	Supply Agreement between Mosaic Fertilizer, LLC dba Mosaic Feed Ingredients and Tradico North America dated June 6, 2005 (effective July 7, 2005) related to supply of feed grade phosphate, potash and urea products in the United States, Canada and Mexico	Exhibit 10.ii.d. to the Quarterly Report on Form 10-Q of Mosaic for the Quarterly Period Ended August 31, 2005**

10.ii.k.	Supply Agreement between Mosaic Fertilizer, LLC dba Mosaic Feed Ingredients and Tradico International dated June 6, 2005 (effective July 7, 2005) related to supply of feed grade phosphate, potash and urea products in Vietnam, Indonesia and Taiwan	Exhibit 10.ii.e. to the Quarterly Report on Form 10-Q of Mosaic for the Quarterly Period Ended August 31, 2005**

10.ii.l.	Supply Agreement between Mosaic Fertilizer, LLC dba Mosaic Feed Ingredients and Cargill Philippines, Grain and Oilseeds Crush Business Segment related to supply of feed grade phosphate, potash and urea in the Philippines	Exhibit 10.ii.f. to the Quarterly Report on Form 10-Q of Mosaic for the Quarterly Period Ended August 31, 2005**

10.ii.m.	Barter Agreement dated May 31, 2005 (effective July 7, 2005) between Cargill Agricola S.A. and Mosaic Fertilizantes Do Brasil S.A.	Exhibit 10.ii.g. to the Quarterly Report on Form 10-Q of Mosaic for the Quarterly Period Ended August 31, 2005**

10.ii.n.	Fruit Purchase Contracts 21880, 21881 and 21882 dated March 21, 2005 (effective October 4, 2005) between South Fort Meade Land Management and Cargill Juice North America, Inc.	Exhibit 10.ii.h. to the Quarterly Report on Form 10-Q of Mosaic for the Quarterly Period Ended August 31, 2005**

10.ii.o.	Amendment to Master Transition Services Agreement dated May 16, 2006, between Cargill, Incorporated and The Mosaic Company		X

10.ii.p.	Services Agreement for Logistics and General Services dated May 16, 2006 between Mosaic de Argentina S.A. and Cargill S.A.C.I.		X

E-8


Exhibit No.	Description	Incorporated Herein by Reference to	Filed with Electronic Submission
10.ii.q.	Services Agreement dated May 16, 2006 between Banco Cargill S.A. and Mosaic Fertilizantes do Brasil S.A.		X

10.ii.r.	Contract of Assignment under the Contract #1 of February 24, 2004 between Cargill YUG LLC, Mosaic Krasnodar LLC and AG-CHEM Europe, B.V.		X

10.ii.s.	Fertilizer Supply Agreement dated October 22, 2004 between Mosaic (Canada) L.P. and Cargill Limited		X

10.ii.t.	Fertilizer Supply Agreement dated October 22, 2004 between Mosaic Company and Cargill, Incorporated, Ag Horizons business unit		X

10.ii.u.	Phosphate Supply Agreement between Mosaic Crop Nutrition, LLC and Cargill Sociedad Anonima Commercial e Industrial		X

10.ii.v.	Fertilizer Supply Agreement dated January 4, 2006 between Mosaic S. de R.L. de C.V. and Agribrands Purina Mexico S.A. de C.V.		X

10.ii.w.	Agreement for Untreated White Muriate of Potash dated February 24, 2006 between Mosaic USA LLC and Cargill, Incorporated, Salt business unit		X

10.ii.x.	Barter Agreement dated May 16, 2006 between Mosaic de Argentina S.A. and Cargill Agropecruaria S.A.C.I.		X

10.ii.y.	Fruit Purchase Contract 22059 dated May 16, 2006 and Fruit Purchase Contract 21932 dated August 31, 2005 between South Fort Meade Land Management Inc. and Cargill Juice North America, Inc.		X

10.ii.z.	Supply Agreement dated May 16, 2006 between Fertilizantes Mosaic S. de R.L. de C.V. and Nutrimentos Agropecuarios Purina S.A. de C.V. (NAPSA) related to supply of feed grade phosphates		X

10.ii.aa.	Supply Agreement dated March 1, 2006 between Fertilizantes Mosaic S. de R.L. de C.V. and Proveedora de Alimentos Avepecuarios S.A. de C.V. (PROVI) related to supply of feed grade phosphates		X

E-9


Exhibit No.	Description	Incorporated Herein by Reference to	Filed with Electronic Submission
10.ii.bb.	Supply Agreement dated May 16, 2006 between Mosaic Fertilizer, LLC and Cargill, Incorporated, Animal Nutrition business segment, related to supply of feed grade phosphates in the United States and Canada		X

10.ii.cc.	Supply Agreement dated May 16, 2006 between Mosaic Fertilizer, LLC and Cargill Incorporated, Animal Nutrition business segment for the sale of feed grade phosphates to Cargill in Venezuela		X

10.ii.dd.	Supply Agreement dated May 18, 2006 between Mosaic Fertilizer, LLC and Cargill Phillipines for the sale of feed grade phosphates to Cargill in the Philippines		X

10.ii.ee.	Supply Agreement dated May 16, 2006 between Mosaic Fertilizer, LLC and Cargill Siam LTD., for the sale of feed grade phosphates to Cargill in Thailand		X

10.ii.ff.	Supply Agreement dated May 16, 2006 between Mosaic Fertilizer, LLC and Cargill Incorporated, for the sale of feed grade phosphates to Cargill in Vietnam, Indonesia and Taiwan.		X

10.ii.gg.	Product Supply Agreement dated September 30, 2005 between Mosaic Fertilizantes do Brasil S.A. and Agribrands Purina do Brasil Ltda.		X

10.ii.hh.	Storage and Handling Agreement at Clavet Warehouse dated November 1, 2005, between Cargill Limited and Mosaic Canada ULC		X

10.ii.ii.	Product Purchase, Storage and Handling Agreement dated June 1, 2006, between Cargill, Incorporated and Mosaic Crop Nutrition, LLC.		X

10.ii.jj.	Shared Service and Access Agreement at Port Cargill, MN dated October 22, 2004, between Cargill, Incorporated and GNS II (U.S.) LLC (now Mosaic Crop Nutrition, LLC).		X

10.ii.kk.	Shared Service and Access Agreement at Houston, TX dated October 22, 2004, between Cargill, Incorporated and GNS III (U.S.) LLC (now Mosaic Crop Nutrition, LLC).		X

E-10


Exhibit No.	Description	Incorporated Herein by Reference to	Filed with Electronic Submission
10.ii.ll.	Description of Related Party Transactions	Note 25 of Notes to the Consolidated Financial Statements that are included in this report in Part II, Item 8, “Financial Statements and Supplementary Data”

10.iii.a.*****	The Mosaic Company 2004 Omnibus Stock and Incentive Plan	Exhibit 10.6 to Amendment No. 1 to Registration Statement No. 333-119275

10.iii.b.*****	Form of Employee Non-Qualified Stock Option under The Mosaic Company 2004 Omnibus Stock and Incentive Plan	Exhibit 10.iii.b. to the Quarterly Report on Form 10-Q of Mosaic for the Quarterly Period Ended November 30, 2004**

10.iii.c.*****	Form of Director Restricted Stock Unit Award Agreement under The Mosaic Company 2004 Omnibus Stock and Incentive Plan	Exhibit 10.iii.c. to the Quarterly Report on Form 10-Q of Mosaic for the Quarterly Period Ended November 30, 2004**

10.iii.d.*****	Form of Employee Restricted Stock Unit Award Agreement under The Mosaic Company 2004 Omnibus Stock and Incentive Plan	Exhibit 10.iii.d. to the Quarterly Report on Form 10-Q of Mosaic for the Quarterly Period Ended November 30, 2004**

10.iii.e.*****	Summary of Board of Director Compensation and Expense Reimbursement for Mosaic, as approved on November 30, 2004	Exhibit 10.1 to Mosaic’s Current Report on Form 8-K for November 29, 2004**

10.iii.f.*****	Description of Executive Financial Planning Program	Item 1.01 of Mosaic’s Current Report on Form 8-K for May 12, 2005**

10.iii.g.*****	Description of Executive Physical Program	Fourth Paragraph of Item 1.01 of Mosaic’s Current Report on Form 8-K for May 26, 2005**

10.iii.h.*****	Description of Mosaic Management Incentive Plan	Item 1.01 of Mosaic’s Current Report on Form 8-K for July 7, 2006**

10.iii.i.*****	Description of Mosaic Synergy Incentive Plan		X

10.iii.j.*****	Form of Employee Non-Qualified Stock Option under The Mosaic Company 2004 Omnibus Stock and Incentive Plan, effective August 1, 2005	Exhibit 99.1 to the Current Report on Form 8-K of The Mosaic Company for August 2, 2006**

10.iii.k.*****	Form of Employee Restricted Stock Unit Award Agreement under The Mosaic Company 2004 Omnibus Stock and Incentive Plan, effective August 1, 2005	Exhibit 99.2 to the Current Report on Form 8-K of The Mosaic Company for August 2, 2006**

E-11


Exhibit No.	Description	Incorporated Herein by Reference to	Filed with Electronic Submission
10.iii.l.*****	Summary of Board of Director Compensation of The Mosaic Company, effective June 1, 2006	Exhibit 10.iii. to the Current Report on Form 8-K of The Mosaic Company for April 20, 2006**

10.iii.m*****	Form of Chief Executive Officer Severance Agreement		X

10.iii.n*****	Form of Senior Management Severance Agreement (effective August 2005)		X

10.iii.o*****	Form of Senior Management Severance Agreement (effective February 2006)		X

10.iii.p.	The Mosaic Company Nonqualified Deferred Compensation Plan, effective January 1, 2006		X

21	Subsidiaries of the Registrant		X

23.1	Consent of KPMG LLP, independent registered public accounting firm for Mosaic		X

24	Power of Attorney		X

31.1	Certification of Chief Executive Officer Required by Rule 13a-14(a)		X

31.2	Certification of Chief Financial Officer Required by Rule 13a-14(a)		X

32.1	Certification of Chief Executive Officer Required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code		X

32.2	Certification of Chief Financial Officer Required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code		X

*	Mosaic agrees to furnish supplementally to the Commission a copy of any omitted schedules and exhibits to the extent required by rules of the Commission upon request.

**	SEC File No. 001-32327

***	SEC File No. 005-80123

****	SEC File No. 1-9759

*****

Denotes management contract or compensatory plan.

E-12

Financial Table of Contents


		Page

Management’s Discussion and Analysis of Financial Condition and Results of Operations

• Introduction		1

• Key Factors That Affect our Results of Operations and Financial Condition		1

• Results of Operations		2

• Critical Accounting Estimates		12

• Capital Resources and Liquidity		15

• Off-Balance Sheet Arrangements and Obligations		17

• Market Risk		20

• Contingencies		20

• Environmental, Health and Safety Matters		20

• Related Parties		24

• Recently Issued Accounting Guidance		24

• Forward-Looking Statements		25

Report of Independent Registered Public Accounting Firm		27

Consolidated Statements of Operations		28

Consolidated Balance Sheets		29

Consolidated Statements of Cash Flows		30

Consolidated Statements of Stockholders’ Equity		31

Notes to Consolidated Financial Statements		32

Quarterly Results (Unaudited)		113

Five Year Comparison		115

Schedule II – Valuation and Qualifying Accounts		116

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the narrative description of our business in Item 1 of Part I of this annual report on Form 10-K and our Consolidated Financial Statements, accompanying Notes and other information listed in the accompanying Financial Table of Contents.

