SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
1998
First Quarter
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1998 Commission file number 1-14066
-------------- -------
SOUTHERN PERU COPPER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3849074
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
180 Maiden Lane, New York, N.Y. 10038
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 212-510-2000
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 ____
As of April 30, 1998 there were outstanding 13,949,872 shares of Southern Peru
Copper Corporation common stock, par value $0.01 per share. There were also
outstanding 65,900,833 shares of Southern Peru Copper Corporation Class A common
stock, par value $0.01 per share.
<PAGE>
SOUTHERN PERU COPPER CORPORATION
AND SUBSIDIARIES
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
<S> <C>
Page No.
Part I. Financial Information:
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statement of Earnings
Three Months Ended March 31, 1998 and 1997 2
Condensed Consolidated Balance Sheet
March 31, 1998 and December 31, 1997 3
Condensed Consolidated Statement of Cash Flows
Three Months Ended March 31, 1998 and 1997 4
Notes to Condensed Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8-11
Report of Independent Accountants 12
Part II. Other Information:
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6(a) Exhibits on Form 10-Q 14
Exhibit 11 Statement re Computation of Earnings per Share
Signatures 15
Exhibit I - Independent Accountants' Awareness Letter
</TABLE>
-1-
<PAGE>
Southern Peru Copper Corporation
and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(unaudited)
<TABLE>
<CAPTION>
3 Months Ended
March 31,
1998 1997
(in thousands, except per share
amounts)
<S> <C> <C>
Net sales:
Stockholders and affiliates $ 5,984 $ 20,969
Others 146,411 193,817
--------- ---------
Total net sales 152,395 214,786
--------- ---------
Operating costs and expenses:
Cost of sales 102,595 108,517
Administrative and other expenses 16,271 12,965
Depreciation and depletion 13,691 11,499
Provision for workers' participation 1,886 5,393
Exploration expense 1,192 1,064
--------- --------
Total operating costs and expenses 135,635 139,438
--------- --------
Operating income 16,760 75,348
Interest income 4,948 2,873
Other income 2,128 1,383
Interest expense (4,407) (2,440)
--------- --------
Earnings before taxes on income and minority
interest of labor shares 19,429 77,164
Taxes on income 6,316 19,805
Minority interest of labor shares in income of
Peruvian Branch (193) (1,543)
--------- --------
Net earnings $ 12,920 $ 55,816
========= ========
Per common share amounts:
Net earnings - basic and diluted $ 0.16 $ 0.70
Dividends paid $ 0.20 $ 0.30
Weighted average number of shares outstanding (Basic and Diluted)
79,943 80,195
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
Southern Peru Copper Corporation
and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 151,309 $ 126,491
Marketable securities 117,711 204,590
Accounts receivable, net 64,987 73,764
Inventories 113,184 108,683
Other assets 67,054 48,062
---------- ----------
Total current assets 514,245 561,590
Net property 994,247 947,457
Other assets 35,660 34,278
---------- ----------
Total Assets $1,544,152 $1,543,325
========== ==========
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 13,683 $ 13,683
Accounts payable 56,785 47,941
Accrued liabilities 32,406 23,490
---------- ----------
Total current liabilities 102,874 85,114
---------- ----------
Long-term debt 234,208 234,208
Deferred credits 44,330 58,574
Deferred income taxes 46,743 44,323
Other liabilities 5,899 4,083
---------- ----------
Total non-current liabilities 331,180 341,188
---------- ----------
Minority interest of labor shares in the Peruvian
Branch 18,524 19,385
---------- ----------
STOCKHOLDERS' EQUITY
Common stock (a) 261,077 264,078
Retained earnings 830,497 833,560
---------- ---------
Total Stockholders' Equity 1,091,574 1,097,638
---------- ---------
Total Liabilities, Minority Interest and Stockholders' Equity
$1,544,152 $1,543,325
========== ==========
(a) Common shares: Authorized 34,099 34,099
Outstanding 13,947 14,157
Class A common shares Authorized & Outstanding 65,901 65,901
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
Southern Peru Copper Corporation
and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
3 Months Ended
March 31,
1998 1997
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 12,920 $ 55,816
Adjustments to reconcile net earnings to net cash provided from operating activities:
