SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1994
Commission File Number: 1-8124
FREEPORT-MCMORAN INC.
Incorporated in Delaware 13-3051048
(IRS Employer Identification No.)
1615 Poydras Street, New Orleans, Louisiana 70112
Registrant's telephone number, including area code:
(504) 582-4000
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___
On March 31, 1994, there were issued and outstanding 140,173,932 shares of the
registrant's Common Stock, par value $1 per share.
FREEPORT-McMoRan INC.
TABLE OF CONTENTS
Page
Part I. Financial Information
Financial Statements:
Condensed Balance Sheets 3
Statements of Operations 4
Statements of Cash Flow 5
Notes to Financial Statements 7
Remarks 8
Management's Discussion and Analysis
of Financial Condition and
Results of Operations 9
Part II. Other Information 17
Signature 18
Exhibit Index E-1
FREEPORT-McMoRan INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED BALANCE SHEETS (Unaudited)
March 31, December 31,
1994 1993
---------- ------------
ASSETS (In Thousands)
Current assets:
Cash and short-term investments $ 80,781 $ 39,785
Accounts receivable 226,452 268,762
Inventories 356,346 345,333
Prepaid expenses and other 26,012 25,675
---------- ----------
Total current assets 689,591 679,555
Property, plant and equipment, net 2,953,116 2,773,730
Long-term receivables 60,883 111,222
Other assets 156,400 149,560
---------- ----------
Total assets $3,859,990 $3,714,067
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 443,730 $ 408,289
Current portion of long-term debt and
short-term borrowings 59,694 49,256
---------- ----------
Total current liabilities 503,424 457,545
Long-term debt, less current portion 1,230,717 1,282,424
Accrued postretirement benefits and
pension costs 242,583 239,134
Reclamation and mine shutdown reserves 118,287 120,957
Other liabilities and deferred credits 148,631 178,583
Deferred income taxes 223,384 201,553
Deferred gain on sale of subsidiary
interests 21,096 33,953
Minority interests in consolidated
subsidiaries 1,395,571 1,199,269
Stockholders' equity (deficit) (23,703) 649
---------- ----------
Total liabilities and stockholders' equity $3,859,990 $3,714,067
========== ==========
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended
March 31,
------------------------
1994 1993
-------- --------
(In Thousands,
Except Per Share Amounts)
Revenues $449,594 $300,821
Cost of sales:
Production and delivery 298,609 211,664
Depreciation and amortization 34,683 34,897
-------- --------
Total cost of sales 333,292 246,561
Exploration expenses 12,338 11,745
Provision for restructuring charges - 7,351
Loss on valuation and sale of assets, net - 40,000
General and administrative expenses 39,726 38,072
-------- --------
Total costs and expenses 385,356 343,729
-------- --------
Operating income (loss) 64,238 (42,908)
Interest expense, net (23,430) (14,921)
Gain on conversion of FCX notes 44,004 8,021
Other income, net (1,475) (1,747)
-------- --------
Income (loss) before income
taxes and minority interests 83,337 (51,555)
Provision for income taxes (33,027) (823)
Minority interests in net (income) loss
of consolidated subsidiaries (26,891) 23,350
-------- --------
Income (loss) before extraordinary item and
changes in accounting principle 23,419 (29,028)
Extraordinary loss on early extinguishment of
debt, net (5,459) -
Cumulative effect of changes in accounting
principle, net - (20,717)
-------- --------
Net income (loss) 17,960 (49,745)
Preferred dividends (5,587) (5,601)
-------- --------
Net income (loss) applicable to common stock $ 12,373 $(55,346)
======== ========
Primary and fully diluted net income (loss)
per share:
Before extraordinary item and changes in
accounting principle $.13 $(.24)
Extraordinary loss on early extinguishment
of debt (.04) -
Cumulative effect of changes in
accounting principle - (.15)
---- -----
$.09 $(.39)
==== =====
Average common and common equivalent shares outstanding:
Primary 141,063 141,847
======= =======
Fully diluted 141,063 142,888
======= =======
Dividends per common share $.3125 $.3125
====== ======
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOW (Unaudited)
Three Months Ended
March 31,
----------------------
1994 1993
-------- --------
(In Thousands)
Cash flow from operating activities:
Net income (loss) $ 17,960 $(49,745)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Cumulative effect of changes in
accounting principle - 20,717
Extraordinary loss on early extinguishment
of debt 5,459 -
Depreciation and amortization 36,243 37,084
Provision for restructuring charges,
net of payments - 7,351
Loss on valuation and sale of assets, net - 40,000
Oil and gas exploration expenses 4,147 4,545
Amortization of debt discount and
financing costs 8,403 10,862
Gain on conversion of FCX notes (44,004) (8,021)
Deferred income taxes 31,718 (9,063)