The Mosaic Company (Mosaic, we, us, our, or the Company) was created to serve as the parent company of the business that was formed through the business combination (Combination) of IMC Global Inc. (IMC or Mosaic Global Holdings) and the Cargill Crop Nutrition fertilizer businesses (CCN) of Cargill, Incorporated and its subsidiaries (Cargill). The Combination closed on October 22, 2004.

Mosaic is the largest producer of phosphate and potash combined, as well as a nitrogen and animal feed supplier. We conduct our business through wholly and majority owned subsidiaries, variable interest entities in which we are the primary beneficiary, and investments accounted for by the equity method. We are organized into the following four business segments:

Our Phosphates business segment (Phosphates) owns and operates mines and processing plants in Florida which produce phosphate fertilizer, feed and industrial phosphate products, and processing plants in Louisiana which produce phosphate fertilizer products.

Our Potash business segment (Potash) owns and operates mines and processing plants in Canada and the United States which produce potash-based fertilizer, feed and industrial products.

Our Offshore business segment (Offshore) consists of fertilizer blending and bagging facilities, port terminals and warehouses and sales offices in several countries, as well as production facilities in Brazil, China and Argentina.

Our Nitrogen business segment (Nitrogen) includes activities related to the North American distribution of nitrogen products which are marketed for Saskferco Products Inc. (Saskferco), a nitrogen fertilizer plant located in Saskatchewan, as well as nitrogen products purchased from third parties. Nitrogen also includes results from our 50% ownership interest in Saskferco.

Key Factors That Affect Our Results of Operations and Financial Condition

The Combination is the most significant element in our reported results of operations and financial condition for the periods covered by this Management’s Discussion and Analysis of Financial Condition and Results of Operations. Pursuant to accounting principles generally accepted in the United States (“US GAAP”), our financial statements reflect the results of operations and financial condition of only CCN through October 22, 2004, and the results of operations and financial condition of both CCN and Mosaic Global Holdings after that date. Prior to the Combination, neither we nor CCN were publicly traded businesses. Neither we nor CCN had significant potash operations prior to the Combination, and our phosphates production capacity and volumes were significantly expanded in the Combination. We have undertaken substantial integration efforts, particularly in our Phosphates business segment. Most of our indebtedness at May 31, 2006 reflects indebtedness of IMC prior to the Combination or refinancings of that indebtedness.

Our primary products, phosphate and potash fertilizers are, to a large extent, global commodities that are also available from a number of domestic and international competitors, and are sold pursuant to negotiated contracts or by reference to published market prices. The most important competitive factor for most of our products is delivered price. As a result, the markets for our products are highly competitive. Business and economic conditions and governmental policies affecting the agricultural industry are the most significant factors affecting worldwide demand for fertilizers.

A discussion of these and other factors that affected our results of operations and financial conditions for the periods covered by this Management’s Discussion and Analysis of Financial Condition and Results of Operations is set forth in further detail below.

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 that we mean short or long ton(s) which are the equivalent of 2,000 and 2,240 pounds, respectively. References to a particular fiscal year are to the twelve months ended May 31 of that year.

Results of Operations

The following table shows the results of operations for the three years ended May 31, 2006, 2005 and 2004 ($ and shares in millions, except for per share data):


	Years Ended May 31									2006-2005					2005-2004
	2006			2005			2004			Change			Percent		Change			Percent
Net sales	$	5,305.8		$	4,396.7		$	2,374.0		$	909.1		21%		$	2,022.7		85%
Cost of goods sold		4,668.4			3,871.2			2,196.4			797.2		21%			1,674.8		76%

Gross margin		637.4			525.5			177.6			111.9		21%			347.9		196%
Gross margin percentage		12.0%			12.0%			7.5%
Selling, general and administrative expenses		241.3			207.0			100.1			34.3		17%			106.9		107%
Restructuring and other charges		287.6			-			-			287.6		100%			-		-
Other operating expenses		2.7			-			0.7			2.7		100%			(0.7	)	(100%	)

Operating earnings		105.8			318.5			76.8			(212.7	)	(67%	)		241.7		315%
Interest expense		166.5			120.6			29.2			45.9		38%			91.4		313%
Foreign currency transaction (gain) loss		100.6			(13.9	)		3.6			114.5		(824%	)		(17.5	)	(486%	)
Other (income) expense		(1.2	)		(3.1	)		3.9			1.9		(61%	)		(7.0	)	(179%	)
Provision for income taxes		5.3			98.3			2.2			(93.0	)	(95%	)		96.1		4368%
Equity in net earnings of nonconsolidated companies		48.4			55.9			35.8			(7.5	)	(13%	)		20.1		56%
Minority interests in net earnings of consolidated companies		(4.4	)		(4.9	)		(1.4	)		0.5		(10%	)		(3.5	)	250%
Cumulative effect of a change in accounting principle, net of tax		-			(2.0	)		-			2.0		(100%	)		(2.0	)	100%

Net earnings (loss)	$	(121.4	)	$	165.6		$	72.3		$	(287.0	)	(173%	)	$	93.3		129%

Diluted earnings (loss) per share	$	(0.35	)	$	0.46		$	0.29		$	(0.81	)	(176%	)	$	0.17		59%
Weighted average diluted shares outstanding		382.2			360.4			250.6

Overview of Consolidated Results

Results for fiscal 2006 showed a net loss of $121.4 million, or $0.35 per diluted share, compared with net earnings for fiscal 2005 of $165.6 million, or $0.46 per diluted share. Our fiscal 2006 results were primarily influenced by the following factors:

•

We had after-tax charges of $285.6 million, or $0.75 per diluted share, due to the restructuring of our Phosphates business, which included the indefinite closure of one phosphate rock mine and two phosphate concentrates plants.

•

We had a foreign currency transaction loss of $100.6 million in fiscal 2006 compared with a gain of $13.9 million a year ago. This was mainly the result of the effect of a strong Canadian dollar on large U.S. dollar-denominated intercompany receivables held by our Canadian affiliates.

•

Operating earnings were $105.8 million in fiscal 2006, including the $287.6 million restructuring charge, compared with $318.5 million in fiscal 2005. Excluding the restructuring charge, operating earnings increased $74.9 million primarily as a result of the full-year effect of the Combination.

•

Net sales increased 21% for fiscal 2006 compared with fiscal 2005. The main reasons for the increase relates to the effects of a full-year of results from the Combination in fiscal 2006 and higher prices for Phosphates and Potash products. Our gross margin increased 21% to $637.4 million, and was 12.0% of net sales, which remained flat with fiscal 2005. In addition, mark-to-market gains on foreign currency exchange contracts and natural gas contracts included in fiscal 2006 cost of goods sold were $7.6 million compared to loss of $4.3 million in fiscal 2005.

•

Our Phosphates business segment net sales in fiscal 2006 increased 34% to $3.1 billion compared with fiscal 2005. This was a result of the Combination and higher prices for our products. The gross margin was $247.7 million, which was 8.0% of sales in fiscal 2006 compared with 7.0% in fiscal 2005. Higher prices were mostly offset by an increase in raw material prices including sulfur, ammonia and natural gas. Costs of production, on a per tonne basis, also increased as a result of lower operating rates to control inventory levels.

•

Our Potash business segment net sales in fiscal 2006 increased 33% compared with fiscal 2005 due to the full-year effect of the Combination and higher prices of our products. The gross margin was $351.6 million, or 30.4% of net sales, compared with 28.3% of net sales for the prior year. Sales volumes slowed in the second half of the fiscal 2006 as dealers in North America delayed purchases due to existing inventory levels and high fertilizer prices. In the international market, sales in the second half of fiscal 2006 were negatively impacted by a lack of potash exports to China and India. We reduced production levels in the second half of fiscal 2006 because of the slower sales volume which resulted in higher production costs.

•

Offshore business segment net sales increased by 1% to $1.2 billion with gross margin of 3.6% in fiscal 2006 compared with 8.1% a year ago. The decline in gross margin was mainly due to ongoing poor economic conditions in Brazil’s agricultural sector.

•

Selling, general and administrative expenses increased $34.3 million which was primarily the result of the full-year effect of the Combination compared to a partial year in fiscal 2005.

•

Interest expense increased by $45.9 million in fiscal 2006, primarily as a result of the full-year impact of the additional debt assumed as part of the Combination. This was partially offset by a non-cash reduction of $19.3 million related to the amortization of a full year effect of the fair market value of debt as a result of the Combination.

•

Our equity in net earnings of nonconsolidated companies was $48.4 million, a decline of $7.5 million compared with the prior year. This was due to the declining results of Fertifos S.A., and its subsidiary Fosfertil, in Brazil which was affected by the poor economic conditions. Dividends from non-consolidated companies totaled $26.7 million compared to $33.9 million for fiscal 2005.

•

Results for fiscal 2005 showed net earnings of $165.6 million, or $0.46 per diluted share, compared with fiscal 2004 net earnings of $72.3 million or $0.29 per diluted share. This was mainly the result of the Combination as net sales increased 85% and the gross margin nearly tripled for fiscal 2005 compared with fiscal 2004.

Going forward, management expects:

•

Sales volumes for Potash to improve due to a supply contract entered into by Canpotex with a key customer in China. The supply contract is for the remainder of calendar 2006 with shipments resuming in August. In addition, sales volumes to North America are expected to increase as dealer inventories are estimated to be at very low levels.

•

The Phosphates business is expected to show improved results because of more attractive industry supply and demand fundamentals and our Phosphates restructuring actions, which should result in lower costs of production and higher margins.

•

Our Offshore business will continue to be impacted by soft economic conditions in Brazil’s agricultural sector.

Mosaic has continued to evaluate additional operating efficiencies in light of significant operating cost and raw material price challenges. Examples of this include Mosaic’s Phosphates restructuring initiative and the April 2006 announcement of Mosaic’s participation in a proposed petroleum coke project adjacent to our Faustina, Louisiana phosphate plant. Mosaic has signed a contract, subject to certain conditions and anticipates being an offtaker of ammonia upon completion of the project which is contingent upon financing and certain other conditions as described under Phosphates – Ammonia in Item 1, Part 1 of Form 10-K.

Phosphates Net Sales and Gross Margin

The following table summarizes Phosphates sales, gross margin, sales volume and price ($ in millions, except price per tonne):


	Years Ended May 31						2006-2005			2005-2004
	2006		2005		2004		Change		Percent	Change		Percent
Net sales:
North America	$	929.2	$	770.9	$	259.2	$	158.3	21%	$	511.7	197%
International		2,168.3		1,541.6		920.1		626.7	41%		621.5	68%

Total		3,097.5		2,312.5		1,179.3		785.0	34%		1,133.2	96%
Cost of goods sold		2,849.8		2,150.0		1,116.8		699.8	33%		1,033.2	93%

Gross margin	$	247.7	$	162.5	$	62.5	$	85.2	52%	$	100.0	160%

Gross margin as a percent of net sales		8.0%		7.0%		5.3%

Sales volume (in thousands of metric tonnes):
Fertilizer		9,654		8,437		5,064		1,217	14%		3,373	67%
Feed		913		754		222		159	21%		532	240%

Total		10,567		9,191		5,286		1,376	15%		3,905	74%

Average price per tonne:
DAP (FOB plant)	$	245	$	222	$	176	$	23	10%	$	46	26%
Average purchase price per tonne (Central Florida):
Ammonia (metric tonne)	$	343	$	303	$	255	$	40	13%	$	48	19%
Sulfur (long ton)		74		66		67		8	12%		(1)	(1%)

Phosphates’ net sales increased 34% in fiscal 2006, mainly due to the Combination and higher phosphate prices. In fiscal 2006, sales volumes increased to 10.6 million tonnes of fertilizer and feed phosphates, compared with 9.2 million tonnes for fiscal 2005. Sales to international fertilizer markets accounted for about 66% of our total, while North American fertilizer sales comprised approximately 25% and feed sales were approximately 9% of the total. We consolidate the financials of the Phosphate Chemicals Export Association, Inc. (PhosChem), a U.S. Webb-Pomerene Act export association which markets phosphate fertilizers. Therefore, non-Mosaic revenue from PhosChem sales of 0.5 million tonnes equivalent to $192 million in fiscal 2006 is included in our results compared with 0.4 million tonnes, or $124 million in fiscal 2005. Phosphates production of DAP, MAP and TSP was 9.1 million tonnes for fiscal 2006, compared to 7.6 million tonnes for the same period last year.