Depreciation and depletion 13,691 11,499
Provision (benefit) for deferred income taxes 2,446 (1,623)
Minority interest of labor shares 193 1,543
Net loss on sale of investments and property 268 -
Cash provided from (used for) operating assets and liabilities:
Accounts receivable 8,717 (6,640)
Inventories (4,501) 7,838
Accounts payable and accrued liabilities 14,399 14,196
Other operating assets and liabilities (16,124) (21,749)
Foreign currency transaction loss - 22
--------- --------
Net cash provided from operating activities 32,009 60,902
--------- --------
INVESTING ACTIVITIES
Capital expenditures (76,408) (29,096)
Proceeds from held-to-maturity investments 86,879 1,000
Sales of property 822 -
--------- ---------
Net cash provided from (used for) investing activities 11,293 (28,096)
--------- ---------
FINANCING ACTIVITIES
Debt repaid - (5,000)
Escrow deposits on long-term loans 1,615 439
Dividends paid to common stockholders (15,983) (24,055)
Distributions to minority interest (396) (735)
Net treasury stock transactions (3,001) -
Purchases of labor shares (912) (3,056)
--------- --------
Net cash used for financing activities (18,677) (32,407)
--------- --------
Effect of exchange rate changes on cash 193 249
---------- --------
Increase in cash and cash equivalents 24,818 648
Cash and cash equivalents, at beginning of period 126,491 173,205
--------- --------
Cash and cash equivalents, at end of period $ 151,309 $ 173,853
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
SOUTHERN PERU COPPER CORPORATION
and Subsidiaries
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
present fairly the Company's financial position as of March 31, 1998 and
the results of operations and cash flows for the three months ended March
31, 1998 and 1997. Certain reclassifications have been made in the
financial statements from amounts previously reported. This financial data
has been subjected to a review by Coopers & Lybrand L.L.P., the Company's
independent accountants. The results of operations for the three month
period are not necessarily indicative of the results to be expected for the
full year. The accompanying condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements
and notes thereto included in the Company's 1997 annual report on Form
10-K.
B. The effective tax rate increased in the first quarter of 1998 as compared
to the first quarter of 1997 primarily because in 1997 the Company realized
a reduction in its effective tax rate as a result of a reinvestment
allowance to expand the Cuajone mine approved by the Government of Peru.
C. The Company's first quarter 1998 results include $10.0 million pre-tax
charge ($6.0 million after-tax) for severance costs associated with the
Company's cost reduction program.
D. Inventories were as follows:
(in millions)
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, December 31,
1998 1997
---- ----
Metals at lower of average cost or market:
Finished goods $ 1.7 $ 0.6
Work-in-process 45.3 45.0
Supplies at average cost, net of reserves 66.2 63.1
------ -------
Total inventories $113.2 $ 108.7
====== =======
</TABLE>
E. At March 31, 1998, the Company has recorded sales of 13.9 million pounds of
copper, at a provisional price of $0.76 per pound. These sales are subject
to final pricing based on the average monthly LME copper price principally
in the second quarter of 1998.
F. Financial Instruments:
The Company may use derivative instruments to manage its exposure to market
risk from changes in commodity prices. Derivative instruments which are
designated as hedges must be deemed effective at reducing the risk
associated with the exposure being hedged and must be designated as a hedge
at the inception of the contract.
-5-
<PAGE>
Copper: Depending on market fundamentals and other conditions, the Company
may purchase put options to reduce or eliminate the risk of price declines
below the option strike price on a portion of its anticipated future
production. Put options purchased by the Company establish a minimum sales
price for the production covered by such put options and permit the Company
to participate in price increases above the option price. The cost of the
options is amortized on a straight-line basis during the period in which
the options are exercisable. Depending upon market conditions the Company
may either sell options it holds or exercise the options at maturity. Gains
or losses from the sale or exercise of options, net of unamortized
acquisition costs, are recognized in the period in which the underlying
production is sold and are reported as a component of the underlying
transaction.
