<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JULY 31, 1998
Or
[ ] 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 333-52285
THE DOE RUN RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
NEW YORK 13-1255630
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1801 PARK 270 DRIVE, SUITE 300
ST. LOUIS, MISSOURI 63146
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (314) 453 - 7100
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 proceeding 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
Number of shares outstanding of each of the issuer's classes of common stock,
as of September 28, 1998:
COMMON STOCK, $.10 PAR VALUE 1,000 SHARES
<PAGE>
THE DOE RUN RESOURCES CORPORATION
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE DOE RUN RESOURCES CORPORATION
Condensed Consolidated Balance Sheets
July 31, 1998 and October 31, 1997 3
Condensed Consolidated Statements of Operations
Three and Nine Months Ended July 31, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows
Nine Months Ended July 31, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6-15
DOE RUN PERU S.R.L.
Condensed Consolidated Balance Sheets
July 31, 1998 and October 31, 1997 16
Condensed Consolidated Statements of Operations
Three and Nine Months Ended July 31, 1998 and 1997 17
Condensed Consolidated Statements of Cash Flows
Nine Months Ended July 31, 1998 and 1997 18
Notes to Condensed Consolidated Financial Statements 19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 20-30
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT 30-31
MARKET RISK
PART II. OTHER INFORMATION.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 32
(a) EXHIBITS
Exhibit 27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
SIGNATURES 33
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENT
THE DOE RUN RESOURCES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1998 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 12,389 $ 8,943
Trade accounts receivable, net of allowance for
doubtful accounts 72,746 52,470
Inventories 109,172 88,648
Prepaid expenses and other current assets 34,299 5,263
Net deferred tax assets - 69
------------ -----------
Total current assets 228,606 155,393
Property, plant and equipment, net 206,371 206,348
Special term deposit 125,000 -
Net deferred tax assets 8,364 7,481
Other noncurrent assets, net 18,010 15,218
------------ -----------
Total assets $586,351 $384,440
------------ -----------
------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current maturities of long-term debt $ 12,895 $ 12,345
Accounts payable 52,219 41,086
Accrued liabilities 49,629 28,893
Net deferred tax liabilities 8,645 7,481
------------ -----------
Total current liabilities 123,388 89,805
Long-term debt, less current maturities 386,767 222,395
Other noncurrent liabilities 57,661 58,066
------------ -----------
Total liabilities 567,816 370,266
Shareholders' equity:
Preferred stock, $1,000 par value, 2,500 shares issued, authorized and
outstanding; liquidation and redemption value of $2,618
at October 31, 1997 - 2,500
Common stock, $.10 par value, 1,000 shares authorized,
issued, and outstanding - -
Additional paid-in capital 5,000 5,000
Retained earnings 13,535 6,674
------------ -----------
Total shareholders' equity 18,535 14,174
------------ -----------
Total liabilities and shareholders' equity $586,351 $384,440
------------ -----------
------------ -----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
THE DOE RUN RESOURCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED JULY 31, ENDED JULY 31,
-------------------------- ---------------------------
1998 1997 1998 1997
------------ ----------- ------------ -----------
<S> <C> <C>
Net sales $ 184,360 $ 70,506 $ 527,765 $ 206,411
Costs and expenses:
Cost of sales 156,586 61,667 439,691 170,145
Depletion, depreciation and amortization 5,551 3,636 17,012 10,959
Selling, general and administrative 8,031 2,245 25,731 8,049
Exploration 1,165 897 2,764 2,262
------------ ----------- ------------ -----------
Total costs and expenses 171,333 68,445 485,198 191,415
------------ ----------- ------------ -----------
Income from operations 13,027 2,061 42,567 14,996
Other income (expense):
Interest expense (12,532) (3,066) (27,037) (10,634)
Interest income 3,641 5 6,000 7
Other, net 704 (57) 69 (51)
------------ ----------- ------------ -----------
(8,187) (3,118) (20,968) (10,678)
------------ ----------- ------------ -----------
Income (loss) before income tax expense
and extraordinary item 4,840 (1,057) 21,599 4,318
Income tax expense 2,181 2,415 7,942 4,241
------------ ----------- ------------ -----------
Income (loss) before extraordinary item 2,659 (3,472) 13,657 77
Extraordinary item related to early retirement
of debt, net of income tax benefit - - (6,607) (314)
------------ ----------- ------------ -----------
Net income (loss) $ 2,659 $ (3,472) $ 7,050 $ (237)
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
THE DOE RUN RESOURCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED JULY 31,
---------------------------
1998 1997
------------ ----------
<S> <C> <C>
Net cash provided by (used in) operating activities $ (3,825) $ 14,200
Cash flows from investing activities:
Special term deposit (125,000) -
Purchases of property, plant and equipment (17,032) (7,432)
------------ ----------
Net cash used in investing activities (142,032) (7,432)
Cash flows from financing activities:
Proceeds from revolving loan and short-term borrowings, net 15,767 12,961
Proceeds from long-term debt 380,000 10,945
Payments on long-term debt (230,845) (25,186)
Payment of deferred financing costs (12,930) (247)
Payment of dividends (189) (5,241)
Redemption of preferred stock (2,500) -
------------ ----------
Net cash provided by (used in) financing activities 149,303 (6,768)
------------ ----------
Net increase in cash 3,446 -
Cash at beginning of period 8,943 -
------------ ----------
Cash at end of period $ 12,389 $ -
------------ ----------
------------ ----------
Supplemental disclosure of cash flow information-
Cash paid during the period for:
Interest, net of capitalized interest $ 9,445 $ 7,202
------------ ----------
------------ ----------
Income taxes $ 14,089 $ 2,506
------------ ----------
------------ ----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
THE DOE RUN RESOURCES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) UNAUDITED INTERIM FINANCIAL STATEMENTS
These condensed consolidated financial statements include the accounts
of the Doe Run Resources Corporation and its subsidiaries (the "Company").
The common stock of the Company is owned by DR Acquisition Corp. a
wholly-owned subsidiary of The Renco Group, Inc ("Renco"). In the opinion
of management, the interim condensed consolidated financial statements
contain all adjustments, consisting of normal recurring accruals, necessary
to present fairly the consolidated financial position as of July 31, 1998
and results of operations for the three month and nine month periods ended
July 31, 1998 and 1997. Interim periods are not necessarily indicative of
results to be expected for the 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 Registration Statement on Form S-4 (File No. 333-52285).
(2) INVENTORIES
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1998 1997
---- ----
(UNAUDITED)
<S> <C> <C>
Finished metals and concentrates $ 12,887 $11,460
Metals and concentrates in process 65,522 51,129
Materials, supplies and repair parts 30,763 26,059
-------- -------
$109,172 $88,648
-------- -------
-------- -------
</TABLE>
Materials, supplies and repair parts are stated net of reserves for
obsolescence of $4,747 and $4,738 as of July 31, 1998 and October 31, 1997,
respectively.
(3) LONG-TERM DEBT
On March 12, 1998, the Company completed the sale of $200,000 11.25%
Senior Notes due 2005 (the "Fixed Rate Notes") and $55,000 Floating
Interest Rate Senior Notes due 2003 (collectively, the "Notes"). The Notes
are guaranteed by certain subsidiaries of the Company (see Note 7). The
Company used $125,000 of the proceeds from the Notes offering to make a
deposit (the "Special Term Deposit") in a bank, which in turn loaned such
amount (the "Back-to-Back Loan") to Doe Run Mining S.R.L. ("Doe Run
Mining"). The Special Term Deposit and the Back-to-Back Loan have payment
terms that match the timing and amount of the payments on $125,000 of the
Fixed Rate Notes, except that additional interest of 0.50% for the first
six months and 0.25% thereafter through September 11, 2004 is payable on
the Back-to-Back Loan. The Back-to-Back Loan is collateralized by the
Special Term Deposit. Doe Run Mining used the proceeds of the Back-to-Back
Loan to repay the $100,000 balance on a $225,000 term loan, plus accrued
interest thereon of $1,004, repay a $23,000 subordinated note to the Doe
Run Resources Corporation, and pay fees of $313.
The remaining $130,000 of the proceeds of the Notes offering, plus the
$23,000 repayment of the subordinated note by Doe Run Mining, were used by
the Doe Run Resources Corporation to: i) repay principal and interest on a
$130,000 term loan of $128,125 and $1,127, respectively, ii) repay the
6
<PAGE>
THE DOE RUN RESOURCES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
revolving loan balance of $14,444, iii) pay Renco $5,000 to redeem $2,500
of outstanding preferred stock, plus accrued dividends thereon of $189, and
a transaction fee of $2,311 and iv) pay related fees and expenses of
$6,553.