Minority interests' share of net
income (loss) 26,891 (23,350)
Cash distribution from IMC-Agrico Company in
excess of capital interest 6,388 -
(Increase) decrease in working capital,
net of effect of acquisitions:
Accounts receivable 38,054 63,400
Inventories (8,871) (18,496)
Prepaid expenses and other (336) (712)
Accounts payable and accrued liabilities (5,772) (62,218)
Reclamation and mine shutdown expenditures (5,989) (3,266)
Other (12,752) (3,200)
-------- --------
Net cash provided by operating activities 97,539 5,888
-------- --------
Cash flow from investing activities:
Capital expenditures:
Metals (168,487) (100,589)
Main Pass (291) (18,929)
Agricultural minerals (2,650) (5,761)
Oil and gas (7,171) (10,980)
Other (4,461) (8,383)
Acquisition of RTM, net of cash acquired (5,756) (1,354)
Proceeds from geothermal notes receivable 36,910 -
Other - 4,175
-------- --------
Net cash used in investing activities (151,906) (141,821)
-------- --------
FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOW (Unaudited)
Cash flow from financing activities:
Proceeds from issuance of:
FCX Gold-Denominated Preferred Stock $158,476 $ -
FRP 8 3/4% Senior Subordinated Notes 146,125 -
Distributions paid to minority interests:
FCX (25,918) (17,949)
FRP (30,296) (30,294)
Proceeds from debt 186,879 135,263
Repayment of debt (202,303) (6,057)
Repurchase of 10 7/8% Senior Debentures (90,458) -
Cash dividends paid:
Common stock (43,761) (44,008)
Preferred stock (5,587) (5,609)
Other 2,206 1,559
-------- --------
Net cash provided by financing activities 95,363 32,905
-------- --------
Net increase (decrease) in cash and short-term
investments 40,996 (103,028)
Cash and short-term investments at beginning
of year 39,785 381,002
-------- --------
Cash and short-term investments at end of
period $ 80,781 $277,974
======== ========
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. SUBORDINATED DEBENTURE TENDER OFFER
In March 1994, Freeport-McMoRan Inc. (FTX) purchased $79.8 million of its
outstanding 10 7/8% Senior Subordinated Debentures (the Debentures) at a
price of 109 percent, plus accrued interest resulting in an after-tax
extraordinary loss on early extinguishment of debt totaling $5.5 million.
As of March 31, 1994, $45.3 million of Debentures remain outstanding and
are redeemable beginning May 15, 1996 at the option of FTX at principal
plus accrued interest.
2. McMoRan OIL & GAS CO.
In April 1994, FTX announced a plan to distribute to its common
shareholders on a pro rata basis the common shares of its newly formed,
wholly owned subsidiary, McMoRan Oil & Gas Co. (McMoRan). McMoRan is
being organized for the purpose of carrying on substantially all of the oil
and natural gas exploration activities currently conducted by FTX. McMoRan
plans to undertake an active program to explore for new reserves of oil and
natural gas and its exploration effort will be directed by FTX's oil and
gas management. FTX will transfer to McMoRan $35.0 million cash,
substantially all of its oil and natural gas exploration rights, its
inventory of oil and natural gas properties and FTX's extensive oil and
natural gas data base. The sulphur/oil assets at Main Pass Block 299 are
not being transferred. The distribution is expected to occur by mid-1994.
3. REDEEMABLE PREFERRED STOCK OFFERING
In January 1994, Freeport-McMoRan Copper & Gold Inc. (FCX), a subsidiary
of FTX, sold publicly 4.3 million depositary shares representing 215,279
shares of its Gold-Denominated Preferred Stock, Series II. Each depositary
share has a cumulative quarterly cash dividend equal to the value of
0.0008125 ounces of gold and is subject to mandatory cash redemption in
February 2006 for the value of 0.1 ounces of gold. The net proceeds from
this offering were loaned to P.T. Freeport Indonesia Company (PT-FI) to
fund the ongoing expansion activities and for general corporate purposes.
4. REDEMPTION OF ZERO COUPON EXCHANGEABLE NOTES
In December 1993, FCX called its Zero Coupon Exchangeable Notes (the Notes)
for redemption in January 1994. During January 1994, Notes with a face
amount of $386.0 million were presented for exchange into 5.8 million
shares of FCX Class A common stock and the remaining Notes were redeemed
for $.3 million in cash. As a result of the issuance by FCX of its Class A
common stock, PT-FI issued shares of its stock to FCX, bringing FCX's
direct ownership of PT-FI to 81.28 percent at March 31, 1994.
5. PUBLIC DEBT OFFERINGS
In April 1994, P.T. ALatieF Freeport Finance Company B.V. (AFFC), a
wholly owned subsidiary of FCX, sold publicly $120 million of its 9 3/4%
Senior Notes Due 2001 (the 9 3/4% Notes), for net proceeds of $116.3
million. The 9 3/4% Notes are guaranteed by FCX. The proceeds from the
sale of the 9 3/4% Notes will be loaned by AFFC to PT-FI and then to P.T.