The recognized pre-tax gains from the Company's copper hedging activities,
were $7.2 million and $5.6 million for the first quarter 1998 and 1997,
respectively.
At March 31, 1998, the Company held no copper put options.
Fuel swaps: The Company may enter into fuel swap agreements to limit the
effect of changes in fuel prices on its product costs. A fuel swap
establishes a fixed price for the quantity of fuel covered by the
agreement. The difference between the published price for fuel and the
price established in the contract for the month covered by the swap is
recognized in production costs. As of March 31, 1998, the Company has
entered into the following fuel swap agreements:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Percent of
Quantity Contract Estimated Fuel
Fuel Type Period (Barrels) Price Requirement
--------- ------ --------- ----- -----------
Residual Oil #6: 4/98-6/98 90,000 $13.93 30%
7/98-9/98 180,000 $12.81 60%
10/98-12/98 90,000 $13.93 30%
Diesel Fuel #2: 4/98-6/98 124,000 $18.42 84%
7/98-12/98 80,000 $21.40 27%
</TABLE>
G. Commitments and Contingencies:
Litigation
In April 1996, Southern Peru Limited, a wholly owned subsidiary of the
Company, was served with a complaint filed in Peru by approximately 800
former employees seeking the delivery of a substantial number of labor
shares of its Peruvian Branch plus dividends. In October 1997, the Superior
Court of Lima nullified a decision of a court of first instance, which had
been adverse to Southern Peru Limited. The Superior Court remanded the case
for a new trial. Plaintiff filed an extraordinary appeal before the
Peruvian Supreme Court. The Supreme Court may grant discretionary review in
limited cases. The Supreme Court has not yet ruled as to whether it will
accept the appeal. There is also pending against Southern Peru Limited a
similar lawsuit filed by 127 additional former employees. In the third
quarter of 1997, the court of first instance dismissed their complaint. The
plaintiffs have appealed to the Superior Court of Lima.
It is the opinion of management that the outcome of the legal proceedings
mentioned, as well as other miscellaneous litigation and proceedings now
pending, will not materially adversely affect the financial position of the
Company and its consolidated subsidiaries. However, it is possible that
litigation matters could have a material effect on quarterly or annual
operating results, when they are resolved in future periods.
-6-
<PAGE>
H. Summarized Financial Information of Significant Subsidiary:
The condensed consolidated financial information for Southern Peru Limited,
a wholly owned subsidiary of Southern Peru Copper Corporation, included in
the consolidated financial statements of the Company, is summarized below.
Separate financial statements and disclosures for Southern Peru Limited are
not presented because management has determined that such information is
not material to holders of Southern Peru Limited's debt securities.
Statement of Earnings and Cash Flow
(in millions)
<TABLE>
Three Months Ended
March 31,
<S> <C> <C>
1998 1997
---- ----
Earnings:
Net sales $152.4 $214.8
Operating income 16.8 75.3
Net earnings 12.9 55.8
Cash Flow:
Operating activities $ 32.0 $ 60.9
Investing activities 11.3 (28.1)
Financing activities (18.7) (32.4)
Balance Sheet
(in millions) At March 31, 1998 At December 31, 1997
------------------ --------------------
Current assets $514.2 $561.6
Noncurrent assets 1,029.9 981.7
Current liabilities 102.9 85.1
Noncurrent liabilities 331.2 341.2
Minority interest 18.5 19.4
Stockholders' equity 1,091.6 1,097.6
</TABLE>
Southern Peru Limited holds all the operating assets and liabilities of the
Company and does not hold any other operating assets.
I. Impact of New Accounting Standard:
In the first quarter of 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income." This
statement, which establishes standards for reporting and display of
comprehensive income and its components, had no impact on the financial
statements.