As a result of these transactions, the Company recognized an
extraordinary loss of $6,607, net of income tax benefit of $143.
(4) HEDGING
The fair market value of the Company's net hedging positions at July
31, 1998 is the difference between quoted prices at the respective
period-end and the contract settlement value. The fair market value
represents the estimated net cash the Company would receive (pay) if the
contracts were canceled on the respective dates. As management has
designated these contracts as hedges, the related gains and losses will be
recognized in net sales when the related production is sold.
The fair market value of the Company's net open hedging positions at
July 31, 1998 was ($265).
The Company is exposed to risk from market price fluctuations to the
extent it cannot meet anticipated sales.
The Company does not obtain collateral or other security to support
hedge instruments subject to credit risk, but assesses the reliability and
reputation of its counterparties before contracts are established.
(5) ENVIRONMENTAL AND LITIGATION MATTERS
The Company is subject to numerous U.S. and Peruvian federal, state
and local environmental laws and regulations governing, among other things,
air emissions, waste water discharge, solid and hazardous waste treatment,
and storage, disposal and remediation of releases of hazardous materials.
In common with much of the mining industry, the Company's facilities are
located on sites that have been used for heavy industrial purposes for
decades and may require remediation. The Company has made and intends to
continue making the necessary expenditures for environmental remediation
and compliance with environmental laws and regulations. Environmental laws
and regulations may become more stringent in the future which could
increase costs of compliance.
The Company has recorded a liability of $34,058 as of July 31, 1998,
which represents management's best estimate of known obligations relating
to environmental and reclamation matters, which are discussed below.
DOMESTIC OPERATIONS
Primary smelter slag produced by and stored at the primary smelter in
Herculaneum, Missouri is exempt from hazardous waste regulation under the
Resource Conservation and Recovery Act of 1976, as amended ("RCRA"). The
U.S. Environmental Protection Agency (the "EPA") has completed a rule
making process where the status of slag and other secondary materials
generated at primary lead smelters were considered for regulation under
RCRA. The final rule has been issued, and slag will continue to be exempt
from hazardous waste regulation under RCRA. Further, if certain management
practices are
7
<PAGE>
THE DOE RUN RESOURCES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
followed for the handling and storage of other secondary materials, these
materials will not be subject to full RCRA requirements. The Company is
developing the requisite management practices, which will be in place by
the end of 1999, and which will require expenditures, primarily capital,
of no more than $500.
The Company is working with regulators at the Herculaneum smelter to
develop a new three-year compliance plan to meet the ambient air quality
standard for lead promulgated under the federal Clean Air Act. The plan
will take effect after fiscal 1998 to implement control measures identified
in the plan. The Company expects to make capital expenditures for
additional control measures totaling approximately $2,800 while the plan is
developed and anticipates future cash requirements of approximately $3,000
for the three-year plan.
The Company has received notice that it is a potentially responsible
party ("PRP") subject to liability under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), at
four sites in St. Francois County, Missouri: the Big River Mine Tailings
Site, the Bonne Terre Site, the Federal site, and the National site; the
Oronogo-Durenweg site in Jasper County, Missouri; the Cherokee County site
in Cherokee County, Kansas; the Tar Creek site in Ottawa County, Oklahoma;
the Block "P" site in Cascade County, Montana; and the Missouri Electric
Works site in Cape Girardeau, Missouri. In addition, there are four sites
in St. Francois County for which the EPA has indicated it will issue
notice. These sites involve historical operations of predecessors of the
Company. CERCLA provides for strict and, in certain circumstances, joint
and several liability for response costs and natural resource damages. The
Company has signed a voluntary Administrative Order of Consent ("AOC") in
1994 with the EPA to remediate the Big River Mine Tailings Site. In
February 1997, The Company signed an AOC to perform an Engineering
Evaluation/Cost Analysis on the Bonne Terre Site. In March 1998, the
Company signed an AOC to perform an EE/CA on the National Site. In addition
to remediating the mine waste areas at these sites, the Company has signed
an AOC with the EPA to conduct a Remedial Investigation/Feasibility Study
("RIFS") to assess potential off-site impacts of site operations on, and
the need for remediation regarding groundwater, residential soils, several
creeks and a river. The RIFS is being conducted by a third party and is
approximately one-third complete, with completion expected within one year.
The Block "P" site in Montana was a polymetallic mine with a waste facility
located on U.S. Forest Service land. Studies of the tailings site, mine and
the potential impacts on surface water have been requested by the State of
Montana and the U.S. Forest Service for the tailings site.
The Company's recycling facility is subject to corrective action
requirements under RCRA, as a result of a storage permit for certain wastes
issued in 1989. This has required and may involve future remediation of
solid waste management units at the site. Although it is not possible to
predict whether completed actions will be approved or new actions required,
the Company has reserved for closure costs for the permitted storage area.
Spending against the reserve has not been significant since October 31,
1997.
The Company's domestic operating facilities have wastewater discharge
permits issued under the federal Clean Water Act, as amended. It is
expected that stricter discharge limits than previously in effect will be
included in permits now subject to renewal. As a result, there will be
additional treatment
8
<PAGE>
THE DOE RUN RESOURCES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
facilities required, with anticipated total capital expenditures of
$4,000 over the next five years to meet applicable permit requirements.
There will be no appreciable increase in operating costs.
The Company's mining and milling operations include five mine waste
disposal facilities that are subject to Missouri mine closure permit
requirements. The total expected cost of closure is $11,000. The Company
has begun certain closure requirements ahead of closure and is also
accruing for the cost of ultimate closure at a rate of approximately $300
per year. Spending against the reserve has not been significant since
October 31, 1997.
The Company has been advised by the EPA that it is considering taking
certain response actions at a mine site in Madison County, Missouri known
as the Mine La Motte site. A predecessor of the Company was a former
operator of the site. The EPA has not decided whether any action will be
taken, but held a meeting with the Company and two other PRPs at the site
on June 17, 1998 to discuss possible future response actions. This site is
substantially smaller than the sites in St. Francois county where the
Company has been named a PRP, and the potential issues are less complex. At
this time, based on this preliminary meeting and an inspection of the site,
management does not believe that any future action will result in a
material adverse impact to the Company's results of operations or cash
flows.
FOREIGN OPERATIONS
In connection with the acquisition by the Company of Empresa
Metalugica La Oroya S.A. ("La Oroya"), the Company is required to expand
and modernize its operations, including certain expenditures to comply with
environmental regulations within Peru as set forth in the Programa de
Adecuacion y Manejo Ambiental (Environmental Remedy and Management Program
(the "PAMA"), an environmental adjustment and management program that has
been submitted to the Ministry for Energy and Mines (the "MEM"). The PAMA
functions as the equivalent of an operating permit with which the operator
must comply. To meet its obligations under the PAMA, the Company has
negotiated a capital spending plan with the Peruvian government to invest
$107,575 million during the next nine years as follows:
The Company's operations at the La Oroya smelter historically and
currently exceed some of the applicable MEM maximum permissible limits
pertaining to air emissions, ambient air quality and waste water effluent
quality. The projects contemplated by the PAMA have been designed to
achieve compliance with the applicable legal requirements prior to the
expiration of the PAMA on January 13, 2007. Under the PAMA, future changes
in regulations and maximum permissible levels would not affect the Company
for ten years from the date of the acquisition contract.
<TABLE>
<CAPTION>
Estimated
Year Costs
---- -----
<S> <C>
1998 2,700
1999 3,612
2000 4,963
2001 3,300
2002 3,000
2003 3,800
2004 2,775
2005 38,700
2006 44,725
--------
$107,575
--------
--------
</TABLE>
The Company's operations at the La Oroya smelter historically and
currently exceed some of the applicable MEM maximum permissible limits
pertaining to air emissions, ambient air quality and
9
<PAGE>
THE DOE RUN RESOURCES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
waste water effluent quality. The projects contemplated by the PAMA have
been designed to achieve compliance with the applicable legal requirements
prior to the expiration of the PAMA on January 13, 2007. Under the PAMA,
future changes in regulations and maximum permissible levels would not
affect the Company for ten years from the date of the acquisition contract.
According to the acquisition contract, the Company has the option to
continue the use of an existing zinc ferrite disposal site for three years,
after which it can take ownership of the site or create a new site. If the
Company chooses to take ownership of the site, it will be responsible for
its closure costs. The Company has accrued for management's estimate of the
closure costs, or $7,200. If the Company abandons the ferrite site, it must
pay this amount to Centromin Peru S.A., the former owner of La Oroya.