The North American fertilizer market was slow during fiscal 2006 and we estimate that industry DAP and MAP domestic sales were down by about 7% during the fertilizer year as a result of lower corn plantings and an estimated modest decline in phosphate application rates. The international market for phosphates was strong in the first half of our fiscal year due to growth in Asian demand, mainly in India and Pakistan. However, international fertilizer sales slowed in the third quarter, mainly due to lower sales to China. We believe that the

lower sales to China is, to a significant degree, due to China’s increasing self-sufficiency in phosphate fertilizers. In the fourth quarter, PhosChem signed large supply contracts with customers in both India and China. Most of these sales will be exported during the first half of fiscal 2007, but international sales began to increase during the fourth quarter as a result of these supply contracts.

Net sales also increased in fiscal 2006 due to higher prices as the average DAP price was $245 per tonne, an increase of $23 per tonne compared with the same period last year. This was mainly the result of an increase in costs due to higher ammonia prices and a strong international market in the first half of fiscal 2006.

Gross margin as a percentage of sales increased from 7.0% in fiscal 2005 to 8.0% in fiscal 2006 due to a $23 per ton increase in average selling prices and a $10.8 million fair market value adjustment to inventory in fiscal 2005 as a result of the Combination. This was partially offset by a 33.0% increase in costs of goods sold compared with fiscal 2005. Costs of goods sold increased due to higher ammonia and sulfur prices, water treatment costs, idle plant costs, and an increase in average phosphate rock costs. For fiscal 2006, the average purchase price of ammonia in central Florida increased by $40 per tonne compared with a year ago to $343 per tonne, driven mostly by higher natural gas prices. Average sulfur prices increased $8 to $74 per long ton compared with the same period a year ago. Sulfur shortages developed subsequent to Hurricanes Katrina and Rita which adversely affected oil refineries that supply us with sulfur. Phosphates had unrealized mark-to-market losses of $11.1 million for fiscal 2006, mainly related to natural gas market derivative contracts, compared with losses of $3.3 million in fiscal 2005. These losses are included in our cost of goods sold.

Our phosphate rock production was 16.9 million tonnes during fiscal 2006, compared with 20.9 million tonnes for the same period a year ago. We permanently closed our Kingsford phosphate rock mine in September 2005, although this reduction of production volume was partially offset by an expansion at our South Fort Meade mine. We also closed our Wingate mine during fiscal 2006. In addition, as further discussed in Note 22 to the Consolidated Financial Statements, on December 1, 2005, we resolved various outstanding commercial matters and disputes with U.S. Agri-Chemicals (USAC), including an early termination of a rock supply agreement, settlement of a pending lawsuit, and acquisition of various equipment, spare parts and phosphate rock reserves owned by USAC (USAC Transactions). As part of the USAC Transactions, we stopped shipping approximately 2.0 million tonnes of phosphate rock per year to USAC in August 2005.

Our average feed phosphate price increased by about 16% in fiscal 2006 compared with year ago levels as a result of a strong international feed market. We are currently operating our phosphate feed plants at Riverview and New Wales in Florida at near capacity levels, and we have started several debottlenecking projects to be able to increase our production capacity, including an expansion at Riverview.

One of our largest North American phosphate customers, Royster-Clark, Inc. (Royster-Clark), was acquired in February 2006 by Agrium, Inc. (Agrium), one of our competitors. We have a long-term phosphate supply agreement with Royster-Clark which expires at the end of calendar year 2008. We expect little impact on our phosphates sales due to Agrium’s purchase of Royster-Clark.

As further discussed in Note 24, we announced the restructuring of the Phosphates business segment in May 2006. This included the indefinite closing of three facilities in Florida, including our Fort Green phosphate rock mine, South Pierce’s granular triple superphosphate (GTSP) concentrates plant and Green Bay’s DAP/MAP concentrates plant in May 2006. These three facilities were among our highest cost operations. The restructuring of our Phosphates business is expected to generate cost reduction benefits by allowing us to maximize production at our most efficient phosphate facilities. Mosaic anticipates that the restructuring actions will result in lower raw material and operating costs, reduced capital expenditures and improved cash flow beginning in fiscal 2007. The closure of these facilities resulted in a pre-tax charge of $287.6 million in fiscal 2006, related to the accelerated depreciation of the closed facilities, as well as other closure costs. Total cash expenditures related to the Phosphates restructuring activities are estimated at $117.2 million, of which approximately $33.8 million will occur in fiscal 2007. In fiscal 2007, this restructuring action is expected to reduce our annual depreciation expense and salaries, wages, and benefits expenses by $36 million and $35 million, respectively. Additional operating efficiencies are anticipated to be achieved through gross margin improvements and reduced capital spending.

The South Pierce concentrates plant was our only GTSP production facility. In order to continue to supply our North American customers, we signed a long-term supply contract with Office Chérifien des Phosphates (OCP) Group of Morocco in June 2006 for the long-term purchase of GTSP. The agreement runs through 2011 and is renewable upon mutual agreement at that time. Mosaic estimates that it will market up to 200,000 tonnes of GTSP per year in North America.

Phosphates’ sales increased 96% to $2.3 billion in fiscal 2005 compared with $1.2 billion in fiscal 2004. The increase in net sales was due to higher sales volumes as a result of the Combination and higher prices. In fiscal 2005, sales volumes were 9.2 million tonnes of fertilizer and feed phosphates, compared with 5.3 million tonnes for fiscal 2004. In fiscal 2005, the average DAP price was $222 per tonne, an increase of $46 per tonne compared with fiscal 2004. In fiscal 2005, approximately 25% of the increase in net sales was due to higher prices.

The gross margin increased by 160% to $162.5 million and was 7.0% of net sales in fiscal 2005 compared with a gross margin of $62.5 million in fiscal 2004, which was 5.3% of net sales. Gross margin was impacted by higher cost of goods sold which increased 93%, offsetting some of the increase in average selling prices. Costs of goods sold increased due to higher ammonia prices, higher costs of energy and an increase in average rock production costs. The average ammonia price increased by $48 per tonne to $303 in fiscal year 2005. In addition, three hurricanes converged on our central Florida operations during fiscal 2005, resulting in an increase in costs of production due to a higher water treatment costs and other associated expenses, such as repairs and lost production. As a result of purchase accounting arising from the Combination, finished product inventory was increased by $10.8 million to its fair market value on October 22, 2004. This inventory was sold during fiscal 2005 resulting in a lower gross margin.

Potash Net Sales and Gross Margin

The following table summarizes Potash sales, gross margin, sales volume and price ($ in millions, except price per tonne):


	Years Ended May 31						2006-2005			2005-2004
	2006		2005		2004		Change		Percent	Change		Percent
Net sales:
North America	$	767.3	$	611.6	$	51.1	$	155.7	25%	$	560.5	NM
International		388.6		257.8		-		130.8	51%		257.8	NM

Total		1,155.9		869.4		51.1		286.5	33%		818.3	NM

Cost of goods sold		804.3		623.3		48.8		181.0	29%		574.5	NM

Gross margin	$	351.6	$	246.1	$	2.3	$	105.5	43%	$	243.8	NM

Gross margin as a percent of net sales		30.4%		28.3%		4.5%

Sales volume (in thousands of metric tonnes):
Fertilizer		5,351		4,652		NA		699	15%		NA	NA
Non-agricultural (industrial and feed)		1,148		801		NA		347	43%		NA	NA

Total		6,499		5,453		NA		1,046	19%		NA	NA

Average price per tonne Potash (FOB plant)	$	140	$	124		NA	$	16	13%		NA	NA
Exchange rate at year-end of the Canadian Dollar	$	1.100	$	1.256	$	1.363

Potash’s net sales increased 33% in fiscal 2006 compared to fiscal 2005 primarily due to the Combination and higher potash prices. Potash sales volumes increased to 6.5 million tonnes in fiscal 2006 compared with 5.5 million tonnes a year ago. The average potash sales price was 13% higher during fiscal 2006. Sales for both the industrial and international markets increased in fiscal 2006 compared with the prior year, but sales to North American fertilizer customers declined 3.9%.

Potash sales volumes increased 19% in fiscal 2006, primarily as a result of the full-year effect of the Combination. However, Potash sales volumes declined in the second half of the year, both in North America and international markets. In North America, we estimate industry potash sales declined by 20% from July 2005 to June 2006 as dealers delayed purchases and reduced existing inventories. In the international market, sales in the second half of fiscal 2006 were negatively impacted by a lack of potash exports to China and India. Canpotex, which historically has been a significant exporter of potash to key Asian markets, including China and India, did not ship potash during the first half of calendar 2006 to these locations due to a lack of supply contracts for calendar 2006. Rather than negotiating annual contracts with Canpotex, Chinese and Indian importers, with participation of relevant government agencies, elected to engage in protracted contract negotiations with other world potash suppliers. In July 2006, Canpotex finalized a supply agreement with a key customer in China. The supply contract is for the remainder of calendar 2006 with shipments resuming in August. We believe that inventory levels in China as well as in India are at very low levels and that importers in these countries will need to replenish stocks for continuing strong potash demand. In addition to China, we anticipate that Canpotex will successfully conclude potash contracts with Indian importers in the near future. International sales are expected to increase as volumes to most customers in the Asian region recover.

The low sales volumes in the second half of the fiscal year resulted in high inventories. In order to more effectively manage high-cost inventories and working capital, we reduced production by 31% at our Canadian mines during the second half of fiscal 2006. Operating rates will likely continue at lower levels until the potash contracts can be settled.

Potash gross margin as a percent of sales increased from 28.3% in fiscal 2005 to 30.4% in fiscal 2006 mainly due to higher potash prices, a $19.5 million fair market value adjustment to inventory in fiscal 2005 as a result of the Combination, and mark-to-market gains on foreign currency exchange contacts and natural gas contracts of $18.7 million in fiscal 2006, offset by higher costs of production compared with the same period last year. The increase in production costs was mainly a result of higher energy prices and lower operating rates.

Average potash prices increased to $140 per tonne in fiscal 2006, an increase of $16 per tonne compared with fiscal 2005. Approximately 18% of our net sales were to industrial customers during 2006, compared with 15% in the prior year. Prices to non-agricultural customers generally are based on long-term legacy contracts at prices which were about 25% below our average potash selling price. The average non-agricultural potash price increased during the second half of fiscal 2006, although the average remains well below our average selling prices for agricultural sales.