In March 1998, the Financial Accounting Standards Board issued SFAS No. 132
"Employers Disclosure about Pensions and other Postretirement Benefits."
This statement which is effective for fiscal years beginning after December
15, 1997, revises employers' disclosures about pensions and other
postretirement benefit plans but does not change the measurement or
recognition of those plans.
-7-
<PAGE>
Part I Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company reported net earnings of $12.9 million, or $0.16 per share on a
diluted basis, for the first quarter ended March 31, 1998 compared with net
earnings of $55.8 million, or diluted earnings per share of $0.70, for the first
quarter of 1997. The decrease in earnings in 1998 is primarily a result of low
copper prices which were lower by 30% from a year ago and from a non-recurring
charge for severance costs related to the Company's cost reduction program.
In response to low copper prices the Company implemented a $30 million annual
cost-reduction program. The program includes reductions in general and
administrative expenses, and purchased materials and supplies, as well as other
operational improvements. The program also includes personnel reductions and the
institution of a hiring freeze of the Company's salaried staff. The Company
provided a $10 million pre-tax charge in the first quarter of 1998 for severance
costs.
In the first quarter 1998 the Company recognized pre-tax gains of $7.2 million
($4.4 million after-tax) as a result of its price protection program, compared
with pre-tax gains of $5.6 million ($3.6 million after-tax) in the first quarter
of 1997.
Copper mine production decreased by 7% to 153.1 million pounds in the first
quarter of 1998, principally due to a reduction in the grade of ore of the
Cuajone mine, partially offset by increases in throughput and recoveries at the
Cuajone concentrator and increased production from the SX/EW facility. Refined
copper production increased by 6% in the first quarter of 1998 due to increased
electric current density at the Ilo refinery and an increase in production from
the SX/EW facility.
The Ilo acid plant expansion was completed in March 1998 and will capture all of
the sulfur dioxide emitted by the Teniente converter which comprises 30% of the
smelter's total emissions. As a result, production of sulfuric acid will
increase to 330,000 tons annually. The Cuajone mine expansion, which will
increase annual copper production by 130 million pounds is on schedule and is
expected to be completed in early 1999. Engineering and planning for the Ilo
smelter modernization are also moving forward on schedule.
Inflation and Devaluation of Peruvian Sol: A portion of the Company's operating
costs are denominated in Peruvian soles. Since the revenues of the Company are
primarily denominated in U.S. dollars, when inflation in Peru is not offset by a
corresponding devaluation of the sol, the financial position, results of
operations and cash flows of the Company could be adversely affected. For the
three months ended March 31,1998 the inflation and devaluation rates were 3.5%
and 2.9%, respectively.
Net Sales: Net sales in the first quarter of 1998 decreased $62.4 million to
$152.4 million from the comparable period in 1997. The decrease in net sales was
a result of lower copper prices in 1998.
-8-
<PAGE>
At March 31, 1998, the Company has recorded sales of 13.9 million pounds of
copper, at a provisional price of $0.76 per pound. These sales are subject to
final pricing based on the average monthly LME copper price principally in the
second quarter of 1998.
Prices: Sales prices for the Company's metals are established principally by
reference to prices quoted on the London Metal Exchange (LME), the New York
Commodity Exchange (COMEX) or published in Platt's Metals Week for dealer oxide
mean prices for molybdenum products.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
<S> <C> <C>
1998 1997
---- ----
Price/Volume Data:
Average Metal Prices
Copper (per pound-LME) $0.77 $1.10
Molybdenum (per pound) $3.96 $4.56
Silver (per ounce-COMEX) $6.24 $5.01
Sales Volume (in thousands):
Copper (pounds) 170,020 172,000
Molybdenum (pounds) (1) 2,851 2,234
Silver (ounces) 753 679
</TABLE>
(1) The Company's molybdenum production is sold in concentrate form. Volume
represents pounds of molybdenum contained in concentrates.