CONSOLIDATED
The Company believes its reserves for domestic and foreign
environmental and reclamation matters are adequate, based on the
information available. Depending upon the type and extent of remediation
activities required, costs in excess of established reserves are reasonably
possible. Therefore, there can be no assurance that additional costs, both
individually and in the aggregate, would not have a material adverse effect
on the results of operations, financial condition and liquidity of the
Company.
LITIGATION
The Company is a defendant in several lawsuits alleging certain
damages stemming from the operations at the Herculaneum, Missouri smelter.
Two of these cases are class action lawsuits. In one case, the plaintiffs
seek to have certified two separate classes. The first class would consist
of property owners in a certain section of Herculaneum, alleging that
property values have been damaged due to the operations of the smelter. The
second class alleged is comprised of children who lived in Herculaneum
during a period of time when they were six months to six years old, and the
remedy sought is medical monitoring for the class. The second class action
similarly is seeking certification of a class of property owners allegedly
damaged by operations from the smelter, but the purported size of the class
is every home in Herculaneum. The other two cases are personal injury
actions by fourteen individuals who allege damages from the effects of lead
poisoning due to operations at the smelter. Punitive damages are also being
sought in each case. The Company is vigorously defending all of these
claims. Preliminary investigation and research by the Company indicates
property values in Herculaneum are consistent with those of surrounding
communities and have not been affected by the smelter. Finally, based on
rules for class certification, the Company believes class certification is
not appropriate. However, because the cases are in the early stages of
discovery, the Company is unable at this time to state with certainty the
expected outcome of and the final costs of any of these cases. Therefore,
there can be no assurance that these cases would not have a material
adverse effect, both individually and in the aggregate, on the results of
operations, financial condition and liquidity of the Company.
(6) SUBSEQUENT EVENT - ACQUISITION OF ASARCO MISSOURI LEAD DIVISION
On September 1, 1998, the Company purchased the assets of the Missouri
Lead Division ("MLD") of ASARCO Incorporated ("ASARCO"), including a
smelter and refinery and two mines. Proceeds of $43,400 from an offering of
$50,000 11.25% Senior Secured Notes due 2005 (the "Secured Notes"), plus
loans under the revolving credit facility of $12,427 financed the payment
of the purchase
10
<PAGE>
THE DOE RUN RESOURCES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
price made at the closing. The payment was based on the MLD's inventories
as of July 31, 1998, and an adjustment based upon the inventories at the
closing date is expected to result in an amount receivable from ASARCO of
between $1,000 and $2,000.
(7) GUARANTOR SUBSIDIARIES
The Guarantor Subsidiaries (Fabricated Products, Inc. ("FPI"), Doe Run
Cayman Ltd. ("Doe Run Cayman") and its wholly-owned subsidiary, Doe Run
Mining and Doe Run Peru S.R.L) have jointly and severally, fully,
unconditionally and irrevocably guaranteed the Notes and the Secured Notes.
Financial information regarding the Guarantor Subsidiaries as of July 31,
1998 and October 31, 1997 and the three month and nine month periods ending
July 31, 1998 is presented for purposes of complying with the reporting
requirements of the Guarantor Subsidiaries. FPI was incorporated in August
1996, and its operations were not material to the results of operations of
the Company for the three and nine month periods ending July 31, 1997.
Separate financial statements of Doe Run Peru S.R.L have been presented to
fulfill the disclosure requirements for guarantor subsidiaries that are not
wholly-owned. Doe Run Mining and Doe Run Cayman are holding companies which
do not have operations separate from those of Doe Run Peru S.R.L. Separate
financial statements and other disclosures concerning each Guarantor
Subsidiary and disclosures concerning non-Guarantor Subsidiaries have not
been presented because management has determined that such information is
not material to investors.
11
<PAGE>
THE DOE RUN RESOURCES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(7) GUARANTOR SUBSIDIARIES (CONTINUED)
CONSOLIDATING BALANCE SHEET
AS OF JULY 31, 1998 (UNAUDITED)
(PER SHARE AMOUNTS NOT IN THOUSANDS)
<TABLE>
<CAPTION>
THE COMPANY
EXCLUDING DOE RUN CAYMAN
GUARANTOR AND WHOLLY-OWNED DOE RUN
SUBSIDIARIES FPI SUBSIDIARY PERU S.R.L.
------------ ------- ---------------- -----------
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash $ - $ - $ 3,070 $ 9,319
Trade accounts receivable, net of allowance for
doubtful accounts 40,433 4,943 - 27,619
Inventories 37,211 2,533 - 69,441
Prepaid expenses and other current assets 10,022 156 4,384 24,265
Due from subsidiaries 22,543 - 6,830 -
Due from parent - - - 134,095
------------ ------- ---------------- -----------
Total current assets 110,209 7,632 14,284 264,739
Property, plant and equipment, net 102,040 7,690 - 96,641
Special term deposit 125,000 - - -
Net deferred tax assets 8,364 - - -
Other noncurrent assets, net 15,959 415 296 1,340
Investment in subsidiaries 20,299 - 275,393 -
------------ ------- ---------------- -----------
Total assets $381,871 $15,737 $289,973 $362,720
------------ ------- ---------------- -----------
------------ ------- ---------------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current maturities of long-term debt $ 895 $ - $ - $ 12,000
Accounts payable 13,803 3,173 - 35,492
Accrued liabilities 33,255 383 6,587 13,932
Net deferred tax liabilities 6,792 - - 1,853
Due to subsidiaries - - 134,095 -
Due to parent - 9,106 5,100 15,167
------------ ------- ---------------- -----------
Total current liabilities 54,745 12,662 145,782 78,444
Long-term debt, less current maturities 261,767 - 125,000 -
Other noncurrent liabilities 46,824 1,954 - 8,883
------------ ------- ---------------- -----------
Total liabilities 363,336 14,616 270,782 87,327
Shareholders' equity:
Common stock, $.10 par value, 1,000 shares authorized,
issued, and outstanding - - - -
Common stock, $1 par value, 1,000 shares authorized,
issued, and outstanding - 1 - -
Common stock, $1 par value, 2,005,000 shares authorized,
issued and outstanding - - 2,005 -
Common stock, one nuevos soles par value, 648,672,941
shares authorized, issued and outstanding - - - 247,926
Additional paid in capital 5,000 935 - -
Retained earnings 13,535 185 17,186 27,467
------------ ------- ---------------- -----------
Total shareholders' equity 18,535 1,121 19,191 275,393
------------ ------- ---------------- -----------
Total liabilities and shareholders' equity $381,871 $15,737 $289,973 $362,720
------------ ------- ---------------- -----------
------------ ------- ---------------- -----------
THE
ELIMINATIONS COMPANY
------------- ----------
ASSETS
<S> <C> <C>
Current assets:
Cash $ - $ 12,389
Trade accounts receivable, net of allowance for
doubtful accounts (249) 72,746
Inventories (13) 109,172
Prepaid expenses and other current assets (4,528) 34,299
Due from subsidiaries (29,373) -
Due from parent (134,095) -
------------- ----------
Total current assets (168,258) 228,606
Property, plant and equipment, net - 206,371
Special term deposit - 125,000
Net deferred tax assets - 8,364
Other noncurrent assets, net - 18,010
Investment in subsidiaries (295,692) -
------------- ----------
Total assets $(463,950) $586,351
------------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current maturities of long-term debt - $ 12,895
Accounts payable (249) 52,219
Accrued liabilities (4,528) 49,629
Net deferred tax liabilities - 8,645
Due to subsidiaries (134,095) -
Due to parent (29,373) -
Total current liabilities (168,245) 123,388
Long-term debt, less current maturities - 386,767
Other noncurrent liabilities - 57,661
------------- ----------
Total liabilities (168,245) 567,816
Shareholders' equity:
Common stock, $.10 par value, 1,000 shares authorized,
issued, and outstanding - -
Common stock, $1 par value, 1,000 shares authorized,
issued, and outstanding (1) -
Common stock, $1 par value, 2,005,000 shares authorized,
issued and outstanding (2,005) -
Common stock, one nuevos soles par value, 648,672,941
shares authorized, issued and outstanding (247,926) -
Additional paid in capital (935) 5,000
Retained earnings (44,838) 13,535
------------- ----------
Total shareholders' equity (295,705) 18,535
------------- ----------
Total liabilities and shareholders' equity $(463,950) $586,351
------------- ----------
------------- ----------
</TABLE>
12
<PAGE>
THE DOE RUN RESOURCES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(7) GUARANTOR SUBSIDIARIES (CONTINUED)
CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JULY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
THE COMPANY
EXCLUDING DOE RUN CAYMAN
GUARANTOR AND WHOLLY-OWNED DOE RUN THE
SUBSIDIARIES FPI SUBSIDIARY PERU S.R.L. ELIMINATIONS COMPANY
------------ --- ---------------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 62,350 $ 4,614 $ 3,049 $122,085 $ (7,738) $184,360
Costs and expenses:
Cost of sales 51,584 4,148 - 101,406 (552) 156,586
Depletion, depreciation and amortization 3,677 260 - 1,614 - 5,551
Selling, general and administrative 4,220 290 2,418 8,393 (7,290) 8,031
Exploration 1,165 - - - - 1,165
-------- ------- -------- -------- --------- --------
Total costs and expenses 60,646 4,698 2,418 111,413 (7,842) 171,333
-------- ------- -------- -------- --------- --------