One of our largest North American potash customers, Royster-Clark, was acquired in February 2006 by Agrium, one of our potash competitors. We have a long-term potash supply agreement with Royster-Clark expiring at the end of calendar year 2008. The impact of the purchase of Royster-Clark by Agrium on our North American potash sales is unknown at this time.

Potash’s net sales increased to $869.4 million in fiscal 2005 compared to $51.1 million in fiscal 2004, primarily due to CCN having only minor potash sales prior to the Combination. Potash volumes were 5.5 million tonnes which included a small amount of feed ingredient sales. The strong potash market was mainly due to an increase in potash exports and higher prices for both the domestic and export markets. Potash prices increased throughout fiscal 2005, and our average selling price from our mines was $124 per tonne for fiscal year 2005, with an average fourth quarter selling price of $135 per tonne.

Potash’s gross margin for fiscal 2005 was $246.1 million, or 28.3% of net sales, compared with $2.3 million, or 4.5% of net sales, in fiscal 2004. The increase in gross margin was mainly due to the Combination, an increase in export volume and higher prices. Costs of production were higher in fiscal 2005 compared with fiscal 2004 due to higher energy prices, maintenance costs, variable production supplies, royalties and Canadian resource taxes. In connection with purchase accounting, finished product inventory increased by $19.5 million to its fair market value on October 22, 2004. This inventory was sold during fiscal 2005 resulting in a lower gross margin.

Nitrogen Net Sales and Gross Margin

The following table summarizes Nitrogen sales, gross margin, sales volume and equity in net earnings of non-consolidated companies ($ in millions):


	Years Ended May 31						2006-2005					2005-2004
	2006		2005		2004		Change			Percent		Change			Percent
Net sales	$	143.4	$	119.8	$	214.9	$	23.6		20%		$	(95.1	)	(44%	)
Cost of goods sold		126.9		104.4		203.1		22.5		22%			(98.7	)	(49%	)

Gross margin	$	16.5	$	15.4	$	11.8	$	1.1		7%		$	3.6		31%

Gross margin as a percent of net sales		11.5%		12.9%		5.5%

Sales volume (in thousands of metric tonnes)		1,484		1,644		936		(160	)	(10%	)		708		76%
Equity in net earnings of nonconsolidated companies - Saskferco	$	18.7	$	15.1	$	12.1	$	3.6		24%		$	3.0		25%

Nitrogen net sales increased 20% in fiscal 2006 compared with year ago levels. A sales volume decline of 10% was more than offset by higher nitrogen prices. Nitrogen sales volumes were 1.5 million tonnes in fiscal 2006. Mosaic serves as a marketing agent for Saskferco’s nitrogen products. Agency sales volumes for Saskferco’s nitrogen products were 1.0 million tonnes for fiscal 2006, down 0.1 million tonnes compared with the same period a year ago. Sales volumes for nitrogen products purchased from sources other than Saskferco were 0.4 million tonnes for fiscal 2006, a decline of 10% compared with a year ago.

Equity in net earnings of Saskferco increased 24% in fiscal 2006 as higher prices offset an increase in the costs of production due to higher natural gas prices.

Nitrogen net sales declined 44% in fiscal 2005 compared with fiscal 2004. Equity in net earnings of Saskferco increased 25% to $15.1 million in fiscal 2005 compared with the prior year.

Offshore

The following table summarizes Offshore net sales, gross margin, gross margin per metric tonne, and equity in net earnings of non-consolidated companies ($ in millions, except gross margin per metric tonne):


	Years Ended May 31						2006-2005					2005-2004
	2006		2005		2004		Change			Percent		Change		Percent
Net sales	$	1,238.9	$	1,228.9	$	1,130.4	$	10.0		1%		$	98.5	9%
Cost of goods sold		1,194.0		1,129.5		1,033.1		64.5		6%			96.4	9%

Gross margin	$	44.9	$	99.4	$	97.3	$	(54.5	)	(55%	)	$	2.1	2%

Gross margin as a percent of net sales		3.6%		8.1%		8.6%

Gross margin per metric tonne	$	4.07	$	12.37	$	10.85	$	(8.30	)	(67%	)	$	1.52	14%

Equity in net earnings of nonconsolidated companies
Fertifos S.A.	$	20.0	$	33.5	$	18.2	$	(13.5	)	(40%	)	$	15.3	84%

Other subsidiaries		7.0		5.4		2.8		1.6		30%			2.6	93%

Total	$	27.0	$	38.9	$	21.0	$	(11.9	)	(31%	)	$	17.9	85%


Exchange rate at year-end of Brazilian Real	$	2.301	$	2.404	$	3.187

Offshore’s net sales remained relatively flat in fiscal 2006 compared with fiscal 2005. Despite an increase in sales volumes of 37% in fiscal 2006 compared to fiscal 2005, gross margins declined to $44.9 million or 3.6% of net sales compared to $99.4 million or 8.1% of sales in fiscal 2005. The decline in gross margin is primarily due to lower margins in Brazil, which was a result of the poor agricultural market environment. The decline in gross margins was also affected by Argentina, which was a result of higher operating costs.

Gross margin in Brazil decreased $45.0 million to $6.5 million, or 1.0% of net sales, in fiscal 2006 compared with $51.5 million, or 4.2% of net sales, in fiscal 2005. The devaluation and continued volatility of the U.S. dollar against the Brazilian Real during fiscal 2006 created an unfavorable market environment for the agricultural sector and impacted margins in several forms. Low grain prices, particularly for corn and soybean producers, continued to erode farmer’s income which is highly dependent on exports. This reduced the demand for and consumption of fertilizer. As a result, the average selling price for fertilizers was down 3% compared to fiscal 2005. In addition, lower demand and high inventory levels carried over by the Brazilian fertilizer industry from last year resulted in lower imports through our port facility. Our port facility imports fertilizer for our distribution operations as well as for third parties.

In Argentina, gross margin declined $4.9 million in fiscal 2006 compared with fiscal 2005. While sales volumes in fiscal 2006 were unchanged from fiscal 2005, margins were lower due to an increase in operating costs and damage to our port terminal caused by a vessel which hit our dock.

Equity in net earnings of non-consolidated companies declined to $27.0 million for fiscal 2006 compared with $38.9 million in fiscal 2005. This was mainly the result of lower equity earnings in the Fertifos S.A., and its subsidiary Fosfertil S.A. operations due to the poor agricultural market environment.

Net sales increased 9% in fiscal 2005 compared with fiscal 2004 and gross margin increased 2%. This was mostly due to improved results in India, China and Brazil. Equity net earnings of non-consolidated companies increased to $38.9 million for fiscal 2005 compared with $21.0 million in fiscal 2004. This was due to a strong Brazilian market during the first half of fiscal 2005.

Selling, General and Administrative Expenses


Year Ended May 31	Selling, General and Administrative Expenses		Percent of Net Sales		Increase (Decrease) Over Prior Fiscal Year
Year Ended May 31	Selling, General and Administrative Expenses		Percent of Net Sales		Dollar		Percentage
2006	$	241.3	4.5	%	$	34.3	16.6	%
2005		207.0	4.7	%		106.9	106.8	%
2004		100.1	4.2	%		12.5	14.3	%

Selling, general and administrative expenses were $241.3 million for fiscal year 2006 compared to $207.0 million for fiscal year 2005. This increase was primarily due to the Combination and approximately $7 million in external consulting fees associated with first year Sarbanes-Oxley Section 404 compliance. These costs were partially offset by the effect of the reversal of a prior allowance of approximately $14 million associated with value added tax credits in Brazil, which we were able to offset against other federal taxes payable in Brazil.

Selling, general and administrative expenses increased $106.9 million in fiscal 2005 to $207.0 million. This increase was primarily due to the Combination, including headquarters transition costs, duplicative employee costs, synergy capture costs and costs related to the kick-off of a new enterprise resource planning (ERP) systems initiative. In addition, additional sales and use taxes in Brazil drove expenses higher.

Interest Expense


Year Ended May 31	Interest Expense		Percent of Net Sales	Increase (Decrease) Over Prior Fiscal Year
Year Ended May 31	Interest Expense		Percent of Net Sales	Dollar			Percentage
2006	$	166.5	3.1%	$	45.9		38.1%
2005		120.6	2.7%		91.4		313.0%
2004		29.2	1.2%		(12.0	)	(29.1%	)

Interest expense was $166.5 million in fiscal year 2006, compared to $120.6 million in fiscal year 2005. This increase was due to the full-year impact of the additional debt assumed as part of the Combination, along with higher interest rates on our floating rate debt. This was partially offset by a non-cash reduction of $19.3 million related to a full year effect of the amortization of the fair market value of debt as a result of the Combination. The cash interest paid in fiscal year 2006 and 2005 was higher than the reported interest expense due to the amortization of the fair market value adjustment on the debt assumed as part of the Combination by $47.9 million and $28.6 million, respectively.

Fiscal 2005 interest expense more than quadrupled compared with fiscal 2004 as a result of interest on debt assumed in the Combination.

Foreign Currency Transaction (Gain) Loss


Year Ended May 31	(Gain)Loss			Percent of Net Sales		Increase (Decrease) Over Prior Fiscal Year
Year Ended May 31	(Gain)Loss			Percent of Net Sales		Dollar			Percentage
2006	$	100.6		1.9%		$	114.5		823.7%
2005		(13.9	)	(0.3%	)		(17.5	)	(486.1%	)
2004		3.6		0.2%			4.5		500.0%

In fiscal year 2006, we recorded a foreign currency transaction loss of $100.6 million compared with a gain of $13.9 million in the prior year. This was mainly the result of the effect of a strong Canadian dollar on large U.S. dollar denominated intercompany receivables held by our Canadian affiliates. The value of the Canadian dollar increased by 12.4% in fiscal 2006. The Canadian dollar is the functional currency for our Potash business which translates its U.S. dollar denominated balance sheet accounts to its Canadian dollar functional currency. This results in transaction gains or losses reflected in Mosaic’s Consolidated Statement of Operations. Because this is a non-cash accounting exposure, we chose not to hedge it.

In fiscal year 2005, we recorded a foreign currency transaction gain of $13.9 million compared with a loss of $3.6 million in fiscal 2004. Approximately $4.6 million of the gain was the result of the marking to market of a promissory note issued to us by Saskferco. The remainder of the gain was primarily caused by a weakening of the Canadian dollar, strengthening of the Brazilian Real and volatility of the Thai Baht against the U.S. dollar.

Equity in Earnings of Non-consolidated Companies

Equity in earnings of non-consolidated companies was $48.4 million in fiscal year 2006 compared with $55.9 million in fiscal year 2005, and $35.8 million in fiscal 2004. The largest earnings contributors were Fertifos S.A. and its subsidiary Fosfertil S.A., which is included in our Offshore segment, and Saskferco, which is included in our Nitrogen segment.

Provision for Income Taxes

Income tax expense was $5.3 million, an effective tax rate of 3.3%, on the pre-tax loss of $160.1 million. The fact that there was tax expense in a year of a pre-tax loss was primarily the result of losses in the U.S. and Brazil, for which no tax benefit was recorded, including substantially all of the $287.6 million restructuring and other charges, and the fact that our Canadian-based businesses are taxed at relatively higher rates than the other businesses of the Company. This was partially offset by an $81.0 million tax benefit from the reduction in our Canadian deferred tax liabilities as the result of a statutory reduction in the future tax rates in the Province of Saskatchewan during the fourth quarter.