Financial Instruments:
The Company may use derivative instruments to manage its exposure to market risk
from changes in commodity prices. Derivative instruments which are designated as
hedges must be deemed effective at reducing the risk associated with the
exposure being hedged and must be designated as a hedge at the inception of the
contract.
Copper: Depending on market fundamentals and other conditions, the Company may
purchase put options to reduce or eliminate the risk of price declines below the
option strike price on a portion of its anticipated future production. Put
options purchased by the Company establish a minimum sales price for the
production covered by such put options and permit the Company to participate in
price increases above the option price. The cost of the options is amortized on
a straight-line basis during the period in which the options are exercisable.
Depending upon market conditions the Company may either sell options it holds or
exercise the options at maturity. Gains or losses from the sale or exercise of
options, net of unamortized acquisition costs, are recognized in the period in
which the underlying production is sold and are reported as a component of the
underlying transaction.
The recognized pre-tax gains of the Company's copper hedging activities, were
$7.2 million and $5.6 million for the first quarter 1998 and 1997, respectively.
At March 31, 1998, the Company held no copper put options.
-9-
<PAGE>
Fuel swaps: The Company may enter into fuel swap agreements to limit the effect
of changes in fuel prices on its product costs. A fuel swap establishes a fixed
price for the quantity of fuel covered by the agreement. The difference between
the published price for fuel and the price established in the contract for the
month covered by the swap is recognized in production costs. As of March 31,
1998, the Company has entered into the following fuel swap agreements:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Percent of
Quantity Contract Estimated Fuel
Fuel Type Period (Barrels) Price Requirement
--------- ------ --------- ----- -----------
Residual Oil #6: 4/98-6/98 90,000 $13.93 30%
7/98-9/98 180,000 $12.81 60%
10/98-12/98 90,000 $13.93 30%
Diesel Fuel #2: 4/98-6/98 124,000 $18.42 84%
7/98-12/98 80,000 $21.40 27%
</TABLE>
Operating Costs and Expenses: Operating costs and expenses were $135.6 million
in the first quarter of 1998 compared with $139.4 million in the first quarter
of 1997. The decrease in the operating costs and expenses is principally due to
lower sales of purchased concentrates and lower workers participation in the
first quarter of 1998, partially offset by a charge in the 1998 quarter of $10.0
million for severance cost associated with the Company's cost reduction program.
Non-Operating Items: Interest income was $4.9 million in the first quarter of
1998, compared with $2.9 million for the respective period in 1997. The increase
reflected higher invested balances partially reduced by lower interest rates.
Interest expense was $4.4 million in the first quarter of 1998, compared with
$2.4 million in the first quarter of 1997, primarily as a result of a higher
outstanding debt.
Taxes on Income: Taxes on income for the three months ended March 31, 1998 were
$6.3 million, compared with $19.8 million for the first quarter of 1997. The
decrease was principally due to lower earnings in 1998.
The effective tax rate increased in the first quarter of 1998 as compared to the
first quarter of 1997 primarily because in 1997 the Company realized a reduction
in its effective tax rate as a result of a reinvestment allowance to expand the
Cuajone Mine approved by the Government of Peru.
Minority Interest of Labor Shares: The minority interest of labor shares was
$0.2 million in the first quarter of 1998, compared to $1.5 million in the first
quarter of 1997. The decrease reflects lower earnings and a reduction in labor
shares interest as result of the Company's purchases of labor shares.
Cash Flows - Operating Activities: Net cash provided from operating activities
was $32.0 million in the first quarter of 1998, compared with $60.9 million in
the comparable 1997 period. The decrease was primarily the result of lower
copper prices.
Cash Flows - Investing Activities: Investing activities in the first quarter of
1998 was a source of cash of $11.3 million, compared with a use of cash of $28.1
million for the first quarter of 1997. The increase in cash provided from
investing activities in the first quarter of 1998 is due to higher proceeds from
held-to-maturity investments partially offset by increased capital expenditures.