Income (loss) from operations 1,704 (84) 631 10,672 104 13,027
Other income (expense):
Interest expense (8,095) (223) (4,193) (244) 223 (12,532)
Interest income 3,761 - 10 93 (223) 3,641
Other, net (302) 2 1,120 (116) - 704
Equity in earnings of subsidiaries 6,377 - 9,042 - (15,419) -
-------- ------- -------- -------- --------- --------
1,741 (221) 5,979 (267) (15,419) (8,187)
-------- ------- -------- -------- --------- --------
Income (loss) before income tax
and extraordinary item 3,445 (305) 6,610 10,405 (15,315) 4,840
Income tax expense 818 - - 1,363 - 2,181
-------- ------- -------- -------- --------- --------
Income (loss) before extraordinary item 2,627 (305) 6,610 9,042 (15,315) 2,659
Extraordinary item - - - - - -
-------- ------- -------- -------- --------- --------
Net income (loss) $ 2,627 $ (305) $ 6,610 $ 9,042 $ (15,315) $ 2,659
-------- ------- -------- -------- --------- --------
-------- ------- -------- -------- --------- --------
</TABLE>
13
<PAGE>
THE DOE RUN RESOURCES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(7) GUARANTOR SUBSIDIARIES (CONTINUED)
CONSOLIDATING STATEMENTS OF OPERATIONS
NINE MONTHS ENDED JULY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
THE COMPANY
EXCLUDING DOE RUN CAYMAN
GUARANTOR AND WHOLLY-OWNED DOE RUN THE
SUBSIDIARIES FPI SUBSIDIARY PERU S.R.L. ELIMINATIONS COMPANY
------------ --- ---------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales $181,356 $12,441 $ 5,049 $349,444 $ (20,525) $527,765
Costs and expenses:
Cost of sales 148,674 11,470 - 283,037 (3,490) 439,691
Depletion, depreciation and amortization 11,463 539 - 5,010 - 17,012
Selling, general and administrative 12,155 1,002 3,158 26,523 (17,107) 25,731
Exploration 2,764 - - - - 2,764
-------- ------- -------- -------- --------- --------
Total costs and expenses 175,056 13,011 3,158 314,570 (20,597) 485,198
-------- ------- -------- -------- --------- --------
Income (loss) from operations 6,300 (570) 1,891 34,874 72 42,567
Other income (expense):
Interest expense (16,933) (534) (9,825) (279) 534 (27,037)
Interest income 5,975 - 10 549 (534) 6,000
Other, net (543) (30) 179 463 - 69
Equity in earnings of subsidiaries 16,384 - 27,576 - (43,960) -
-------- ------- -------- -------- --------- --------
4,883 (564) 17,940 733 (43,960) (20,968)
-------- ------- -------- -------- --------- --------
Income (loss) before income tax
and extraordinary item 11,183 (1,134) 19,831 35,607 (43,888) 21,599
Income tax expense (benefit) (105) 16 - 8,031 - 7,942
-------- ------- -------- -------- --------- --------
Income (loss) before extraordinary item 11,288 (1,150) 19,831 27,576 (43,888) 13,657
Extraordinary item (4,238) - (2,369) - - (6,607)
-------- ------- -------- -------- --------- --------
Net income (loss) $ 7,050 $(1,150) $ 17,462 $ 27,576 $ (43,888) $ 7,050
-------- ------- -------- -------- --------- --------
-------- ------- -------- -------- --------- --------
</TABLE>
14
<PAGE>
THE DOE RUN RESOURCES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(7) GUARANTOR SUBSIDIARIES (CONTINUED)
CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED JULY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
THE COMPANY
EXCLUDING DOE RUN CAYMAN
GUARANTOR AND WHOLLY-OWNED DOE RUN
SUBSIDIARIES FPI SUBSIDIARY PERU S.R.L.
------------ --- ---------------- -------------
<S> <C> <C> <C> <C>
Net cash provided by (used in) operating activities $ 25,584 $ 420 $ 22,771 $ (8,640)
Cash flows from investing activities:
Special term deposit (125,000) - - -
Purchases of property, plant and equipment (8,729) (4,391) - (3,912)
Investment in subsidiaries (16,384) - (27,576) -
------------ --- ---------- -------------
Net cash provided by (used in)
investing activities (150,113) (4,391) (27,576) (3,912)
Cash flows from financing activities:
Proceeds from revolving loan
and short-term borrowings, net 6,767 - (3,000) 12,000
Proceeds from long-term debt 255,000 - 125,000 -
Payments on long-term debt (130,845) - (100,000) -
Payment of deferred financing costs (12,618) - (312) -
Loans from parent/subsidiaries 7,335 3,971 (16,164) 4,858
Payment of dividends (189) - - -
Redemption of preferred stock (2,500) - - -
------------ --- ---------- -------------
Net cash provided by financing activities 122,950 3,971 5,524 16,858
------------ --- ---------- -------------
Net increase (decrease) in cash (1,579) - 719 4,306
Cash at beginning of period 1,579 - 2,351 5,013
------------ --- ---------- -------------
Cash at end of period $ - $ - $ 3,070 $ 9,319
------------ --- ---------- -------------
------------ --- ---------- -------------
THE
ELIMINATIONS COMPANY
------------ ---------
<S> <C> <C>
Net cash provided by (used in) operating activities $ (43,960) $ (3,825)
Cash flows from investing activities:
Special term deposit - (125,000)
Purchases of property, plant and equipment - (17,032)
Investment in subsidiaries 43,960 -
------------ ---------
Net cash provided by (used in)
investing activities 43,960 (142,032)
Cash flows from financing activities:
Proceeds from revolving loan
and short-term borrowings, net - 15,767
Proceeds from long-term debt - 380,000
Payments on long-term debt - (230,845)
Payment of deferred financing costs - (12,930)
Loans from parent/subsidiaries - -
Payment of dividends - (189)
Redemption of preferred stock - (2,500)
------------ ---------
Net cash provided by financing activities - 149,303
------------ ---------
Net increase (decrease) in cash - 3,446
Cash at beginning of period - 8,943
------------ ---------
Cash at end of period $ - $ 12,389
------------ ---------
------------ ---------
</TABLE>
15
<PAGE>
DOE RUN PERU S.R.L.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1998 1997
------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 9,319 $ 5,013
Trade accounts receivable, net of allowance for
doubtful accounts 27,619 390
Inventories 69,441 59,032
Prepaid expenses and other current assets 24,265 2,729
Due from parent 134,095 125,000
-------- ---------
Total current assets 264,739 192,164
Property, plant and equipment, net 96,641 97,739
Other noncurrent assets, net 1,340 -
-------- ---------
Total assets $362,720 $ 289,903
-------- ---------
-------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 12,000 $ -
Accounts payable 35,492 23,151
Accrued liabilities 13,932 9,375
Net deferred tax liabilities 1,853 -
Due to parent 15,167 1,214
-------- ---------
Total current liabilities 78,444 33,740
Other noncurrent liabilities 8,883 8,346
-------- ---------
Total liabilities 87,327 42,086
Shareholders' equity:
Common stock, one nuevos soles par value, 648,672,941
shares authorized, issued and outstanding 247,926 247,926
Retained earnings 27,467 (109)
-------- ---------
Total shareholders' equity 275,393 247,817
-------- ---------
Total liabilities and shareholders' equity $362,720 $ 289,903
-------- ---------
-------- ---------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
16
<PAGE>
DOE RUN PERU S.R.L.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED JULY 31, ENDED JULY 31,
--------------------------- --------------------------
1998 1997 1998 1997
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 122,085 $ 114,787 $ 349,444 $ 332,518
Costs and expenses:
Cost of sales 101,406 96,470 283,037 278,036
Depreciation and amortization 1,614 1,501 5,010 4,254
Selling, general and administrative 8,393 4,650 26,523 14,762
------------- ----------- ----------- -----------
Total costs and expenses 111,413 102,621 314,570 297,052
------------- ----------- ----------- -----------
Income from operations 10,672 12,166 34,874 35,466
Other income (expense):
Interest expense (244) (96) (279) (866)
Interest income 93 - 549 -
Other, net (116) 249 463 (1,189)
------------- ----------- ----------- -----------
(267) 153 733 (2,055)
------------- ----------- ----------- -----------
Income before income tax expense 10,405 12,319 35,607 33,411
Income tax expense 1,363 3,696 8,031 10,078
------------- ----------- ----------- -----------
Net income $ 9,042 $ 8,623 $ 27,576 $ 23,333
------------- ----------- ----------- -----------
------------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
17
<PAGE>
DOE RUN PERU S.R.L.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED JULY 31,
----------------------------
1998 1997
----------- ---------
<S> <C> <C>
Net cash provided by (used in) operating activities $ (8,640) $ 20,733
Cash flows from investing activities:
Purchases of property, plant and equipment (3,912) -
---------- --------
Net cash used in investing activities (3,912) -
Cash flows from financing activities:
Proceeds from short-term borrowings, net 12,000 -
Payments on long-term debt - (15,068)
Loans from parent 4,858 -
Transfer to Centromin - (6,197)
---------- --------
Net cash provided by (used in) financing activities 16,858 (21,265)
---------- --------
Net increase (decrease) in cash 4,306 (532)
Cash at beginning of period 5,013 572
---------- --------
Cash at end of period $ 9,319 $ 40
---------- --------
---------- --------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
18
<PAGE>
DOE RUN PERU S.R.L.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS)
(1) BASIS OF PRESENTATION
COMPARABILITY OF FINANCIAL STATEMENTS
The condensed consolidated statement of operations and the condensed
consolidated statement of cash flows for the nine months ended July 31,
1997 reflect the basis of assets and liabilities of La Oroya, a division of
Centromin Peru. S.A. The condensed consolidated statement of operations and
the condensed consolidated statement of cash flows for the nine months
ended July 31, 1998 reflect the new basis of assets and liabilities of Doe
Run Peru S.R.Ltda. ("the Company") acquired as of October 23, 1997. The
Company's results may not be comparable in all respects to those of La
Oroya.