ALatieF Freeport Infrastructure Corporation and one or more Infrastructure
Affiliates to purchase infrastructure assets from PT-FI.
In February 1994, Freeport-McMoRan Resource Partners, Limited
Partnership sold publicly $150 million of 8 3/4% Senior Subordinated Notes
due 2004. Net proceeds were used to reduce other indebtedness.
6. INTEREST COSTS
Interest expense excludes capitalized interest of $10.0 million and $18.4
million in the first quarters of 1994 and 1993, respectively.
7. RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the first quarter of 1994
resulted in a ratio of 1.8 to 1 compared with a shortfall of $76.8 million
for the 1993 period. For this calculation, earnings are income from
continuing operations before income taxes, minority interests, and fixed
charges. Fixed charges are interest, that portion of rent deemed
representative of interest, and the preferred stock dividend requirements
of majority-owned subsidiaries.
__________________
Remarks
The information furnished herein should be read in conjunction with FTX's
financial statements contained in its 1993 Annual Report to stockholders
and incorporated by reference in its Annual Report on Form 10-K.
The information furnished herein reflects all adjustments which are, in the
opinion of management, necessary for a fair statement of the results for
the periods. All such adjustments are, in the opinion of management, of a
normal recurring nature.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
RESULTS OF OPERATIONS
First Quarter
------------------
1994 1993 a
----- ------
(In Millions,
Except Per Share Amounts)
Revenues $449.6 $300.8
Operating income (loss) 64.2 (42.9)b
Net income (loss) applicable to common stock 12.4 c (55.3)b,d
Net income (loss) per share .09 c (.39)b,d
a. Excludes the operating results of Rio Tinto Minera, S.A. prior to its
March 1993 acquisition.
b. Includes charges of $47.4 million ($18.5 million to net income or $.13
per share) related to administrative restructuring costs ($7.4 million
relating to a reduction in personnel) and the sale of Freeport-McMoRan
Resource Partners, Limited Partnership's geothermal assets ($40.0
million).
c. Includes gains of $44.0 million ($28.6 million to net income or $.20 per
share) related to the conversion of Freeport-McMoRan Copper & Gold Inc.
securities and a $5.5 million charge ($.04 per share) for an
extraordinary loss on early extinguishment of debt (Note 1).
d. Includes gains of $8.0 million ($5.3 million to net income or $.04 per
share) related to the conversion of Freeport-McMoRan Copper & Gold
Inc. securities and a $20.7 million charge ($.15 per share) for the
cumulative effect of changes in accounting principle.
Freeport-McMoRan Inc.'s (FTX) operating results reflect higher earnings
from its metals segment primarily due to higher gold revenues and from its
agricultural minerals segment primarily due to higher phosphate fertilizer
sales volumes and price realizations. In the first quarter of 1994, FTX
recorded a $2.7 million reduction to its general and administrative expenses
resulting from a change in the estimate of cost relating to excess office
space. The initial estimated cost, recorded in the second quarter of 1993,
resulted from the restructuring of FTX's administrative organization.
Interest expense increased primarily due to the Main Pass sulphur project
becoming operational for accounting purposes in July 1993; previously, Main
Pass development related interest costs were capitalized.
FTX recognized net income of $6.9 million and a loss of $43.4 million,
before income taxes, for the first quarters of 1994 and 1993, respectively,
which represents its proportionate share of Freeport-McMoRan Resource
Partners, Limited Partnership's (FRP) earnings. This included recognition
of $12.5 million and $15.5 million, respectively, of the gain deferred by
FTX in connection with the public sale of FRP units in February 1992. The
remaining deferred gain ($21.1 million as of March 31, 1994) will be
recognized in future periods when distributions are not paid to FTX such
that its operating results will include its proportionate share of FRP's
earnings. Subsequent to the recognition of the balance of the deferred
gain, when FRP distributions are not paid to FTX in any quarter, FTX will
recognize a smaller share of any FRP net income, or a larger share of any
FRP net loss, than that which would be recognized based on FTX's ownership
interest in FRP. If in future quarters FTX were to receive no
distributions from FRP, the deferred gain would be fully recognized in the
third quarter of 1994.