The effective tax rate in fiscal 2005 was 45.7%, compared with 5.5% in fiscal 2004. The significant increase in the effective tax rate was due to the effects of the Combination, including the inclusion in fiscal 2005 of the earnings of the Canadian-based businesses which are taxed at relatively higher rates than the other businesses of the company and the fact that in fiscal 2004, the effective tax rate was lower as a result of a tax benefit related to the depletion of phosphate rock reserves.

During June 2006, the Canadian government approved legislation to reduce the Canadian federal corporate tax rate and eliminate the corporate surtax, which will be phased in through fiscal 2011 and collectively is expected to reduce the tax rate on our Canadian earnings by approximately three percentage points. Statement of Financial Accounting Standards (SFAS) No. 109, “Accounting for Income Taxes”, requires that deferred tax balances be revalued to reflect tax rate changes. The company has not completed its analysis of these tax rate changes; however, we currently estimate the impact of these rate changes to be $45 to $50 million. We will record this as a reduction of income tax expense during the first quarter of fiscal 2007 in accordance with SFAS No. 109.

Critical Accounting Estimates

The Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America. In preparing the 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 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 Consolidated Financial Statements.

Our significant accounting policies can be found in Note 2 to the Consolidated Financial Statements. We believe the following accounting policies may include a higher degree of judgment and complexity in their application and are most critical to aid in fully understanding and evaluating our reported financial condition and results of operations.

Goodwill

We review goodwill for impairment annually or at any time events or circumstances indicate that the carrying value may not be fully recoverable. According to our accounting policy, an annual review is performed in the second quarter of each year, or more frequently if indicators of potential impairment exist. Our impairment review process is based on a discounted future cash flow approach that uses estimates of revenues for the reporting units, driven by sales volumes, average sales price and estimated future gross margin, as well as appropriate foreign exchange, discount and tax rates. These estimates are consistent with the plans and estimates that are used to manage the underlying businesses. Charges for impairment of goodwill for a reporting unit may be incurred if the reporting unit fails to achieve its assumed sales volume or assumed gross margin, or if interest rates increase significantly.

Recoverability of Long-Lived Assets

The assessment of the recoverability of long-lived assets reflects management’s assumptions and estimates. Factors that management must estimate when performing impairment tests include sales volume, prices, inflation, discount, exchange, and tax rates and capital spending. Significant management judgment is involved in estimating these factors, and they include inherent uncertainties. The measurement of the recoverability of these assets is dependent upon the accuracy of the assumptions used in making these estimates and how the estimates compare to the eventual future operating performance of the specific businesses to which the assets are attributed.

Judgments made by management related to the expected useful lives of long-lived assets and the ability to realize undiscounted cash flows in excess of the carrying amounts of such assets are affected by factors such as the ongoing maintenance and improvement of the assets, changes in economic conditions and changes in operating performance.

Restructuring Charges

As described in Note 24 of the Consolidated Financial Statements, we approved plans to restructure the Phosphates segment in May 2006. In connection with these activities, we recorded restructuring charges for employee termination costs, accelerated depreciation and other restructuring-related costs.

The recognition of these restructuring charges required that we make certain judgments and estimates regarding the nature, timing and amount of costs associated with the planned restructuring activity. To the extent our actual results in restructuring these facilities differ from our estimates and assumptions, we may be required to revise the estimates of future liabilities, requiring the recognition of additional restructuring charges or the reduction of liabilities already recognized. At the end of each reporting period, we evaluate the remaining accrued balances to ensure that no excess accruals are retained and the utilization of the provisions are for their intended purpose in accordance with developed exit plans.

Environmental Liabilities and Asset Retirement Obligation

We also record accrued liabilities for various environmental and reclamation matters. The estimation processes used to determine the amounts of these accrued liabilities are complex and use information obtained from company-specific and industry data, as well as general economic information.

Accruals for environmental matters are based on third party estimates for the cost of remediation at previously operated sites and estimates of legal costs for ongoing litigation. In accordance with (SFAS) No. 5, “Accounting

for Contingencies,” we are required to assess the likelihood of material adverse judgments or outcomes as well as potential ranges or probability of losses. We determine the amount of accruals required, if any, for contingencies after carefully analyzing each individual matter. The required accruals may change due to new developments in each matter, or changes in approach, such as a change in settlement strategy in dealing with these matters. Actual costs to be incurred at identified sites in future periods may vary from the estimates, given the inherent uncertainties in evaluating environmental exposures. Using reasonably possible alternative assumptions of the exposure could result in an increase or decrease to the environmental reserve. Due to the inherent uncertainties related to environmental exposures, a significant increase to the reasonably possible exposure level could occur if the scope of the remediation was increased, a significant increase in our proportionate share occurred, or a new site was identified to need environmental remediation.

Based upon the guidance of SFAS No. 143, “Accounting for Asset Retirement Obligations,” we obtained third party estimates for the costs of retiring certain of our long-term operating assets. The costs are inflated based on an inflation factor and discounted based on a credit-adjusted risk-free rate. Fluctuations in the estimated costs, inflation and interest rates can have a significant impact on the amounts recorded. A further discussion of the Company’s asset retirement obligation can be found in Note 16 to the Consolidated Financial Statements.

Pension Plans and Other Postretirement Benefits

The accounting for benefit plans is highly dependent on actuarial estimates, assumptions and calculations which result from a complex series of judgments about future events and uncertainties. The assumptions and actuarial estimates required to estimate the employee benefit obligations for pension plans and other postretirement benefits, include discount rate, expected salary increases, certain employee-related factors, such as turnover, retirement age and mortality (life expectancy), expected return on assets and healthcare cost trend rates. We evaluate these critical assumptions at least annually. Our assumptions reflect our historical experiences and our best judgment regarding future expectations that have been deemed reasonable by management. The judgments made in determining the costs of our benefit plans can materially impact our results of operations. As such, we obtain assistance from actuarial experts to aid in developing reasonable assumptions and cost estimates. Actual results in any given year will often differ from actuarial assumptions because of economic and other factors. The effects of actual results differing from our assumptions are included in unamortized net gain and loss, which is amortized over future periods.

Deferred Income Taxes

In preparing our Consolidated Financial Statements, we recognize income taxes in each of the jurisdictions in which we operate. For each jurisdiction, we estimate the actual amount of taxes currently payable or receivable, as well as deferred tax assets and liabilities attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for those deferred tax assets for which it is more likely than not that the related tax benefits will not be realized, which generally includes significant estimates and assumptions which result from a complex series of judgments about future events. In determining whether a valuation allowance is required, we apply the principles enumerated in SFAS No. 109, “Accounting for Income Taxes”, in the U.S. and each foreign jurisdiction in which a deferred tax asset is recorded. In addition, as part of the process of recording the Combination, we have made certain adjustments to valuation allowances related to the businesses of IMC (Purchase Accounting Valuation Allowances). If during an accounting period we determine that we will not realize all or a portion of our deferred tax assets, we will increase our valuation allowances with a charge to income tax expense. Conversely, if we determine that we will ultimately be able to realize all or a portion of the related tax benefits, we will reduce valuation allowances with either a charge to goodwill if the reduction relates to Purchase Accounting Valuation Allowances or in all other cases with a credit to income tax expense.

Variable Interest Entities

In the normal course of business, we may enter into arrangements that need to be examined to determine whether they fall under the variable interest entity (VIE) accounting guidance prescribed under Financial Accounting Standards Board (FASB) Interpretation No. 46R (FIN 46(R)), “Consolidation of Variable Interest Entities.” In accordance with the interpretation, management must exercise significant judgment to determine if VIE relationships are required to be consolidated. We use a variety of complex estimation processes involving both qualitative and quantitative factors that may involve the use of a number of assumptions about the business environment in which an entity operates to determine whether the entity is a VIE, and to analyze and calculate its expected losses and expected residual returns. These processes involve estimating the future cash flows and performance of the entity, analyzing the variability in those cash flows and allocating the losses and returns among the identified parties holding variable interests. Our interests are then compared to those of unrelated outside parties to identify if we are the primary beneficiary, and thus should consolidate the entity.

Litigation

The Company is involved from time to time in claims and legal actions incidental to its operations, both as plaintiff and defendant. The Company has established what management currently believes to be adequate reserves for pending legal matters. These reserves are established as part of an ongoing worldwide assessment of claims and legal actions that takes into consideration such items as advice of legal counsel, individual developments in court proceedings, changes in the law, changes in business focus, changes in the litigation environment, changes in opponent strategy and tactics, new developments as a result of ongoing discovery, and past experience in defending and settling similar claims. Changes in accruals, both up and down, are part of the ordinary, recurring course of business, in which management, after consultation with legal counsel, is required to make estimates of various amounts for business and strategic planning purposes, as well as for accounting and SEC reporting purposes. These changes are reflected in the reported earnings of the Company each quarter. The litigation accruals at any time reflect updated assessments of the then existing claims and legal actions. The final outcome or potential settlement of litigation matters could differ materially from the accruals which have been established by the Company.

Capital Resources and Liquidity

Liquidity is defined as the ability to generate adequate amounts of cash to meet current cash needs. We assess our liquidity in terms of our ability to make payments on and to refinance our indebtedness and to fund planned capital expenditures and expansion efforts in the future. This, to a certain extent, is subject to general economic, financial, competitive and other factors that are beyond our control. We believe that our cash, other liquid assets and operating cash flow, together with available borrowings and potential access to credit and capital markets, will be sufficient to meet our operating and capital expenditure requirements and to service our debt and meet other contractual obligations as they become due.

Cash Requirements

We have certain contractual cash obligations that require us to make payments on a scheduled basis which include, among other things, long-term debt payments, interest payments, operating leases, unconditional purchase obligations, and funding requirements of pension and postretirement obligations. Our long-term debt is our largest contractual cash obligation and has maturities ranging from one year to 22 years. Our next largest contractual cash obligation is unconditional purchase obligations. Unconditional purchase obligations are contracts to purchase raw materials such as sulfur, ammonia, and natural gas. We expect to fund these purchases and our capital expenditures with a combination of operating cash flows and borrowings. See Off-Balance Sheet Arrangements and Obligations for the amounts owed by Mosaic under Contractual Cash Obligations.

Sources and Uses of Cash

Historically, the primary sources of cash for Mosaic have been operating cash flows, revolving credit facilities, and other senior debt. Historically, the primary uses of cash for Mosaic have been capital expenditures, working capital requirements, and the repayment of debt obligations.

Operating Activities

Operating activities provided $279.5 million of cash for fiscal 2006, a decrease of $54.2 million compared to fiscal 2005. The decrease in cash flows was primarily the result of the swing from net earnings to a net loss, and an overall decrease in cash flows from changes in assets and liabilities, offset by an increase in non-cash charges. The reduction in cash flows from changes in assets and liabilities was primarily the result of asset retirement obligation payments, and the settlement of the USAC Transactions.

In fiscal 2005, operating activities provided $333.7 million of cash, an increase of $212.2 million compared to fiscal 2004. The favorable variance was primarily the result of an increase in net earnings and the impact of higher non-cash charges, partially offset by an increase in the amount invested in working capital.

Investing Activities

Investing activities used $350.6 million of cash for fiscal 2006, an increase of $135.5 million compared to fiscal 2005. The increase in cash used by investing activities primarily related to additional capital expenditures in fiscal 2006. Capital expenditures increased in fiscal 2006 due to a full-year of capital expenditures as a result of the Combination compared to the partial year in fiscal 2005.