UNAUDITED INTERIM FINANCIAL STATEMENTS
In the opinion of management, the interim condensed consolidated
financial statements contain all adjustments, consisting of normal
recurring accruals, necessary to present fairly the condensed consolidated
financial position as of July 31, 1998 and results of operations for the
three month and nine month periods ended July 31, 1998 and 1997. Interim
periods are not necessarily indicative of results to be expected for the
year.
(2) INVENTORIES
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1998 1997
------- --------
<S> <C> <C>
Refined metals and concentrates for sale $ 1,347 $ 5,324
Metals and concentrates in process 53,724 43,188
Materials, supplies and spare parts 14,370 10,520
------- --------
$69,441 $59,032
------- --------
------- --------
</TABLE>
19
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis includes the Company, the domestic
operations of the Company, including FPI ("Doe Run"), and the Peruvian
operations of the Company, including Doe Run Cayman and its subsidiaries
("Doe Run Peru") and should be read in conjunction with the condensed
consolidated financial statements of the Company and the notes thereto, and
other financial information included herein and the Company's Registration
Statement on Form S-4 (File No. 333-52285).
CONSOLIDATED FINANCIAL POSITION
During the nine months ended July 31, 1998, total debt increased by
approximately $164.9 million and noncurrent assets, in the form of the
Special Term Deposit, increased by $125.0 million. See "- Liquidity and
Capital Resources." In addition, the Company increased working capital,
primarily at Doe Run Peru after the acquisition on October 23, 1997 (the
"Acquisition") of Empresa Metalurgica La Oroya S.A. ("La Oroya") from Empresa
Minera del Centro del Peru S.A., a Peruvian government-owned conglomerate
("Centromin"). Accounts receivable, inventories and other current assets,
primarily value added tax and prepaid income taxes, increased $20.3 million,
$20.5 million and $29.0 million, respectively, offset by increases of $11.1
million in accounts payable and $20.7 million in accrued liabilities.
Management believes that the current working capital level at Doe Run Peru is
adequate to support ongoing operations.
RESULTS OF OPERATIONS
The Company reported net earnings of $2.7 million for the third quarter
ended July 31, 1998 compared to a net loss of $3.5 million for the third
quarter of 1997. Doe Run recorded a net loss of $8.3 million in the third
quarter of 1998 (excluding intercompany fee revenue of $4.2 million) compared
to a net loss of $3.5 million in the third quarter of 1997. The Company's
results were improved by the net earnings of $11.0 million of Doe Run Peru
(excluding intercompany fees of $4.2 million). See "Results of Operations -
Doe Run Peru".
For the nine months ended July 31, 1998, the Company reported net
earnings of $7.1 million compared to a net loss of $.2 million for the nine
months ended July 31, 1997. Earnings for the 1998 period include a $6.6
million extraordinary charge related to the early retirement of debt.
Earnings from Doe Run were $22.2 million lower (excluding intercompany fee
revenue of $12.1 million) than the prior year primarily due to the lower lead
prices, partially offset by improved production volume and operating cost.
The addition of Doe Run Peru contributed $29.5 million to net earnings
(excluding intercompany fees of $12.1 million) for the nine months ended July
31, 1998.
Results for the third quarter and the nine months ended July 31, 1998
reflect a sharp decline in the market prices of lead, copper and zinc, from
the prior year. The impact of these reductions was partially offset by a
significant increase in the market price of silver.
During the second quarter of fiscal 1998 the Company implemented plans
to minimize the impact of the decline in metal prices through cost reductions
and productivity and revenue enhancements. These plans included maintenance
and other expense reductions, increased lead ore grade at the Company's lead
mines, increased secondary smelter production and increased production,
primarily of silver and lead, at the Company's La Oroya smelter. The impacts
of these
20
<PAGE>
plans are reflected in the results of the third quarter and nine months ended
July 31, 1998.
The following table sets forth average London Metal Exchange ("LME")
prices for lead, copper and zinc and the average London Bullion Market
Association ("LBMA") price for silver for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
----------------------- ---------------------
1998 1997 1998 1997
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Average Prices
- --------------
Lead ($/ton) $ 489.00 $ 573.60 $ 492.60 $ 600.60
Copper ($/ton) 1,522.60 2,289.40 1,573.20 2,190.80
Zinc ($/ton) 939.80 1,270.00 973.60 1,114.40
Silver ($/troy ounce) 5.43 4.63 5.83 4.82
</TABLE>
The following table sets for the Company's production for the periods
indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
------------------ -------------------
1998 1997 1998 1997
--------- -------- --------- ----------
<S> <S> <C> <C> <C>
Doe Run
- -------
Lead metal - primary (short tons) 55,183 60,835 183,129 184,036
Lead metal - secondary (short tons) 28,401 26,925 82,687 71,611
Lead concentrates (metal content, short tons) 60,410 58,084 179,582 188,641
Ore Grade 5.56% 5.06% 5.42% 5.33%
Doe Run Peru
- ------------
Refined copper (short tons) 18,501 18,548 53,410 53,172
Refined lead (short tons) 30,945 28,044 88,098 79,296
Refined zinc (short tons) 19,932 20,211 58,916 56,118
Refined silver (thousands of troy ounces) 7,160 5,492 19,940 15,710
Refined gold (thousands of troy ounces) 16 10 42 33
</TABLE>
Mine production of lead metal in concentrates for the third quarter of
1998 was 4.0% better than the third quarter of 1997, although slightly less
than planned, due to lower than expected ore grades. For the nine-month
period, mine production was 4.8% less than the prior year, which was
consistent with the planned operating level. Primary smelter production for
the third quarter of 1998 was approximately 9.3% less than the third quarter
of 1997 and 5.8% less than planned. For the nine-month period, primary
smelter production was approximately equal to the prior year but
21
<PAGE>
slightly less than planned. These variances are primarily due to minor
operating problems which occurred subsequent to the planned maintenance
shutdown in June 1998. By the end of July 1998, smelter production increased
to levels which were better than planned. Secondary smelter production
exceeded the prior year by 5.5% for the third quarter and 15.5% for the nine
months ended July 31, 1998, due to increased cable strip processing and
improved smelter operating efficiencies.
During the third quarter of 1998, the capacity of the silver refinery at
the La Oroya smelter was increased by approximately 25.0% and the lead
refinery capacity was increased by 4.8%. These improvements along with other
improvements in operating efficiency are reflected in the production results.