Metals Operations
FTX's metals operations are conducted through its affiliate Freeport-
McMoRan Copper & Gold Inc. (FCX) and FCX's operating units P.T. Freeport
Indonesia Company (PT-FI) and Rio Tinto Minera, S.A. (RTM). First-quarter
1994 metals segment earnings were $53.0 million on revenues of $266.2
million compared with earnings of $30.0 million on revenues of $133.5
million for the 1993 period. Significant items impacting the metals
segment earnings are as follows (in millions):
Metals segment earnings - 1993 $ 30.0
------
Increases (decreases):
RTM revenues 111.9
Elimination of intercompany sales (31.0)
Price realization:
Copper (9.7)
Gold 7.7
Sales volumes:
Copper 15.8
Gold 23.3
Treatment charges 5.0
Adjustments to prior period concentrate sales 9.6
Other .1
------
Revenue variance 132.7
Cost of sales (100.5)
Exploration expenses and other (9.2)
------
23.0
------
Metals segment earnings - 1994 $ 53.0
======
Revenues were negatively impacted by a 7 percent decrease in copper
price realizations partially offset by a 17 percent increase in gold price
realizations. Copper sales volumes increased 13 percent between periods.
Increased mill throughput was partially offset by lower grades which were 9
percent lower. Gold sales volumes increased 43 percent over the 1993
period reflecting increased mill throughput and a 16 percent increase in
gold grades. See operating statistics below. Treatment charges declined
due to a tightening in the concentrate market as the industry's inventories
were reduced for much of 1993 and into 1994 and because of lower copper
prices as treatment charges vary to an extent with the price of copper.
Adjustments to prior period concentrate sales for the current quarter
resulted in a positive adjustment of $2.6 million, primarily caused by
favorable adjustments to the gold content of prior period sales, compared
to the 1993 period when falling copper prices resulted in a $7.0 million
negative adjustment.
During 1993, copper prices dropped to their lowest levels since 1987,
reflecting lower demand, particularly in Europe and Japan, caused by the
continuing global recession. Copper prices strengthened beginning in late
1993, but currently remain below $.90 per pound. PT-FI has in place a
price protection program that eliminates exposure to copper price declines
below an average $.90 per pound for estimated copper sales priced during
1994. At March 31, 1994, 174.5 million pounds of copper remained to be
contractually priced during future quotational periods. As a result of PT-
FI's price protection program, these pounds are recorded at an average
price of $.90 per pound. PT-FI recently extended its price protection
program to cover anticipated copper sales through 1995. For the first half
of 1995, PT-FI's program established a minimum average selling price of
$.875 per pound, with full participation in any price increase above an
average of approximately $.97 per pound. Fourth-quarter 1994 copper sales,
a substantial portion of which will be priced in the first quarter of 1995,
are covered under this program. For the second half of 1995, PT-FI's
program established an average floor price of $.83 per pound, while
allowing full benefit from prices above that amount. PT-FI has sales
commitments from its purchasers for virtually all of its estimated 1994
production which is to be priced at the current market price under the
terms of the contracts.
PT-FI Operating Results: First Quarter
------------------
1994 1993
------ ------
Ore milled (metric tons per day) 73,400 61,300
Copper grade (%) 1.37 1.51
Gold grade (grams per metric ton) 1.34 1.16
Recovery rate (%)
Copper 83.0 86.1
Gold 69.7 73.7
Copper (000s of recoverable pounds)
Production 160,500 150,600
Sales 155,700 138,100
Average realized pricea $.90 $.97
------ ------
Gold (recoverable ounces)
Production 190,800 146,800
Sales 201,300 140,300
Average realized price $381.67 $326.93
Gross profit per pound of copper:
Average realized price 90.0cent 97.4cent
------ ------
Production costs:
Site production and delivery 59.4 50.2
Gold and silver credits (48.9) (33.3)
Treatment charges 23.1 25.2
Royalty on recoverable metal 1.4 2.2
------ ------
Cash production costs 35.0 44.3
Depreciation and amortization 8.1 8.7
------ ------
Total production costs 43.1 53.0
------ ------
Revenue adjustmentsb .6 (6.6)
------ ------
Gross profit per pound 47.5cent 37.8cent
====== ======
a. FCX recognized $6.3 million of revenues (excluding $1.5 million in
amortized cost) in the first quarter of 1994 as a result of the price
protection program discussed above. Excluding amounts recognized under
this program, the realization for the first quarter of 1994 would have
been $.86 per pound. Excludes the adjustments discussed in Note b.
b. Reflects adjustments primarily for prior period concentrate sales (net
of related amounts recognized under the price protection program) and
amortization of the cost of the price protection program.
PT-FI's first-quarter mill throughput rate increased 20 percent
compared with the 1993 period as the expansion activities continue toward a
level of 115,000 metric tons per day (MTPD) by year-end 1995. PT-FI site
production and delivery costs totaled $92.5 million for the first quarter
of 1994, a 33 percent increase over the 1993 period. Unit site production
and delivery costs during the 1994 quarter increased by 18 percent over the
year ago period resulting from lower production per ton mined, the result
of lower copper grades and recoveries, higher jobsite administrative
expenses, and expansion related activities. Unit site production and
delivery costs increased 20 percent over the last quarter when production
was 26 percent higher. The lower copper grades alone accounted for
approximately one-half of the per unit cost increase over the year ago
period and about two-thirds of the increase over the previous quarter. For
the remainder of 1994, site production and delivery costs are still
expected to be in excess of 50 cents per pound, but lower than the first
quarter, as grades and recoveries are anticipated to increase, particularly
in the second half of the year.