The increase in capital expenditures from the prior year first quarter is
principally related to the expansion of the Cuajone mine.
-10-
<PAGE>
Cash Flows - Financing Activities: Financing activities in the first quarter of
1998 included dividend distributions of $16.0 million and $3.9 million used to
repurchase labor shares and treasury stock.
The first quarter of 1997 included a dividend distribution of $24.1 million,
funds used to purchase labor shares and treasury stock of $3.1 million and a
scheduled payment of $5.0 million of long-term debt.
Liquidity and Capital Resources: At March 31, 1998, the Company's debt as a
percentage of total capitalization (total debt, minority interests and
stockholders' equity) was 18.3% compared to 18.2% at December 31, 1997. Debt at
March 31, 1998 was $247.9 million, the same as at the end of 1997. Additional
indebtedness permitted under terms of the most restrictive of the Company's
credit agreements totaled $843 million at March 31, 1998.
The Company expects that it will meet its cash requirements for 1998 and beyond
from internally generated funds, cash on hand, from borrowings under the
seven-year loan facility signed in April 1997, and from additional external
financing.
In the first quarter of 1998, the Company paid a dividend to shareholders of
$16.0 million or $0.20 per share, compared with $24.1 million or $0.30 per share
in the same period of 1997. On April 30, 1998, the Company declared a quarterly
dividend of $0.08 per share payable June 3, 1998 to stockholders of record at
the close of business on May 18, 1998.
Certain financing agreements contain covenants which limit the payment of
dividends to stockholders. Under the most restrictive covenant, the Company may
pay dividends to stockholders equal to 50% of the net income of the Company for
any fiscal quarter as long as such dividends are paid by June 30 of the
following year.
Impact of New Accounting Standard: In the first quarter of 1998, the Company
adopted Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." This statement, which establishes standards for reporting
and display of comprehensive income and its components, had no impact on the
financial statements.
In March 1998, the Financial Accounting Standards Board issued SFAS No. 132
"Employers Disclosure about Pensions and other Postretirement Benefits." This
statement which is effective for fiscal years beginning after December 15, 1997,
revises employers' disclosures about pensions and other postretirement benefit
plans but does not change the measurement or recognition of those plans.
Cautionary statement: Forward-looking statements in this report and in other
Company statements include statements regarding expected commencement dates of
mining or metal production operations, projected quantities of future metal
production, anticipated production rates, operating efficiencies, costs and
expenditures as well as projected demand or supply for the Company's products.
Actual results could differ materially depending upon factors including the
availability of materials, equipment, required permits or approvals and
financing, the occurrence of unusual weather or operating conditions, lower than
expected ore grades, the failure of equipment or processes to operate in
accordance with specifications, labor relations, environmental risks as well as
political and economic risk associated with foreign operations. Results of
operations are directly affected by metal prices on commodity exchanges which
can be volatile.
-11-
<PAGE>
COOPERS & LYBRAND L.L.P.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Southern Peru Copper Corporation:
We have reviewed the condensed consolidated balance sheet of Southern Peru
Copper Corporation and Subsidiaries as of March 31, 1998 and the condensed
consolidated statements of earnings and cash flows for the three months ended
March 31, 1998 and 1997. These financial statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements, referred to above,
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1997 and the
related consolidated statements of earnings,cash flows, and changes in common
stockholders' equity for the year then ended (not presented herein); and in our
report dated January 23, 1998, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of December 31, 1997,
is fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
Coopers & Lybrand L.L.P.
New York, New York
April 20, 1998
-12-
<PAGE>
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
At the annual meeting of stockholders of the Company held on April 30, 1998,
the holders of Common Stock, voting as a class, were asked to elect two
directors, the holders of Class A Common Stock, voting as a class, were asked
to elect 13 directors, and both classes, voting together, were asked to approve
the selection of the independent accountants for 1998.