Investing activities used $215.1 million of cash for fiscal 2005, which was essentially flat with fiscal 2004. Cash flows used for investing activities increased primarily related to an increase in capital expenditures as a result of the Combination, offset by cash provided from the Combination, and the acquisition of businesses and minority interests in fiscal 2004.

Financing Activities

Cash provided by financing activities for fiscal 2006 was $12.6 million, a decrease of $93.7 million compared with fiscal 2005. The primarily reason for the decrease in cash flows provided by financing activities is from the net payments of debt in fiscal 2006 compared to net issuances of debt in fiscal 2005.

Cash provided by financing activities for fiscal 2005 of $106.3 million, an increase of $10.5 million compared with fiscal 2004. Cash provided by financing activities was primarily the result of net proceeds from the issuance of debt compared to net debt payments and contributions by Cargill in fiscal 2004.

Debt Instruments, Guarantees and Related Covenants

Most of our material debt instruments have cross-default provisions. In general, pursuant to these provisions, the instruments governing such debt arrangements each provide that a failure to pay principal or interest under other indebtedness in excess of a specified threshold amount will result in a cross-default. Of our material debt instruments, the indentures relating to Mosaic Global Holdings’ 6.875% Debentures due 2007, 10.875% Senior Notes due 2008, 11.250% Senior Notes due 2011, 10.875% Senior Notes due 2013, 7.375% Debentures due 2018 and 7.30% Debentures due 2028 and Phosphate Acquisition Partners L.P.’s 7% Senior Notes due 2008, about which further information is included in Note 13 of Notes to Consolidated Financial Statements, have the lowest specified threshold amount, $25.0 million.

In February 2005, Mosaic entered into a senior secured credit facility, which we refer to as the Mosaic Credit Facility. The Mosaic Credit Facility is intended to serve as our primary senior secured bank credit facility to meet the combined liquidity requirements of all of Mosaic’s business segments. The Mosaic Credit Facility includes a $450.0 million Revolving Credit Facility, a $50.0 million Term Loan A Facility and a $350.0 million Term

Loan B Facility. Under the Revolving Credit Facility, Mosaic may from time to time borrow, repay and reborrow amounts as revolving loans or swingline loans or obtain letters of credit, up to a maximum of $450.0 million principal amount outstanding at any time. The net available borrowings under the Revolving Credit Facility as of May 31, 2006 were approximately $221.6 million.

The maturity date of the Revolving Credit Facility is February 18, 2010, the maturity date of the Term Loan A Facility is February 19, 2010, and the maturity date of the Term Loan B Facility is February 21, 2012; provided, however, that an Event of Default would occur unless one of certain specified events occurs prior to November 30, 2007. A description of these events is incorporated by reference to Note 13 of Notes to Consolidated Financial Statements. There can be no assurance that one of these events will occur prior to November 30, 2007.

The Credit Agreement requires Mosaic to maintain certain financial ratios, including a leverage ratio and an interest coverage ratio. These ratios become more stringent over time pursuant to the terms of the Credit Agreement. There can be no assurance that Mosaic will be able to meet these ratios in the future, particularly as they become more stringent. Mosaic’s access to funds is dependent upon its product prices, input costs and market conditions. During periods in which product prices or volumes, raw material prices or availability, or other conditions reflect the adverse impact of cyclical market trends or other factors, there can be no assurance that Mosaic would be able to comply with applicable financial covenants or meet its liquidity needs. Mosaic cannot assure that its business will generate sufficient cash flow from operations in the future, that its currently anticipated growth in net sales and cash flow will be realized, or that future borrowings will be available when needed or in an amount sufficient to enable Mosaic to repay indebtedness or to fund other liquidity needs. Mosaic was in compliance with the provisions of financial covenants in the Credit Agreement as of May 31, 2006.

The Credit Agreement also contains other events of default and covenants that limit various matters. Such covenants include limitations on capital expenditures, joint venture investments, monetary acquisitions and indebtedness. In addition, the Credit Agreement generally limits the payment of dividends on Mosaic’s common stock and repurchases or redemptions of Mosaic’s capital stock beginning February 18, 2005 to $20.0 million plus an amount equal to the sum of (a) 25 percent of Consolidated Net Income (as defined in the Credit Agreement) for each fiscal year beginning with the fiscal year ending May 31, 2006 and (b) 25 percent of the net proceeds from equity offerings by Mosaic that comply with the applicable requirements of the Credit Agreement. Additionally, after the payment of any future cash dividends on common stock, the sum of additional borrowings available under the Revolving Credit Facility plus permitted investments must be at least $100.0 million.

Further information regarding Financing Arrangements is hereby incorporated by reference to Note 13 of Notes to Consolidated Financial Statements.

Financial Assurance Requirements

In addition to various operational and environmental regulations related to Phosphates, we are subject to financial assurance requirements or letters of credit. In various jurisdictions in which we operate, particularly Florida and Louisiana, we are required to pass a financial strengths test or provide credit support, typically in the form of surety bonds. See Other Commercial Commitments under Off-Balance Sheet Arrangements and Obligations for the amounts of such financial assurance maintained by the Company and the impacts of such assurance.

Off-Balance Sheet Arrangements and Obligations

Off-Balance Sheet Arrangements

In accordance with the definition under SEC rules, the following qualify as off-balance sheet arrangements:

•

any obligation under a guarantee contract that has any of the characteristics identified in paragraph 3 of FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others;

•

a retained or contingent interest in assets transferred to an unconsolidated entity or similar entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets;

•

any obligation, including a contingent obligation, under contracts that would be accounted for as derivative instruments that are indexed to the Company’s own stock and classified as equity; and

•

any obligation, arising out of a variable interest in an unconsolidated entity that is held by, and material to, the registrant, where such entity provides financing, liquidity, market risk or credit risk support to the registrant, or engages in leasing, hedging or research and development services with the registrant.

Information regarding guarantees is hereby incorporated by reference to Note 18 of Notes to Consolidated Financial Statements. Information regarding derivative instruments is hereby incorporated by reference to Note 17 of Notes to Consolidated Financial Statements. Information regarding variable interest entities is hereby incorporated by reference to Note 14 of Notes to Consolidated Financial Statements.

The following information summarizes our contractual obligations and other commercial commitments as of May 31, 2006.

Contractual Cash Obligations

The following is a summary of our contractual cash obligations as of May 31, 2006:


			*Payments by Fiscal Year*
(in millions)	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
Long-term debt	$	2,245.3	$	19.1	$	732.7	$	86.5	$	1,407.0
Estimated interest payments on long-term debt^(a)		1,205.6		213.4		347.2		276.7		368.3
Operating leases		109.1		33.8		42.7		20.7		11.9
Purchase commitments^(b)		769.6		429.6		244.4		51.2		44.4
Pension and postretirement liabilities^(c)		448.3		39.5		80.5		88.6		239.7

Total contractual cash obligations	$	4,777.9	$	735.4	$	1,447.5	$	523.7	$	2,071.3

^(a)	Based on interest rates and debt balances as of May 31, 2006.

^(b)	Based on prevailing market prices as of May 31, 2006.

^(c)	Fiscal 2007 pension plan payments are based on minimum funding requirements. For years thereafter, pension plan payments are based on expected benefits paid. The postretirement plan payments are based on projected benefit payments.

Other Commercial Commitments

The following is a summary of our other commercial commitments as of May 31, 2006:


			*Commitment Expiration by Fiscal Year*
(in millions)	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
Letters of credit	$	130.0	$	123.8	$	6.2	$	-	$	-
Surety bonds		116.4		101.4		-		-		15.0

Total	$	246.4	$	225.2	$	6.2	$	-	$	15.0

The surety bonds and letters of credit generally expire every year but primarily provide financial assurance for continuing obligations and, therefore, in most cases, must be renewed on an annual basis. We incur liabilities for reclamation activities and phosphogypsum stack system closure in our Florida and Louisiana operations where, in order to obtain necessary permits, we must either pass a test of financial strength or provide credit support, typically in the form of surety bonds or letters of credit. As of May 31, 2006, we had $91.1 million in surety bonds outstanding for mining reclamation obligations in Florida. In connection with the outstanding surety bonds, we have posted $26.6 million of collateral in the form of letters of credit. In addition, we have letters of credit directly supporting mining reclamation activity of $16.8 million. The surety bonds generally require us to obtain a discharge of the bonds or to post additional collateral (typically in the form of cash or letters of credit) at the request of the issuer of the bonds.

We have entered into a Consent Agreement with the Florida Department of Environmental Protection to satisfy financial responsibility obligations for our phosphogypsum stack systems in Florida, and are currently in negotiations for an exemption request with the Louisiana Department of Environmental Quality on its financial responsibility requirements, which we currently do not meet. See Note 16 of Notes to our Consolidated Financial Statements for more information on our compliance with applicable financial responsibility regulations.

Other Long-Term Obligations

The following is a summary of our other long-term obligations as of May 31, 2006:


			*Payments by Fiscal Year*
(in millions)	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
Asset retirement obligations^(a)	$	1,078.7	$	59.9	$	75.0	$	60.2	$	883.6

^(a)	Represents the undiscounted, inflation adjusted estimated cash outflows required to settle the asset retirement obligations. The corresponding present value of these future expenditures is $548.2 million as of May 31, 2006, and is reflected in liabilities in our Consolidated Balance Sheet.

In addition, we have granted a mortgage on approximately 22,000 previously mined acres of land in Florida with a net book value of approximately $14.0 million as security for certain reclamation costs in the event that an option granted to a third party to purchase the mortgaged land is not exercised.

Most of our export sales of phosphate and potash crop nutrients are marketed through two North American export associations, PhosChem and Canpotex, respectively, which fund their operations in part through third-party financing facilities. As a member, Mosaic or our subsidiaries are, subject to certain conditions and exceptions, contractually obligated to reimburse the export associations for their pro rata share of any operating expenses or other liabilities incurred. The reimbursements are made through reductions to members’ cash

receipts from the export associations. Commitments are set forth in Note 21 to our Consolidated Financial Statements and are incorporated herein by reference.

Market Risk

We are exposed to the impact of interest rate changes on borrowings, fluctuations in the functional currency of foreign operations and the impact of fluctuations in the purchase price of natural gas, ammonia and sulfur consumed in operations, as well as to changes in freight costs and fluctuations in market prices for our products.

Interest Rates

We conducted sensitivity analyses of our debt assuming a one-percentage point adverse change in interest rates on outstanding borrowings from the actual level as of May 31, 2006. Holding all other variables constant, the hypothetical adverse changes would not materially affect our operating results of financial position. These analyses did not consider the effects of the reduced level of economic activity that could exist in such an environment. Further, in the event of a one-percentage point adverse change in interest rates, management would likely take actions to further mitigate its exposure to possible changes. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analyses assumed no changes in our financial structure. Additional information regarding market risk related to interest rates is hereby incorporated by reference to Note 17 of Notes to Consolidated Financial Statements.

Foreign Currency Exchange Rates and Commodities

Information regarding market risk related to foreign currency exchange rates and commodities is hereby incorporated by reference to Note 17 of Notes to Consolidated Financial Statements.

Contingencies

Information regarding contingencies is hereby incorporated by reference to Note 23 of Notes to Consolidated Financial Statements.

Environmental, Health and Safety Matters

The Company’s Program

We have adopted the following Environmental, Health and Safety (EHS) Policy (Policy):

It is the policy of The Mosaic Company and subsidiaries, which it controls, to conduct all business activities in a manner that protects the environment and the health and safety of our employees, contractors, customers and communities. Environmental stewardship, health and safety will be integrated into all business practices. Our employees will be trained to ensure that environmental, health and safety standards and procedures are understood and implemented.