First-quarter 1994 per pound gold and silver credits increased 47
percent over the 1993 period because of higher gold grades (16 percent) and
realizations (17 percent).
Effective January 1, 1994, as a result of recently announced reserve
additions, PT-FI's depreciation rate decreased to 7.5 cents per pound
compared with 8.3 cents for 1993. Additionally, FCX is amortizing costs in
excess of book value ($.9 million for first-quarter 1994 and $.6 million
for first-quarter 1993) relating to certain capital stock transactions with
PT-FI.
Exploration expenses, currently budgeted at $41 million for 1994,
including $6 million for RTM, totaled $8.0 million in the first quarter of
1994 compared with $6.4 million in the 1993 period, as FCX aggressively
explored promising prospects in Irian Jaya and Spain.
RTM Operating Results: First Quarter
-------------
1994
-------
Smelter operations (metric tons):
Concentrate treated 118,000
Anode production 37,900
Cathode production 34,600
Gold operations:
Ore milled (MTPD) 18,100
Gold grade (grams per metric ton) 1.04
Sales (recoverable ounces) 37,400
Average realized price $346.33
a. Includes a negative hedging adjustment of $37.91 per ounce.
For the first quarter of 1994, RTM contributed earnings of $1.7
million. RTM's smelter operated at 92 percent of capacity for the first
quarter of 1994, approximately 5 percent below budget, primarily due to an
absorption tower breakdown in March which was repaired within a few days.
Smelter operating rates are forecast to be at 97 percent for the remainder
of 1994. RTM has commitments from most of its suppliers for 1994 treatment
charge rates in excess of current spot market rates. Cathode refinery
operations were not affected by this breakdown as there was sufficient
anode inventory on hand to continue to run the tankhouse at full capacity.
RTM's gold operations realized a mill throughput level slightly above
fourth-quarter 1993 levels, although current quarter gold production was 15
percent below fourth-quarter 1993 primarily due to lower ore grades and
lower gold recovery rates. Gold production for the remainder of 1994 is
expected to remain at current levels.
Agricultural Minerals Operations
FTX's agricultural minerals segment, which includes FRP's fertilizer and
phosphate rock operations (conducted through its ownership in the IMC-
Agrico Company joint venture) and its sulphur business, reported first-
quarter 1994 earnings of $21.2 million on revenues of $172.5 million
compared with a loss of $14.9 million on revenues of $155.7 million for the
1993 period. Significant items impacting the agricultural minerals segment
earnings are as follows (in millions):
Agricultural minerals earnings - 1993 $(14.9)
------
Increases (decreases):
Sales volumes 16.6
Realizations .6
Other (.4)
------
Revenue variance 16.8
Cost of sales 12.8
General and administrative and other 6.5
------
36.1
------
Agricultural minerals earnings - 1994 $ 21.2
======
FRP's proportionate share of the IMC-Agrico Company first-quarter 1994
sales volumes for diammonium phosphate (DAP), its principal fertilizer
product, increased 8 percent from FRP's sales during the 1993 period.
FRP's average DAP realization rose significantly from the 1993 quarter
reflecting a further recovery in phosphate fertilizer markets throughout
the current quarter. Increased export purchases, which began in late 1993,
continued into 1994. Additionally, first-quarter 1994 industrywide
domestic phosphate fertilizer purchases rose over 1993 period levels. Unit
production costs declined from the 1993 quarter, in spite of sharply higher
ammonia prices, reflecting continued production efficiencies from the joint
venture and reduced raw material costs for sulphur and internally produced
phosphate rock.
The near-term outlook is for continued strong export and domestic
market demand. Key export customers continue to be active in the
marketplace and domestic sales activity picked up sharply in late March.
As a result of the increased international phosphate fertilizer demand and
an anticipated second-quarter 1994 drop in producer inventories, IMC-Agrico
Company is scheduled to resume production at its Nichols, Florida plant in
May, bringing IMC-Agrico Company's phosphate fertilizer production to
essentially full capacity. IMC-Agrico Company will continue to monitor
market conditions and operate its facilities accordingly.
FRP's proportionate share of the larger IMC-Agrico Company phosphate
rock operation caused first-quarter 1994 sales volumes to increase 15
percent from the 1993 period.