Votes cast in the election of directors by holders of Common Stock were as
follows:
<TABLE>
<CAPTION>
Number of Shares
<S> <C> <C> <C>
Names For Withheld
----- ---- -------
Amb. Everett E. Briggs 8,813,771 778,191
John F. McGillicuddy 8,863,284 728,678
</TABLE>
In the election of directors by holders of Class A Common Stock, each of the
following directors received 65,900,833 votes and no votes were withheld:
<TABLE>
<CAPTION>
<S> <C> <C>
Jaime Claro Charles G. Preble
Augustus B. Kinsolving Robert A. Pritzker
Francis R. McAllister Michael O. Varner
Kevin R. Morano J. Steven Whisler
Robert J. Muth David B. Woodbury
Robert M. Novotny Douglas C. Yearley
Richard de J. Osborne
</TABLE>
Stockholders approved the selection of the independent accountants as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For Against Withheld
Common Stock: 10,059,128 10,438 132,705
Class A Common Stock: 329,504,165 - -
------------ ------- --------
Total 339,563,293 10,438 132,705
</TABLE>
Holders of Class A Common Stock are entitled to five votes per share when voting
together with the holders of Common Stock as one class.
-13-
<PAGE>
Item 6(a) - Exhibits on Form 10Q
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C>
Exhibit
11 Statement re Computation of Earnings per Share
</TABLE>
-14-
<PAGE>
Exhibit 11 Statement re Computation of Earnings per Share
This calculation is submitted in accordance with Regulation S-K item 601(b)(11).
Earnings per Common Share
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
3 Months Ended
March 31,
<S> <C> <C>
1998 1997
---- ----
Net earnings applicable to common stock $12,920 $55,816
======= =======
Weighted average number of common shares outstanding 79,943 80,192
Shares issuable from assumed exercise of Stock Options - 3
------- -------
Weighted average number of common shares outstanding, 79,943 80,195
====== =======
as adjusted
Diluted earnings per share:
Net earnings applicable to common stock $.16 $.70
==== ====
Basic earnings per share:
Net earnings applicable to common stock $.16 $.70
==== ====
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirement 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.
SOUTHERN PERU COPPER CORPORATION
(Registrant)
Date: May 14, 1998 /s/ Ronald J. O'Keefe
---------------------
Ronald J. O'Keefe
Executive Vice President and
Chief Financial Officer
Date: May 14, 1998 /s/ Brendan M. O'Grady
----------------------
Brendan M. O'Grady
Comptroller
-15-
<PAGE>
Exhibit I
COOPERS & LYBRAND L.L.P.
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
We are aware that our report dated April 20, 1998 on our review of the interim
financial information of Southern Peru Copper Corporation and Subsidiaries as of
March 31,1998 for the three months ended March 31, 1998 and 1997 and included in
this Form 10-Q for the quarter ended March 31,1998 is incorporated by reference
in the Company's Registration Statement on Form S-8 (File Nos. 33-32736 and
333-40293). Pursuant to Rule 436(c) under the Securities Act of 1933, this
report should not be considered a part of the Registration Statement prepared or
certified by us within the meaning of Sections 7 and 11 of that Act.
Coopers & Lybrand L. L. P.
New York, New York
May 14, 1998
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 151309
<SECURITIES> 117711
<RECEIVABLES> 64987
<ALLOWANCES> 0
<INVENTORY> 113184
<CURRENT-ASSETS> 514245
<PP&E> 1885259
<DEPRECIATION> 891012
<TOTAL-ASSETS> 1544152
<CURRENT-LIABILITIES> 102874
<BONDS> 0
<COMMON> 261077
0
0
<OTHER-SE> 830497
<TOTAL-LIABILITY-AND-EQUITY> 1544152
<SALES> 152395
<TOTAL-REVENUES> 152395
<CGS> 102595
<TOTAL-COSTS> 102595
<OTHER-EXPENSES> 33040
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4407
<INCOME-PRETAX> 19429
<INCOME-TAX> 6316
<INCOME-CONTINUING> 13113
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12920
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