Refined silver production exceeded the prior year by 30.4% and 26.9% for the
quarter and the nine months ended July 31, 1998, respectively. Refined lead
production increased over the prior year by 10.3% for the quarter and 11.1%
for the nine-month period. These results were accomplished in spite of the
flooding caused by El Nino, which caused supply and shipment problems, as
well as the failure of the main turbine of La Oroya's oxygen plant which was
inoperative during approximately six weeks of the quarter.
Results of operations for the quarter and the nine months ended July 31,
1998 include the results of Doe Run and Doe Run Peru. Since the Acquisition
occurred on October 23, 1997, results of operation for the quarter and nine
months ended July 31, 1997 include only the results of Doe Run. In order to
provide a more meaningful analysis, the results of operations attributable to
Doe Run Peru for the quarter and nine months ended July 31, 1998 will be
noted and discussed separately under "Results of Operations - Doe Run Peru."
This discussion will include a comparison to La Oroya's results for the
comparable periods of 1997.
NET SALES in the third quarter of 1998 were $184.4 million compared to
$70.5 million in the third quarter of 1997. Of this increase, $122.1 million
is attributable to the addition of Doe Run Peru. Doe Run's net sales were
$8.2 million or 11.6% lower in the third quarter of 1998 compared to the
third quarter of 1997 primarily due to lower lead metal and copper
concentrate sales.
The following table sets forth the sales volume and realized prices of
Doe Run for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
-------------------- ----------------------
1998 1997 1998 1997
--------- -------- --------- ----------
<S> <S> <C> <C> <C>
Sales volumes (short tons)
- --------------------------
Lead metal 72,480 77,224 209,995 208,266
Zinc concentrates 18,009 15,426 51,151 51,407
Copper concentrates 3,844 6,792 13,339 19,599
Realized Prices ($/ton)
- -----------------------
Lead metal $578.49 $638.01 $583.56 $662.59
Zinc concentrates 324.56 434.07 346.78 379.75
Copper concentrates 172.22 375.44 208.64 361.80
</TABLE>
22
<PAGE>
Lead metal net sales decreased 14.9% from $49.3 million in the 1997
quarter to $41.9 million in the 1998 quarter. Of the decline, $3.0 million is
due to lower sales volume and the remaining $4.4 million decrease is due to
lower realized prices for lead metal. The average LME price for lead metal
decreased 14.7% in the third quarter of 1998 compared to the corresponding
period in 1997. Although Doe Run was able to obtain higher premiums for lead
sold, the net realized price was 9.3% lower in the third quarter of 1998. Net
realized prices for lead metal include the effects of changes in premiums
received as well as net hedging activity. Copper concentrate net sales were
lower by $1.9 million or 74.0% in the third quarter of 1998 compared to the
third quarter of 1997 due to a 43.4% decrease in volume and a 54.1% decrease
in net realized price. The volume decrease is primarily due to lower
production resulting from a planned change in operations to focus on lead
production. The net realized price decrease is due in part to a 33.5%
decrease in the LME average price of copper for the comparable quarters. Net
realized prices for copper concentrates and other by-products are net of
adjustments for provisionally priced sales and hedging activities.
Net sales for the nine-month period ended July 31, 1998 were $527.8
million compared to $206.4 million for the nine months ended July 31, 1997.
Of this increase, $346.9 million is attributable to the addition of Doe Run
Peru. Doe Run's net sales for the nine months ended July 31, 1998 were $25.5
million less than the 1997 period primarily due to lower lead prices. Lead
metal net sales decreased 11.2% from $138.0 million in the 1997 period to
$122.5 million in 1998. Doe Run's net realized price was 11.9% lower in the
1998 period compared to the 1997 period due to an 18.0% decline in the
average LME prices for lead metal. The resulting $16.5 million net sales
decrease was partially offset by improved lead metal sales volume. Copper
concentrate net sales were lower by $4.3 million or 60.8% in the 1998 period
compared to the 1997 period due to a 31.9% decrease in volume and a 42.3%
decrease in net realized price. The volume decrease is primarily due to lower
production resulting from the focus on lead production while the net realized
price decrease is the result of a 28.2% decrease in the LME average price of
copper. Sales by Seafab Metals Company ("Seafab") were $4.6 million lower in
the 1998 period compared to the 1997 period, primarily as a result of the
planned relocation of the fabrication plant from Seattle, Washington to Casa
Grande, Arizona. A slowdown in oxide sales due to lower battery demand also
contributed to the reduction.
COST OF SALES for the third quarter 1998 was $156.6 million compared to
$61.7 million for the third quarter 1997. Of this increase, $101.3 million is
attributable to the addition of Doe Run Peru. Doe Run's cost of sales for the
third quarter of 1998 was $6.4 million less than the third quarter of 1997.
The reduced sales volume discussed above accounted for $3.6 million of the
cost decrease. The remainder of the decrease is principally due to lower
operating costs, primarily reduced usage of materials and supplies on major
maintenance projects.
Cost of sales for the nine month period ended July 31, 1998 was $439.7
million compared to $170.1 million for the nine months ended July 31, 1997.
Of this increase, $280.5 million is attributable to the addition of Doe Run
Peru. Doe Run's cost of sales was $159.2 million for the 1998 period compared
to $170.1 million for the 1997 period. Increased volume of lead metal offset
by lower zinc, copper and lead concentrate and toll volumes accounted for
$2.0 million of the cost decrease. The cost of purchased lead concentrates
and higher costs for purchased feed material and salaries and wages were
offset by reduced spending on purchased services, purchased lead metal and
materials and supplies, and the impact of a 4.2% increase in lead metal
production volume. As a result, the average cost per ton produced was 2.8%
lower in the 1998 period, compared to the 1997 period, reducing cost of sales
by $5.6 million from the 1997 period. Lower volume at Seafab, primarily
related to the relocation of the fabrication plant, reduced cost of sales by
$3.3 million.
23
<PAGE>
DEPLETION, DEPRECIATION AND AMORTIZATION for the third quarter 1998
increased by $1.9 million compared to the third quarter 1997. For the nine
months ended July 31, 1998 depletion, depreciation and amortization increased
by $6.1 million compared to the 1997 period. Increases of $1.6 million for
the third quarter and $5.0 million for the nine months ended July 31, 1998
are attributable to the addition of Doe Run Peru. The remainder of the
increases are primarily due to depreciation of plant and equipment on recent
capital additions.
SELLING, GENERAL AND ADMINISTRATIVE expenses increased by $5.8 million
in the third quarter 1998 compared to the third quarter 1997. The addition of
Doe Run Peru accounts for $4.8 million of the increase. This includes
increases in domestic general and administrative expenses of $1.3 million for
salaries for expatriates, management fees, insurance and travel related to
the operation of Doe Run Peru. The cost of selling and administrative
services provided by Doe Run to Doe Run Peru are reimbursed by fees collected
under various services and agency agreements between Doe Run and Doe Run
Peru, which are eliminated in consolidation. Other expenses, including
salaries, wages and benefits, net worth appreciation, audit fees, and other,
are approximately $.9 million higher than the prior year.
Selling, general and administrative expenses increased by $17.7 million
for the nine months ended July 31, 1998 compared to the nine months ended
July 31, 1997. The addition of Doe Run Peru accounts for $12.6 million of the
increase. Increased domestic general and administrative expenses associated
with the operation of Doe Run Peru totaled $3.4 million for the nine-month
period. Other expenses, primarily the items discussed previously, account for
the remainder of the increase.
EXPLORATION expense for the third quarter of 1998 increased $.3 million
or 29.9% from the third quarter of 1997. For the nine months ended July 31,
1998 exploration expense increased $.5 million or 22.2% compared to the nine
months ended July 31, 1997. These increases were due to increased
expenditures at minerals properties located in Missouri and the Republic of
South Africa.
INCOME FROM OPERATIONS for the third quarter 1998 was $13.0 million
compared to $2.1 million for the third quarter 1997. For the nine months
ended July 31, 1998, operating income was $42.6 million compared to $15.0
million for the 1997 period. Increases of $15.7 million for the third quarter
and $48.8 million for the nine months ended July 31, 1998, are attributable
to the addition of Doe Run Peru. The reminder of the changes are due to the
factors discussed above.
INTEREST EXPENSE increased by $9.5 million in the third quarter and
$16.4 million in the nine months ended July 31, 1998, compared to the prior
year due to an increase of approximately $300 million in the Company's
average outstanding debt balance partially offset by lower average interest
rates. The increase in the Company's outstanding debt balance is primarily
associated with the Acquisition and operation of Doe Run Peru.
INTEREST INCOME increased $3.6 million in the third quarter and $6.0
million in the nine months ended July 31, 1998, compared to the prior year,
primarily due to interest income on the $125.0 million Special Term Deposit
associated with the Back-to-Back Loan.