Environment. Mosaic employees and business units will comply with all applicable laws and regulations. Mosaic supports the responsible production and use of crop nutrient products to enhance preservation of natural systems.

Health and Safety. Mosaic will design, operate and manage company facilities to protect the health and safety of our employees and communities. We insist that all work, however urgent, be done safely.

Product Safety. The safety of Mosaic products for human, animal and plant applications will not be compromised. The management of raw materials, production processes and material handling facilities will at all times be protective of our customers and communities.

This Policy is the cornerstone of our comprehensive EHS management program (EHS Program), which seeks to achieve sustainable, predictable and verifiable EHS performance. Key elements of the EHS Program include: (i) identifying and managing EHS risk; (ii) complying with legal requirements; (iii) improving our EHS procedures and protocols; (iv) educating employees regarding EHS obligations; (v) retaining and developing professional qualified EHS staff; (vi) evaluating facility conditions; (vii) evaluating and enhancing safe workplace behaviors; (viii) performing audits; (ix) formulating EHS action plans; and (x) assuring accountability of all managers and other employees for environmental performance. The business units are responsible for implementing day-to-day elements of the EHS Program, assisted by an integrated staff of EHS professionals. We conduct audits to verify that each facility has identified risks, achieved regulatory compliance, implemented continuous EHS improvement, and incorporated EHS management systems into day-to-day business functions.

A critical focus of our EHS Program is achieving compliance with the evolving myriad of international, federal, state, provincial and local EHS laws that govern our production and distribution of crop and animal nutrients. These EHS laws regulate or propose to regulate: (i) conduct of mining and production operations, including employee safety procedures; (ii) condition of our facilities; (iii) management and handling of raw materials; (iv) product content; (v) use of products by both us and our customers; (vi) management and/or remediation of potential impacts to air, water quality and soil from our operations; (vii) disposal of waste materials; and (viii) reclamation of lands after mining. For any new regulatory programs that might be proposed, it is difficult to ascertain future compliance obligations or to estimate future costs until implementing regulations have been finalized and definitive regulatory interpretations have been adopted. We typically respond to such regulatory requirements at the appropriate time by implementing necessary modifications to facilities or to operating procedures.

We have expended, and anticipate that we will continue to expend, substantial financial and managerial resources to comply with EHS standards. In fiscal 2007, environmental capital expenditures are expected to total approximately $60 million, primarily related to: (i) modification or construction of wastewater treatment areas and water treatment systems; (ii) construction, modification and closure projects associated with phosphogypsum stacks (Gypstacks) at our Phosphates’ concentrates plants; (iii) upgrading or new construction of air pollution control equipment at some of the concentrates plants; and (iv) capital projects associated with remediation of contamination at current or former operations. Additional expenditures for land reclamation activities are expected to total approximately $40 million in fiscal 2007. In fiscal 2008, we estimate environmental capital expenditures will be approximately $30 million and expenditures for land reclamation activities are expected to be approximately $40 million. No assurance can be given that greater-than-anticipated EHS capital expenditures or land reclamation expenditures will not be required in the fiscal 2007 or in the future.

We have recorded accounting accruals for certain contingent environmental liabilities and believe such accruals are in accordance with U.S. GAAP. We record accruals for environmental investigatory and non-capital remediation costs and for expenses associated with litigation when litigation has commenced or a claim or assessment has been asserted or is imminent, the likelihood of an unfavorable outcome is probable and the financial impact of such outcome is reasonably estimable. These accruals are adjusted quarterly for any changes in our estimates of the future costs associated with these matters.

Product Requirements and Impacts

International, federal, state and provincial standards require us to register many of our products before these products can be sold. The standards also impose labeling requirements on these products and require us to manufacture the products to formulations set forth on the labels. Various environmental, natural resource and public health agencies continue to evaluate alleged health and environmental impacts that could arise from the handling and use of products such as those manufactured by Mosaic. The U.S. Environmental Protection Agency, the state of California, and The Fertilizer Institute in conjunction with the European Fertilizer Manufacturers Association have completed independent assessments of potential risks posed by crop nutrient materials. These assessments concluded that when handled and used as intended, based on the available data, crop nutrient

materials do not pose harm to human health or the environment. Nevertheless, agencies could impose additional standards or regulatory requirements on the producing industries, including Mosaic or our customers. It is the current opinion of management that the potential impact of any such standards on the market for our products, and the expenditures that might be necessary to meet any such standards, will not have a material adverse effect on our business or financial condition.

Operating Requirements and Impacts

Permitting. We hold numerous environmental, mining and other permits or approvals authorizing operation at each of our facilities. Our ability to continue operations at a facility could be materially affected by a government agency decision to deny or delay issuing a new or renewed permit or approval, to revoke or substantially modify an existing permit or approval or to substantially change conditions applicable to a permit modification. In addition, expansion of our operations or extension of operations into new areas is predicated upon securing the necessary environmental or other permits or approvals. For instance, over the next several years, we will be continuing our efforts to obtain permits in support of our anticipated Florida mining operations at certain of our properties. For years, we have successfully permitted mining properties and anticipate that we will be able to permit these properties as well. In Florida, local community participation has become an important factor in the permitting process for mining companies. A denial of these permits or the issuance of permits with cost-prohibitive conditions would prevent us from mining at these properties and thereby have a material adverse effect on our business and financial condition.

Operating Impacts Due to the Kyoto Protocol. On December 16, 2002, the Prime Minister of Canada ratified the Kyoto Protocol, committing Canada to reduce its greenhouse gas emissions on average to six percent below 1990 levels through the first commitment period (2008-2012). This equates to reductions of between 20 to 30 percent from current emission levels across the country. Implementation of this commitment will be achieved through The Climate Change Plan for Canada. We have been in active negotiation with the Canadian government regarding the measures to be implemented by Mosaic and other members of the potash industry to achieve the target reductions. Negotiating through the Canadian Fertilizer Institute, we have established carbon dioxide reduction targets that we believe we can meet by continuing to focus on energy efficiency initiatives within our operations, thus avoiding the need of purchasing carbon credits. The carbon dioxide target levels are not final and may change in light of the intervening election of a conservative government. While we are not anticipating stricter carbon dioxide reduction targets than those currently proposed, we cannot predict with certainty what the impact of the change in government will be.

Reclamation Obligations. During our phosphate mining operations, we remove overburden and sand tailings in order to retrieve phosphate rock reserves. Once we have finished mining in an area, we return overburden and sand tailings and reclaim the area in accordance with approved reclamation plans and applicable laws. We have incurred and will continue to incur significant costs to fulfill our reclamation obligations. In the past, we have established accruals to account for our reclamation expenses. Since June 1, 2003, we have accounted for mandatory reclamation of phosphate mining land in accordance with SFAS No. 143. See Note 16 of Notes to Consolidated Financial Statements for the impact of this accounting treatment.

Management of Residual Materials and Closure of Management Areas. Mining and processing of potash and phosphate generate residual materials that must be managed both during the operation of the facility and upon facility closure. Potash tailings, consisting primarily of salt, iron and clay, are stored in surface disposal sites. Phosphate clay residuals from mining are deposited in clay settling ponds. Processing of phosphate rock with sulfuric acid generates phosphogypsum that is stored in phosphogypsum management systems.

During the life of the tailings management areas, clay settling ponds and phosphogypsum management systems, we have incurred and will continue to incur significant costs to manage our potash and phosphate residual materials in accordance with environmental laws and regulations and with permit requirements. Additional legal and permit requirements will take effect when these facilities are closed.

The Company has significant asset retirement obligations recorded under SFAS No. 143. See Critical Accounting Estimates and Note 16 of the Notes to the Consolidated Financial Statements for the impact of this accounting treatment.

Saskatchewan Environment (SE) is in the process of establishing appropriate closure requirements for potash tailings management areas. SE has required all mine operators in Saskatchewan to obtain approval of facility decommissioning and reclamation plans (Plans). These Plans, which apply once mining operations at any facility are terminated, must specify procedures for handling potash residuals and for decommissioning all mine facilities including potash tailings management areas. On July 5, 2000, SE approved, with comments, the decommissioning Plans submitted by us for each of our facilities. These comments required us and the rest of the industry to cooperate with SE to evaluate technically feasible, cost-effective and environmentally responsible disposal options for tailings residuals and to correct any deficiencies in the Plans that were noted by SE. The Plans initially approved July 5, 2000 were reviewed, updated, and resubmitted to SE in May 2006. SE is presently considering the updated Plans, but due to time constraints was unable to complete its review by July 5, 2006. SE has extended approval of our previous plan to September 20, 2006.

Financial Assurance. Separate from our accounting treatment for reclamation and closure liabilities, some jurisdictions in which we operate have required us either to pass a test of financial strength or provide credit support, typically surety bonds or financial guarantees or letters of credit, to address phosphate mining reclamation liabilities and closure liabilities for clay settling areas and phosphogypsum management systems. See Other Commercial Commitments under Off-Balance Sheet Arrangements and Obligations above for the amounts of such assurance maintained by the Company and the impacts of such assurance.

In February 2005, the State of Florida Environmental Regulation Commission approved certain modifications to the financial assurance rules for the closure and long-term care of phosphogypsum systems located in the State of Florida that impose financial assurance requirements that are more stringent than the prior rules.

Finally, in connection with the interim approval of closure plans for potash tailings management areas, discussed above, we were required to post interim financial assurance to cover the estimated amount that would be necessary to operate our tailings management areas for approximately two years in the event that we were no longer able to fund facility decommissioning. In April 2006, a proposal for initiating a closure fund for each company was made to SE. As proposed, the fund would be managed by a mutually agreed upon third party. An initial investment by us of approximately $1.5 million Canadian would grow by the estimated time of closure, or by the one-hundredth year of operation, to an amount that would fully fund the industry’s closure liability. SE would review the sufficiency of the fund every five years. In addition, under the proposal, the existing interim financial assurance would remain in place. SE has not yet formally responded to the proposal, but in principle, appears to support it. Our current financial assurance was to expire on July 5, 2006, but SE extended the expiration date to September 30, 2006, pending its review of the proposal.

Upon final approval by SE, we will be required to provide financial assurance that Plans proposed by us ultimately will be carried out. Because SE has not yet specified the assurance mechanism to be utilized, we cannot predict with certainty the financial impact of these financial assurance requirements on us.

Remedial Activities

The Comprehensive Environmental Response Compensation and Liability Act (Superfund) imposes liability, without regard to fault or to the legality of a party’s conduct, on certain categories of persons who are considered to have contributed to the release of “hazardous substances” into the environment. Various states have enacted legislation that is analogous to the federal Superfund program. Under Superfund, or its various state analogues, one party may, under certain circumstances, be required to bear more than its proportionate share of cleanup costs at a site where it has liability if payments cannot be obtained from other responsible parties. Superfund or state analogues may impact us at our current or former operations.

Remediation at Our Facilities. Many of our formerly owned or current facilities have been in operation for a number of years. The historical use and handling of regulated chemical substances, crop and animal nutrients and additives as well as by-product or process tailings at these facilities by us and predecessor operators have resulted in soil, surface water and groundwater impacts.