First Quarter
--------------------
1994 1993
------ ------
Phosphate fertilizers (short tons) a
Diammonium phosphate
Sales:
Florida 216,600
Louisiana 271,700
Other 46,000
--------- -------
Total sales 534,300 495,300
Average realized price: b
Florida $134.50
Louisiana 143.85
Monoammonium phosphate
Sales:
Granular 86,700 122,800
Powdered 42,800 -
Average realized price: b
Granular $153.39
Powdered 120.58
Granular triple superphosphate
Sales 130,400 177,700
Average realized price b $106.04
Phosphate rock (short tons) a
Sales 1,006,500 874,600
Average realized price b $21.71
Sulphur (long tons)
Sales c 515,500 464,800
a. Beginning July 1, 1993, reflects FRP's 46.5 percent share of the assets
of IMC-Agrico Company during the year ended June 30, 1994. FRP is
entitled to 58.6 percent of the cash flow generated by IMC-Agrico
Company during such period. Certain information prior to formation of
IMC-Agrico Company was not recorded on a basis consistent with that
currently being presented and therefore is not available.
b. Represents average realization f.o.b. plant/mine.
c. Includes 187,100 tons and 344,500 tons for the first quarters of 1994
and 1993, respectively, which represent internal consumption and Main
Pass start-up sales that are not included in sales for accounting
purposes.
First-quarter 1994 sulphur production increased 16 percent over the
1993 period level, with Main Pass operations averaging 5,600 tons per day
(exceeding full design operating rates of 5,500 tons per day or
approximately 2 million tons per year). Current efforts to optimize
earnings and cash flow include maximizing Main Pass production within the
current cost structure. It is expected that production can be sustained
near the 6,000 tons per day level in the immediate future. Furthermore,
the increase in Main Pass production rates helped to decrease its unit
production costs. Due to the increased production from Main Pass, FRP
ceased operating the marginally profitable Caminada mine in January 1994.
The shutdown of Caminada will have no material impact on FRP's reported
earnings. Sales volumes for the first quarter of 1994 improved 11 percent
over the 1993 period levels, primarily caused by higher operating rates in
the phosphate fertilizer industry. Sulphur realizations for the 1994
quarter were significantly reduced, reflecting the decline in prices which
occurred throughout 1993; although the improved phosphate fertilizer
operating rates, coupled with reduced imports from Canada and Mexico,
resulted in a slight improvement in Tampa, Florida sulphur prices early in
the second quarter of 1994. However, Canadian producers continue to
increase their inventories and in the near-term FRP does not anticipate a
major increase in sulphur prices.
Oil And Gas Operations
FTX's oil and gas operations (excluding the Main Pass oil operation)
involves exploring for new reserves. These activities generated a loss of
$8.1 million, including exploration expense of $4.1 million, for the first
quarter of 1994 compared with a loss of $5.3 million, including exploration
expense of $4.5 million, for the 1993 period. See Note 2 to the financial
statements regarding the formation of McMoRan Oil & Gas Co.
Main Pass's oil operations achieved the following:
First Quarter
--------------------
1994 1993
------ ------
Sales (barrels) 823,200 433,500
Average realized price $11.65 $15.55
Earnings (in millions) $1.0 $(1.7)
Oil production for the Main Pass joint venture (in which FRP owns a
58.3 percent interest) averaged 18,800 barrels per day during the first
quarter of 1994, whereas first-quarter 1993 production was limited during
development drilling to alleviate water encroachment. Joint venture
production for 1994 is expected to approximate 3 million barrels if water
encroachment follows current trends. FRP anticipates drilling additional
wells at an estimated cost to FRP of approximately $4 million. First-
quarter 1994 oil realizations continue to reflect the significant decline
in prices which occurred in late 1993. Prices have since improved to above
$13.00 per barrel. As a result of the decline in oil prices, in the fourth
quarter of 1993 FRP recognized a write-down of its Main Pass oil
investment. At March 31, 1994, FRP's investment in its Main Pass oil
facilities ($40.6 million) approximated the future net cash flows expected
to be received. Future price declines, increases in costs, or negative
reserve revisions could result in a charge to future earnings.
CAPITAL RESOURCES AND LIQUIDITY
Cash flow from operating activities increased during the first three months
of 1994 to $97.5 million from $5.9 million for the 1993 period, due to
higher operating income. Net cash used in investing activities was $151.9
million compared with $141.8 million for the 1993 period. Increased metals
capital expenditures associated with the PT-FI and RTM expansions were
partially offset by lower agricultural minerals and Main Pass expenditures
and the early receipt of proceeds from the geothermal notes receivable
(reflected in other assets). Net cash provided by financing activities was
$95.4 million, whereas the 1993 period provided net cash of $32.9 million.
The 1994 period includes proceeds totaling $304.6 million from the public
sales of FCX and FRP securities (Notes 3 and 5). Distributions to minority
interest holders of FCX securities increased during 1994 as a result of
increased FCX public common shares outstanding and dividends paid on
depositary shares issued during the second half of 1993. Debt repayments
increased during the 1994 period primarily due to the tender offer
discussed in Note 1 to the financial statements.