INCOME TAX EXPENSE for the three month period ended July 31, 1998
reflects an effective rate of approximately 45%, primarily due to a revision
of the Company's estimate of its annual effective
24
<PAGE>
tax rate increase from 34% to 37% in the third quarter. Lower income during
the third quarter 1998, magnified the impact of the revision. Income tax
expense for the three-month period ended July 31, 1997 reflects an adjustment
to the Company's estimate of the effective tax rate for the year ended
October 31, 1997, resulting from a decrease in pre-tax book income and the
effect of a valuation allowance of U.S. alternative minimum tax in excess of
the Company's regular tax liability.
25
<PAGE>
RESULTS OF OPERATIONS - DOE RUN PERU
The following tables set forth the operating results, sales volumes and
realized prices of Doe Run Peru and its predecessor for the periods indicated
(note that the financial statements of Doe Run Peru and its predecessor
reflect different bases in assets and liabilities as a result of purchase
accounting and may not be comparable in all respects):
<TABLE>
<CAPTION>
Results of operations Three Months Ended Nine Months Ended
- --------------------- July 31, July 31,
-------------------------- ------------------------------
1998 1997 1998 1997
----------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales $122,085 $114,787 $ 349,444 $ 332,518
Costs and expenses:
Cost of sales 101,406 96,470 283,037 278,036
Depreciation and amortization 1,614 1,501 5,010 4,254
Selling, general and administrative 3,521 4,650 12,574 14,762
Intercompany fees 4,241 - 12,058 -
----------- ---------- ------------ ------------
Total costs and expenses 110,782 102,621 312,679 297,052
----------- ---------- ------------ ------------
Income from operations 11,303 12,166 36,765 35,466
Other income (expense)
Interest expense (4,437) (96) (10,104) (866)
Interest income 103 - 559 -
Other, net 1,004 249 642 (1,189)
----------- ---------- ------------ ------------
(3,330) 153 (8,903) (2,055)
----------- ---------- ------------ ------------
Income before income tax expense
and extraordinary item $ 7,973 $12,319 $ 27,862 $ 33,411
----------- ---------- ------------ ------------
----------- ---------- ------------ ------------
Note: The following eliminations were made in consolidating these results with
Doe Run.
Net sales $ 20 $ 2,498
Cost of sales 126 2,498
Intercompany fees 4,241 12,058
Sales Volumes
- -------------
Copper (short tons) 18,943 18,212 54,098 53,907
Lead (short tons) 32,949 28,246 88,387 80,652
Zinc (short tons) 20,656 19,667 60,348 55,018
Silver (thousands of troy ounces) 7,227 5,047 20,235 15,076
Gold bullion (thousands of troy ounces) 16 9 43 29
Realized Prices
- ---------------
Copper ($/ton) $1,545.00 $2,335.00 $1,565.00 $2,218.00
Lead ($/ton) 519.00 582.00 521.00 625.00
Zinc ($/ton) 977.00 1,212.00 1,007.00 1,084.00
Silver ($/troy ounce) 5.63 4.74 5.81 4.88
Gold bullion ($/troy ounce) 299.15 343.72 300.15 357.67
</TABLE>
26
<PAGE>
NET SALES in the third quarter of 1998 were $122.1 million compared to
$114.8 million in the third quarter of 1997. Refined silver sales increased
70.1% from $23.9 million in 1997 to $40.7 million in 1998. The production
improvements discussed previously increased refined silver sales volume by
2.2 million ounces or 43.2%, contributing $10.3 million to the sales
increase. The average LBMA price for silver increased 17.3% in the third
quarter of 1998 compared to the third quarter of 1997. As a result, Doe Run
Peru's net realized price was 18.8% higher in the 1998 quarter contributing
$6.4 million to the sales increase. Net realized prices for silver are net of
the effects of changes in premiums and hedging activities. Refined copper net
sales were lower by $13.3 million or 31.2% in the third quarter of 1998 due
to lower prices partially offset by increased volume. Doe Run Peru's net
realized price for refined copper was lower by 33.8%, reducing net sales by
$15.0 million. Copper tolling, a service which was not provided in the 1997
quarter, contributed $2.7 million to the net sales increase.
Net sales for the nine-month period ended July 31, 1998 were $349.4
million compared to $332.5 million for the nine-month period ended July 31,
1997. The increase is due primarily to higher prices and volumes for silver
offset by lower copper prices. The production improvements previously
discussed increased silver sales volume by 5.2 million ounces or 34.2% in the
1998 period contributing $25.2 million to the net sales increase. The average
LBMA price for silver was 21.0% higher in the nine-month period ended July
31, 1998 compared to the 1997 period. As a result, the net realized price for
refined silver increased by $.93 per ounce, increasing net sales by $18.8
million. Net sales of refined copper were 29.2% or $34.9 million lower in the
1998 period due to lower prices partially offset by increased volume. The net
realized price for refined copper was lower by 29.5%, which reduced net sales
by $35.2 million. Bullion lead net sales were higher by $7.2 million in the
1998 period compared to the 1997 period due to a 234.3% increase in volume
and a 32.6% increase in net realized price. The volume increase is the result
of the increased lead and silver production while the price increase is a
result of increased silver content in the lead bullion due to increased
silver in feed material. Refined lead net sales were $4.4 million lower in
the 1998 period compared to the 1997 period due to a 16.7% decrease in the
net realized price offset by a 9.6% increase in sales volume.
COST OF SALES increased 5.1% from $96.5 million in the third quarter
1997 to $101.4 million in the third quarter 1998. The 1998 period included
higher power cost resulting from the new electricity contract implemented on
October 23, 1997, a sales volume increase of approximately 10.6% and $1.1
million of workers' profit sharing expense which was classified as
administrative expense in the 1997 quarter. These increases were offset by
the impact of improved metallurgical recoveries and a decrease in feed cost
due to lower average prices of copper, gold and lead.
Cost of sales increased 1.8% from $278.0 million in the nine months
ended July 31, 1997 compared to $283.0 million in the nine months ended July
31, 1998. The 1998 period included higher power cost resulting from the new
electricity contract, a sales volume increase of approximately 10.8% and $2.3
million of workers' profit sharing expense which was classified as
administrative expense in the 1997 period. These increases were offset by the
impact of improved metallurgical recoveries and a decrease in feed cost due
to lower average prices of copper, gold and lead.
DEPRECIATION AND AMORTIZATION expense increased by $.1 million in the
third quarter 1997 and $.7 million in the nine months ended July 31, 1998
compared to the prior year, primarily due to the change in asset basis
resulting from purchase accounting for the Acquisition.
27
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE expenses decreased 25.5% from $4.7
million in the third quarter 1997 to $3.5 million in the third quarter 1998.
Of this decrease, $.8 million was due to the personnel reduction program
undertaken by Centromin, which was completed during 1997 and $1.1 million was
due to the reclassification of workers' profit sharing to cost of sales.
These decreases were partially offset by increases in salaries and other
administrative costs.
Selling, general and administrative expenses decreased 14.9% from $14.8
million in the nine months ended July 31, 1997 to $12.6 million in the nine
months ended July 31, 1998. Of this decrease, $1.3 million was due to the
personnel reduction program undertaken by Centromin, which was completed
during 1997, and $2.9 million was due to the reclassification of workers'
profit sharing to cost of sales. Selling expenses were $.7 million lower due
to a decrease in sales commissions and other commercial expenses, primarily
salaries. These decreases were offset by increases in audit and legal fees,
salaries and other administrative costs.
INTERCOMPANY FEES for the third quarter and the nine months ended July
31, 1998 represent charges recorded persuant to various services and agency
agreements between Doe Run and Doe Run Peru, which are designed to reimburse
Doe Run for the cost of selling and administrative services provided to Doe
Run Peru.
INCOME FROM OPERATIONS decreased $.9 million in the third quarter 1998
compared to the third quarter 1997 and increased $1.3 million in the nine
months ended July 31, 1998 compared to the nine months ended July 31, 1997
due to the factors discussed above.
INTEREST EXPENSE increased $4.3 million in the third quarter and $9.2
million in the nine months ended July 31, 1998, compared to the prior year,
due primarily to the increases in long-term debt associated with the
Acquisition.
OTHER INCOME, NET increased $.8 million in the third quarter 1998
compared to the third quarter 1997 primarily due to translation gains,
partially offset by costs related to the flooding caused by El Nino,
primarily road and rail repairs. For the nine months ended July 31, 1998,
other income, net increased by $1.8 million over the prior year due to the
factors just discussed and to the elimination of expenses related to the
privatization which was completed in 1997.