At many of these facilities, spills or other releases of regulated substances have occurred previously and potentially could occur in the future, possibly requiring us to undertake or fund cleanup efforts under Superfund or otherwise. In some instances, we have agreed, pursuant to consent orders or agreements with the appropriate governmental agencies, to undertake certain investigations, which currently are in progress, to determine whether remedial action may be required to address site impacts. At other locations, we have entered into consent orders or agreements with appropriate governmental agencies to perform required remedial activities that will address identified site conditions. Taking into account established accruals, future expenditures for these known conditions currently are not expected, individually or in the aggregate, to have a material adverse effect on our business or financial condition. However, material expenditures by us could be required in the future to remediate the environmental impacts at these or at other current or former sites.

Remediation at Third-Party Facilities. Various third parties have alleged that our historic operations have impacted neighboring off-site areas or nearby third-party facilities. In some instances, we have agreed, pursuant to orders from or agreements with appropriate governmental agencies or agreements with private parties, to undertake or fund investigations, some of which currently are in progress, to determine whether remedial action, under Superfund or otherwise, may be required to address off-site impacts. Our remedial liability at these sites, either alone or in the aggregate, taking into account established accruals, currently is not expected to have a material adverse effect on our business or financial condition. As more information is obtained regarding these sites, this expectation could change.

Liability for Off-Site Disposal Locations. Currently, we are involved or concluding involvement for off-site disposal at several Superfund or equivalent state sites. Moreover, we previously have entered into settlements to resolve liability with regard to Superfund or equivalent state sites. In some cases, such settlements have included “reopeners,” which could result in additional liability at such sites in the event of newly discovered contamination or other circumstances. Our remedial liability at such disposal sites, either alone or in the aggregate, currently is not expected to have a material adverse effect on our business or financial condition. As more information is obtained regarding these sites and the potentially responsible parties involved, this expectation could change.

Oil and Gas

Through its 1997 merger with Freeport-McMoRan Inc. (FTX), IMC assumed responsibility for environmental impacts at a significant number of oil and gas facilities that had been operated by FTX, PLP (which was merged into PAP in connection with the Combination) or their predecessors. In connection with the acquisition of the sulfur transportation and terminaling assets of Freeport-McMoRan Sulphur LLC (FMS), we reached an agreement with FMS and McMoRan Exploration Co. (MOXY) whereby FMS and MOXY would assume responsibility for and indemnify us against these oil and gas responsibilities except for a limited number of specified potential claims for which we retained responsibility. These specified claims, either individually or in the aggregate, are not expected to have a material adverse effect on our business or financial condition.

Related Parties

Related parties are set forth in Note 25 of Notes to Consolidated Financial Statements and are incorporated herein by reference.

Recently Issued Accounting Guidance

Recently issued accounting guidance are set forth in Note 5 of Notes to Consolidated Financial Statements and are incorporated herein by reference.

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. 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;

•

changes in the operation of world nitrogen, phosphate or potash markets, including continuing consolidation in the fertilizer industry, particularly if we do not participate in the consolidation;

•

pressure on prices realized by us for our products;

•

the expansion or contraction of production capacity or selling efforts by competitors or new entrants in the industries in which we operate;

•

seasonality in our business that results in the need to carry significant amounts of inventory and seasonal peaks in working capital requirements, and 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;

•

the effects of and change in trade, monetary, environmental, tax and fiscal policies, laws and regulations;

•

foreign exchange rates and fluctuations in those rates;

•

adverse weather conditions affecting our operations, including the impact of potential hurricanes or excess rainfall;

•

difficulties or delays in receiving, or increased costs of obtaining or satisfying conditions of, required governmental and regulatory approvals including permitting activities;

•

the financial resources of our competitors;

•

provisions in the agreements governing our indebtedness that limit our discretion to operate our business and require us to meet specified financial tests;

•

the retention of existing, and continued attraction of additional, customers and key employees, including any difficulties we may experience in establishing a separate brand identity from Cargill, particularly in certain international jurisdictions in which Cargill traditionally attracted premiums from customers, before expiration of our existing license of Cargill’s brand in 2009;

•

the costs and effects of legal proceedings and regulatory matters affecting us including environmental and administrative proceedings;

•

any errors in our financial statements, including errors related to the material weakness we have identified in our internal controls discussed in Item 9A of Part I of this report;

•

our ability to effectively implement our planned enterprise resource planning system in a timely fashion;

•

adverse changes in the ratings of our securities and changes in availability of funds to us in the financial markets;

•

actions by the holders of controlling equity interests in businesses in which we hold a minority interest;

•

strikes, labor stoppages or slowdowns by our work force or increased costs resulting from unsuccessful labor contract negotiations;

•

increased water inflows into our potash mines at Esterhazy, Saskatchewan;

•

terrorism or other malicious intentional acts;

•

changes in antitrust and competition laws;

•

the effectiveness of our risk management strategy;

•

our ability to successfully integrate the former operations of IMC and the CCN businesses;

•

the ability to develop and execute comprehensive plans for asset optimization and/or rationalization;

•

actual costs of closures of the South Pierce, Green Bay and Fort Green facilities differing from management’s current estimates;

•

realization of management’s expectations regarding reduced raw material or operating costs, reduced capital expenditures and improved cash flow from the closures of the South Pierce, Green Bay and Fort Green facilities, and the ability to obtain any necessary waivers from regulatory agencies with oversight of us or our Phosphates business;

•

Cargill’s majority ownership and representation on Mosaic’s Board of Directors and its ability to control Mosaic’s actions, and the possibility that it could increase its ownership or sell its interest in Mosaic after the expiration of existing standstill and lockup provisions in our investor rights agreement with Cargill that expire in 2008 and 2007, respectively;

•

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;

•

our current suboptimal organizational structure in which most of our indebtedness is incurred in the United States while most of our earnings and cash flow are generated by our Canadian subsidiaries; 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 of this Annual Report on Form 10-K and incorporated into this Item 7 as if fully stated herein.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

The Mosaic Company:

We have audited the accompanying consolidated balance sheets of The Mosaic Company and subsidiaries as of May 31, 2006 and 2005, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years in the three-year period ended May 31, 2006. In connection with our audits of the consolidated financial statements, we also have audited financial statement schedule II – Valuation and Qualifying Accounts. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Mosaic Company and subsidiaries as of May 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the three-year period ended May 31, 2006, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of The Mosaic Company’s internal control over financial reporting as of May 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated August 10, 2006 expressed an unqualified opinion on management’s assessment of, and an adverse opinion on the effective operation of, internal control over financial reporting.

/S/ KPMG LLP

Minneapolis, Minnesota

August 11, 2006

Consolidated Statements of Operations

In millions, except per share amounts


	Years Ended May 31
	2006			2005			2004
Net sales	$	5,305.8		$	4,396.7		$	2,374.0
Cost of goods sold		4,668.4			3,871.2			2,196.4

Gross margin		637.4			525.5			177.6
Selling, general and administrative expenses		241.3			207.0			100.1
Restructuring and other charges		287.6			-			-
Other operating expenses		2.7			-			0.7

Operating earnings		105.8			318.5			76.8
Interest expense		166.5			120.6			29.2
Foreign currency transaction (gain) loss		100.6			(13.9	)		3.6
Other (income) expenses		(1.2	)		(3.1	)		3.9

Earnings (loss) from consolidated companies before income taxes and the cumulative effect of a change in accounting principle		(160.1	)		214.9			40.1
Provision for income taxes		5.3			98.3			2.2

Earnings (loss) from consolidated companies before the cumulative effect of a change in accounting principle		(165.4	)		116.6			37.9
Equity in net earnings of nonconsolidated companies		48.4			55.9			35.8
Minority interests in net earnings of consolidated companies		(4.4	)		(4.9	)		(1.4	)

Earnings (loss) before the cumulative effect of a change in accounting principle		(121.4	)		167.6			72.3
Cumulative effect of a change in accounting principle, net of tax		-			(2.0	)		-

Net earnings (loss)	$	(121.4	)	$	165.6		$	72.3

Earnings (loss) available for common stockholders:
Earnings (loss) before the cumulative effect of a change in accounting principle	$	(121.4	)	$	167.6		$	72.3
Preferred stock dividend		11.1			6.3			-

Earnings (loss) available for common stockholders	$	(132.5	)	$	161.3		$	72.3

Basic earnings (loss) per share:
Earnings (loss) before the cumulative effect of a change in accounting principle	$	(0.35	)	$	0.49		$	0.29
Cumulative effect of a change in accounting principle, net of tax		-			(0.01	)		-

Basic net earnings (loss) per share	$	(0.35	)	$	0.48		$	0.29

Basic weighted average number of shares outstanding		382.2			327.8			250.6

Diluted earnings (loss) per share:
Earnings (loss) before the cumulative effect of a change in accounting principle	$	(0.35	)	$	0.47		$	0.29
Cumulative effect of a change in accounting principle, net of tax		-			(0.01	)		-

Diluted net earnings (loss) per share	$	(0.35	)	$	0.46		$	0.29

Diluted weighted average number of shares outstanding		382.2			360.4			250.6

See Notes to Consolidated Financial Statements

Consolidated Balance Sheets

In millions, except per share amounts


	May 31
	2006		2005
Assets
Current assets:
Cash and cash equivalents	$	173.3	$	245.0
Receivables, net		453.2		592.9
Trade receivables due from Cargill, Incorporated and affiliates		52.6		61.1
Inventories		760.9		753.4
Deferred income taxes		50.5		2.2
Other current assets		89.9		73.7

Total current assets		1,580.4		1,728.3
Property, plant and equipment, net		4,416.6		4,121.4
Investments in nonconsolidated companies		318.9		289.9
Note receivable from Saskferco Products Inc.		-		41.5
Goodwill		2,347.1		2,160.3
Other assets		57.6		70.1

Total assets	$	8,720.6	$	8,411.5

Liabilities and Stockholders’ Equity
Current liabilities:
Short-term debt	$	152.8	$	80.7
Current maturities of long-term debt		69.3		124.2
Accounts payable		403.1		434.8
Trade accounts payable due to Cargill, Incorporated and affiliates		17.1		27.9
Accrued liabilities		385.9		380.0
Accrued income taxes		97.9		105.0

Total current liabilities		1,126.1		1,152.6
Long-term debt, less current maturities		2,384.6		2,455.2
Long-term debt-due to Cargill, Inc. and affiliates		3.5		8.5
Deferred income taxes		675.0		692.2
Other noncurrent liabilities		980.2		867.7
Minority interest in consolidated subsidiaries		20.4		21.8
Stockholders’ equity:
Preferred stock, 7.5% mandatorily convertible, $0.01 par value, 15,000,000 shares authorized, 2,750,000 shares issued and outstanding as of May 31, 2006 and 2005 (liquidation preference $50 per share)		-		-
Common stock, $0.01 par value, 700,000,000 shares authorized:
Class B common stock, 5,458,955 shares issued and outstanding as of May 31, 2006 and 2005		0.1		0.1
Common stock, 384,393,848 and 379,409,047 shares issued and outstanding as of May 31, 2006 and May 31, 2005, respectively		3.8		3.8
Capital in excess of par value		2,244.8		2,166.2
Retained earnings		982.9		1,115.4
Accumulated other comprehensive income (loss)		299.2		(72.0	)

Total stockholders’ equity		3,530.8		3,213.5

Total liabilities and stockholders’ equity	$	8,720.6	$	8,411.5

See Notes to Consolidated Financial Statements

Consolidated Statements of Cash Flows

In millions, except per share amounts


	Years Ended May 31
	2006			2005		2004
Cash Flows from Operating Activities
Net earnings (loss)	$	(121.4	)	$	165.6