Through 1995, FTX's capital expenditures are expected to be greater
than cash flow from operations. Upon completion of FCX's previously
announced 115,000 MTPD expansion by year-end 1995, annual production is
expected to approach 1.1 billion pounds of copper and 1.5 million ounces of
gold. Completion of the FCX expansion, along with the additional cash
flows generated through savings achieved by IMC-Agrico Company, are
expected to enhance FTX's financial flexibility. Subsequently, capital
expenditures will be determined by the results of FCX's exploration
activities and ongoing capital maintenance programs. Estimated capital
expenditures for 1994 and 1995 for the expansion to 115,000 MTPD, the
initial phase of the EIP, ongoing capital maintenance expenditures, and the
expansion of RTM's smelter to 270,000 metric tons of metal per year are
expected to range from $1 billion to $1.25 billion and will be funded by
operating cash flow, sales of existing and to-be-constructed infrastructure
assets and a wide range of financing sources FTX believes are available as
a result of the future cash flow from FTX's mineral reserve asset base.
These sources include, but are not limited to, FTX's credit facility and
the public and private issuances of securities. The Company's long-lived,
low-cost reserve base provides its potential access to a broad range of
sources of capital.
The full EIP (currently expected to involve aggregate cost of as much
as $500 million to $600 million to be completed in stages) includes plans
for commercial, residential, educational, retail, medical, recreational,
environmental and other infrastructure facilities to be constructed during
the next 20 years for PT-FI operations. The EIP will develop and promote
the growth of local and other third-party activities and enterprises in
Irian Jaya through the creation of certain necessary support facilities.
The initial phase of the EIP is under construction and is scheduled for
completion in 1996. Additional expenditures for EIP assets beyond the
initial phase depend on the long-term growth of PT-FI's operations and
would be expected to be funded by third-party financing sources, which may
include debt, equity or asset sales. As discussed below, certain portions
of the EIP and other existing infrastructure assets are expected to be sold
in the near future to provide additional funds for the expansion to 115,000
MTPD.
During 1993, PT-FI entered into a joint venture agreement with P.T.
ALatieF Nusakarya Corporation (ALatieF), an Indonesian investor, which
provides for the sale of certain portions of the to-be-constructed
infrastructure assets and certain existing assets by PT-FI to a joint
venture or ventures (the ALatieF Joint Venture) owned one-third by PT-FI
and two-thirds by ALatieF for total consideration of $270 million. The
sale of the first group of assets to the ALatieF Joint Venture was
completed in December 1993 for a price of $90 million. Debt financing for
the remaining sales, which are anticipated for 1994 and later, was
finalized in April 1994 through the public offering of $120 million of 9
3/4% Senior Notes Due 2001, which are guaranteed by FCX (Note 5).
PT-FI has also entered into Letters of Intent to sell: (i) existing
and to-be-constructed power generation and transmission assets and certain
other power-related assets; (ii) certain aircraft, airport and related
operations; and (iii) certain construction equipment, port facilities and
related marine, logistics and related assets to other joint ventures. The
sales to these joint ventures are expected to generate approximately $315
million (net of equity contributions) over the next two years to be used to
fund the EIP and the expansion to 115,000 MTPD. The foregoing letters of
intent are not binding and are subject to the execution of definitive
agreements, financing, and certain Indonesian Government approvals.
RTM's principal operations currently consist of a copper smelter with
an annual capacity of 150,000 metric tons of metal. In February 1994, RTM
obtained a commitment for short-term bank financing for up to $45 million,
of which $5 million was outstanding at March 31, 1994, to fund the cost of
expansion to 180,000 metric tons of metal per year. FCX recently announced
plans to further expand RTM's copper smelter to 270,000 metric tons of
metal production per year, scheduled for completion by early 1996. The
further expansion to 270,000 metric tons of production and the current
expansion to 180,000 metric tons involve total estimated costs of
approximately $215 million and is expected to be financed through project
financing and RTM's internal cash flows. RTM's future cash flow is
dependent on a number of variables including fluctuations in the exchange
rate between the United States dollar and Spanish peseta, future prices and
sales volumes of gold, the timing of the completion of the smelter
expansion, and the supply/demand for smelter capacity and its impact on
related treatment and refining charges. PT-FI has a long-term contract
with RTM to provide the smelter with a significant portion of its copper
concentrate requirements.
The Contract of Work contains provisions for PT-FI to conduct or cause
to be conducted a feasibility study relating to the construction of a
copper smelting facility in Indonesia and for the eventual construction of
such a facility by PT-FI, if it is deemed to be economically viable by PT-
FI and the Government of Indonesia. FCX recently announced that PT-FI and
RTM have now taken the lead role in developing the proposed 150,000 to
200,000 metric tons of metal per year copper smelter in Gresik, Indonesia.
It is contemplated that PT-FI would provide approximately 50 percent of the
annual concentrate feed required by the Gresik smelter. Preliminary
engineering on the proposed smelter has been completed, and the smelter
could be operational as early as 1998.