INCOME TAXES - DOE RUN PERU
Doe Run Peru's income tax provision reflects the provision of its
Peruvian subsidiaries at the statutory rate of 30%. Differences between the
effective and statutory rate are due primarily to book losses of certain Doe
Run Peru subsidiaries that cannot be offset against other subsidiaries' book
income for Peruvian income tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements arise from working capital
requirements, capital investment and debt service obligations. The Company's
primary available sources of liquidity are cash provided by operating
activities and revolving credit facilities. Doe Run has available a revolving
credit facility (the "Doe Run Revolving Credit Facility") that provides for
advances by the lender to a maximum of $100.0 million less outstanding
letters of credit, based on specific
28
<PAGE>
percentages of eligible receivables and inventories. As of July 31, 1998,
$6.8 million was outstanding, exclusive of $4.9 million of letters of credit,
under the Doe Run Revolving Credit Facility. Doe Run Peru has available a
revolving credit facility (the "Doe Run Peru Revolving Credit Facility") that
provides for advances by the lender to a maximum of $40.0 million less
outstanding letters of credit, based upon specific percentages of eligible
receivables and inventories. At July 31, 1998, Doe Run Peru had outstanding
$12.0 million, exclusive of $14.4 million of letters of credit, under the Doe
Run Peru Revolving Credit Facility. Net unused availability under the
respective facilities at July 31, 1998 was $38.7 million and $14.3 million.
On September 1, 1998, the Company purchased the assets of the Missouri
Lead Division ("MLD") of ASARCO Incorporated ("ASARCO"), including a smelter
and refinery and two mines. Proceeds of $43.4 million from an offering of
$50.0 million of 11.25% Senior Secured Notes due 2005, issued at a discount,
plus loans under the Doe Run Revolving Credit Facility of $12.4 million
financed the payment made at the closing. After this borrowing under the Doe
Run Revolving Credit Facility and borrowings for interest payments on the
Notes and other operating activity, the net unused availability under the Doe
Run Revolving Credit Facility and the Doe Run Peru Revolving Credit Facility
was $12.4 million and $12.0 million, respectively, as of September 15, 1998.
Management believes that availability will improve from these levels and will
be adequate to support ongoing operation.
In the third quarter 1998, $2.1 million was used in operating
activities, $6.1 million was used in investing activities and $8.4 million
was provided by financing activities. For the nine months ended July 31,
1998, $3.8 million was used in operating activities, $142.0 million was used
in investing activities (this includes $125 million Special Term Deposit used
to collateralize the Back-to-Back Loan, see discussion of financing
activities below), and $149.3 million was provided by financing activities.
As part of its financing activities, the Company issued the Notes with a
face amount of $255.0 million. The net proceeds of the Notes were primarily
used to pay $128.1 million plus accrued interest to banks in full settlement
of the Doe Run term loan and to make the $125.0 million Special Term Deposit
in a bank to collateralize the Back-to-Back Loan. Doe Run Peru used the
proceeds of the Back-to-Back Loan to pay $100.0 million plus accrued interest
to banks in full settlement of the Doe Run Peru term loan and to pay $23.0
million to Doe Run in settlement of a subordinated note. Doe Run used the
repayment of the subordinated note to pay $14.4 million to financial
institutions in full settlement of a revolving credit facility, to pay Renco
$5.0 million for redemption of preferred stock of $2.5 million plus accrued
dividends and a transaction fee, and to pay associated fees and expenses.
Doe Run has projected capital expenditures of approximately $15.7
million for fiscal 1998, primarily for maintenance of operations, and
operational and environmental improvements. In addition to ongoing capital
investments, Doe Run has expended an average of approximately $59.5 million
per year on maintenance from fiscal 1995 through fiscal 1997. As a result of
these expenditures and ongoing efforts, Doe Run believes that it operates and
will continue to maintain modern and efficient facilities.
As part of the Acquisition, Doe Run Peru undertook a capital investment
program estimated to total approximately $300.0 million over a ten-year
period, in part to satisfy its investment commitment of $120.0 million as set
forth in the acquisition contract. Doe Run Peru has projected capital
expenditures of approximately $9.4 million for fiscal 1998, primarily for
maintenance of
29
<PAGE>
operations and operational and environmental improvements.
The Company has substantial indebtedness and debt service requirements.
As of July 31, 1998, on a consolidated basis, the Company had $399.7 million
of indebtedness outstanding, or $274.7 million net of the Special Term
Deposit. Management believes that cash flow from operations at Doe Run and
Doe Run Peru, in addition to availability under the revolving credit
facilities, will be sufficient to provide for the Company's liquidity needs
for the foreseeable future.
The Doe Run Revolving Credit Facility, the Doe Run Peru Revolving Credit
Facility, and the indentures governing the Notes and the Secured Notes
contain numerous covenants and prohibitions that impose limitations on the
liquidity of the respective borrowers, including requirements that Doe Run
and Doe Run Peru satisfy certain financial ratios and limitations in order to
incur additional indebtedness. The ability of the Company to meet its debt
service requirements and to comply with such covenants will be dependant upon
future operating performance and financial results which will be subject to
financial, economic, political, competitive and other factors affecting the
Company, many of which are beyond the Company's control.
YEAR 2000 MATTERS
Many information and process control systems used in the current
business environment were designed to use only two digits in the date field,
and thus may not function properly in the year 2000. Any of the Company's
programs that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000, which could result in a major system
failure or in miscalculation. The Company has conducted a comprehensive
review of its computerized information systems (IS) to identify the systems
that could be affected by the "year 2000 problem" and has implemented a plan
to resolve the issues identified. Currently, most of the major IS of the
Company have been modified to be year 2000 compliant. The Company anticipates
that the appropriate modifications to IS will be completed by mid-year 1999.
Process control and other systems are being evaluated individually and
may require replacement software, reprogramming and other corrective actions.
The Company has not completed an evaluation of the status of these systems,
and is unable at this time to estimate the required actions, if any, and
related costs of making these systems year 2000 compliant.
The Company's operations depend on the availability of utility services,
primarily electricity and transportation services. A substantial disruption
in any of these services due to providers of these services failing to
achieve year 2000 compliance could have a significant impact on the Company's
financial results. The Company intends to assess possible modifications to
mitigate the risk of disruption to its operations.
The cost of achieving year 2000 compliance is included in the Company's
operating and administrative expenses.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
In the normal course of its business, Doe Run has used in the past, and
may use in the future, forward sales commitments and commodity put and call
option contracts to manage its exposure to fluctuations in the prices of
lead, copper, zinc and silver. Contract positions are designed to ensure that
the Company will receive a defined minimum price for certain quantities of
30
<PAGE>
its production. Gains and losses, and the related costs paid or premiums
received, for option contracts which hedge the sales prices of commodities
are recognized in net sales when the related production is sold. None of the
aforementioned activities have been entered into for speculative purposes.
31
<PAGE>
PART II. OTHER INFORMATION.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
Exhibit 27 Financial Data Schedule
(b) REPORTS ON FORM 8-K.
On September 16, 1998, the Company filed a Form 8-K to report, among
other things, the acquisition of the ASARCO MLD, the issuance of the 11.25%
Senior Secured Notes due 2005, and the acquisition of Empresa Minera Cobriza
S.A.
32
<PAGE>
S I G N A T U R E S
Pursuant to the requirements 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 DOE RUN RESOURCES CORPORATION
(Registrant)
September 28, 1998 /s/ Marvin K. Kaiser
Date Marvin. K. Kaiser
Vice President and Chief Financial Officer
(duly authorized officer and principal
financial officer)
33
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> JUL-31-1998
<CASH> 12,389
<SECURITIES> 0
<RECEIVABLES> 73,503
<ALLOWANCES> (757)
<INVENTORY> 109,172
<CURRENT-ASSETS> 228,606
<PP&E> 269,396
<DEPRECIATION> (63,025)
<TOTAL-ASSETS> 586,351
<CURRENT-LIABILITIES> 123,388
<BONDS> 386,767
0
0
<COMMON> 0
<OTHER-SE> 18,535
<TOTAL-LIABILITY-AND-EQUITY> 586,351
<SALES> 527,765
<TOTAL-REVENUES> 527,765
<CGS> 439,691
<TOTAL-COSTS> 439,691
<OTHER-EXPENSES> 45,507
<LOSS-PROVISION> 28
<INTEREST-EXPENSE> 27,037
<INCOME-PRETAX> 21,599
<INCOME-TAX> 7,942
<INCOME-CONTINUING> 0
<DISCONTINUED> 13,657
<EXTRAORDINARY> (6,607)
<CHANGES> 0
<NET-INCOME> 7,050
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