FTX is primarily a holding company and its sources of cash flow are
dividends and distributions from its ownership in FCX and FRP. FCX
currently pays an annual cash dividend of 60 cents per share to FTX and to
its public common shareholders. Management anticipates that this dividend
will continue at this level through completion of the expansion in 1995,
absent significant changes in the prices of copper and gold. FCX's Board
of Directors determines its dividend payment on a quarterly basis and at
its discretion may change or maintain the dividend payment.
Publicly owned FRP units have cumulative rights to receive quarterly
distributions of 60 cents per unit through December 31, 1996 (the
Preference Period) before any distributions may be made to FTX. On April
19, 1994, FRP declared a distribution of 60 cents per publicly held unit
($30.3 million), payable May 15, 1994, bringing the total unpaid
distribution to FTX to $271.1 million. Unpaid distributions due FTX will
be recoverable from part of the excess of future quarterly FRP
distributions over 60 cents per unit for all units. The April 1994
distributable cash included $40.2 million received from IMC-Agrico Company
for its first-quarter 1994 distribution (excluding $14.3 million from
working capital reductions) and $2.5 million from the receipt of the
geothermal notes receivable. FRP's future distributions will be dependent
on the distributions received from IMC-Agrico Company, which will primarily
be determined by prices and sales volumes of its commodities and cost
reductions achieved by its combined operations, and the future cash flow of
FRP's sulphur and oil operations.
In the past, including in 1993, the FTX Board of Directors has decided
to borrow funds when the cash received from FCX, FRP, and asset sales was
insufficient to pay dividends and cover FTX's other cash requirements for
interest, general and administrative expenses, and oil and gas operations.
These decisions reflected the Board's analyses of FTX's estimated future
cash flow from its large and long-lived mineral reserves, current and
expected commodity price levels, its borrowing capacity, and its cash
requirements in determining the dividend that the Board considers prudent.
FTX's 10 7/8% Senior Subordinated Debentures, a portion of which were
purchased in 1994 as discussed in Note 1 to the financial statements,
potentially restrict dividend payments ($81.1 million available for future
dividends as of March 31, 1994); however, management has alternative
courses of action that it plans to pursue to eliminate the effect of this
restriction. If low commodity prices persist over an extended period, the
Board can be expected to change FTX's dividend, in which event there may be
a reduced dividend, a lower cash dividend supplemented by a property
dividend in the form of securities in its publicly traded subsidiaries or,
in an extreme case, an elimination of the dividend.
Management believes that operating cash flow, existing lines of credit
($425.0 million available as of April 22, 1994), selected asset sales,
third-party financing, and discretion with respect to capital, exploration
and development spending provides FTX with sufficient financial flexibility
and capital resources to meet its anticipated cash requirements.
________________________
The results of operations reported and summarized above are not necessarily
indicative of future operating results.
FREEPORT-McMoRan INC.
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) The list of exhibits appearing on Page E-1 hereof and the
exhibit immediately following said page are incorporated herein by
reference.
(b) No reports on Form 8-K were filed by the registrant during the
quarter for which this report is filed.
FREEPORT-McMoRan INC.
SIGNATURE
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.
FREEPORT-McMoRan INC.
By: s/ John T. Eads
--------------------------------
John T. Eads
Controller - Financial Reporting
(authorized signatory and
Principal Accounting Officer)
Date: April 26, 1994
FREEPORT-McMoRan INC.
EXHIBIT INDEX
Sequentially
Numbered
Number Description Page
- ------ ----------- ------------
11.1 Freeport-McMoRan Inc. and Consolidated
Subsidiaries Computation of Net Income
per Common and Common Equivalent Share
EXHIBIT 11.1
FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE
Three Months Ended
March 31,
--------------------
1994 1993
------ ------
(In Thousands,
Except Per Share Amounts)
Primary:
Net income (loss) applicable to
common stock $12,373 $(55,346)
======= ========
Average common shares outstanding 140,063 140,933
Common stock equivalents:
Stock options 1,000 914
------- -------
Common and common equivalent shares 141,063 141,847
======= ========
Net income (loss) per common and
common equivalent share $.09 $(.39)
======= ========
Fully diluted:
Net income (loss) applicable to common stock:
Net income (loss) $12,373 $(55,346)
Plus preferred dividends - -
Plus interest, net of tax effect, on
convertible subordinated debentures - -
------- -------
Net income (loss) applicable to
common stock $12,373 $(55,346)
======= ========
Average common shares outstanding 140,063 140,933
Common stock equivalents:
Stock options 1,000 1,955
Convertible securities:
Preferred stock - -
Convertible subordinated debentures - -
------- -------
Common and common equivalent shares 141,063 142,888
======= ========
Net income (loss) per common and
common equivalent share $.09 $(.39)
======= ========
