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, 1995
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, 1995, there were issued and outstanding 136,530,238 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 Income 4
Statements of Cash Flow 5
Notes to Financial Statements 6
Remarks 7
Management's Discussion and Analysis
of Financial Condition and
Results of Operations 8
Part II. Other Information 16
Signature 17
Exhibit Index E-1
FREEPORT-McMoRan INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
---------------------
FREEPORT-McMoRan INC.
CONDENSED BALANCE SHEETS (Unaudited)
March 31, December 31,
1995 1994
---------- ------------
ASSETS (In Thousands)
Current assets:
Cash and short-term investments $ 57,597 $ 41,548
Accounts receivable 279,601 312,264
Inventories 451,513 423,698
Prepaid expenses and other 18,002 18,331
---------- ----------
Total current assets 806,713 795,841
Property, plant and equipment, net 3,581,421 3,366,243
Other assets 217,901 211,491
---------- ----------
Total assets $4,606,035 $4,373,575
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 551,560 $ 571,118
Current portion of long-term debt and
short-term borrowings 34,916 24,412
---------- ----------
Total current liabilities 586,476 595,530
Long-term debt, less current portion 1,830,212 1,646,882
Accrued postretirement benefits and
pension costs 269,045 263,137
Reclamation and mine shutdown reserves 140,837 125,702
Other liabilities and deferred credits 213,795 172,722
Deferred income taxes 306,432 292,580
Minority interests 1,515,781 1,507,489
Stockholders' equity (deficit) (256,543) (230,467)
---------- ----------
Total liabilities and stockholders' equity $4,606,035 $4,373,575
========== ==========
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan INC.
STATEMENTS OF INCOME (Unaudited)
Three Months Ended
March 31,
---------------------
1995 1994
-------- --------
(In Thousands, Except
Per Share Amounts)
Revenues $663,285 $449,594
Cost of sales:
Production and delivery 396,704 297,325
Depreciation and amortization 36,642 34,683
-------- --------
Total cost of sales 433,346 332,008
Exploration expenses 8,125 12,338
General and administrative expenses 50,445 39,726
-------- --------
Total costs and expenses 491,916 384,072
-------- --------
Operating income 171,369 65,522
Interest expense, net (25,059) (23,430)
Gain on conversion of FCX securities - 44,004
Other expense, net (583) (2,759)
-------- --------
Income before income taxes and minority interests 145,727 83,337
Provision for income taxes (50,127) (33,027)
Minority interests in net income of consolidated
subsidiaries (70,740) (26,891)
-------- --------
Income before extraordinary item 24,860 23,419
Extraordinary loss - (5,459)
-------- --------
Net income 24,860 17,960
Preferred dividends (5,469) (5,587)
-------- --------
Net income applicable to common stock $ 19,391 $ 12,373
======== ========
Primary and fully diluted net income per share:
Before extraordinary item $.14 $.13
Extraordinary loss - (.04)
---- ----
$.14 $.09
==== ====
Average primary and fully diluted common and
common equivalent shares outstanding 137,326 141,063
======= =======
Dividends per common share:
Cash $ - $.3125
Property .2602 -
------ ------
$.2602 $.3125
====== ======
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan INC.
STATEMENTS OF CASH FLOW (Unaudited)
Three Months Ended
March 31,
-----------------------
1995 1994
-------- --------
Cash flow from operating activities: (In Thousands)
Net income $ 24,860 $ 17,960
Adjustments to reconcile net income to net
cash provided by operating activities:
Extraordinary loss - 5,459
Depreciation and amortization 37,008 36,243
Amortization of debt discount and
financing costs 8,544 8,403
Gain on conversion of FCX securities - (44,004)
Deferred income taxes 11,875 31,718
Minority interests' share of net income 70,740 26,891
Cash distribution from IMC-Agrico in
excess of interest in capital 12,800 6,388
Reclamation and mine shutdown expenditures (2,121) (5,989)
(Increase) decrease in working capital, net of
effect of acquisition:
Accounts receivable 35,289 38,054
Inventories (28,574) (8,871)
Prepaid expenses and other 352 (336)
Accounts payable and accrued liabilities (28,899) (5,772)
Other 3,487 (8,605)
-------- --------
Net cash provided by operating activities 145,361 97,539
-------- --------
Cash flow from investing activities:
Capital expenditures:
PT-FI (137,695) (165,099)
RTM, including acquisition cost (31,257) (9,144)
FRP (6,367) (2,941)
Other (2,742) (11,632)
Sales of assets - 36,910
-------- --------
Net cash used in investing activities (178,061) (151,906)
-------- --------
Cash flow from financing activities:
Proceeds from sale of:
FCX Preferred Stock - 158,476
FRP 8 3/4% Senior subordinated notes - 146,125
Purchase of FTX, FCX and FRP equity shares (73,284) -
Distributions paid to minority interests:
FCX (30,032) (25,918)
FRP (30,239) (30,296)
Proceeds from (repayments of) debt, net 88,112 (15,424)
Purchase of 10 7/8% Senior Debentures - (90,458)
Net proceeds from infrastructure financing 98,481 -
FTX cash dividends paid:
Common stock - (43,761)
Preferred stock (5,469) (5,587)
Other 1,180 2,206
-------- --------
Net cash provided by financing activities 48,749 95,363
-------- --------
Net increase in cash and short-term
investments 16,049 40,996
Cash and short-term investments at beginning
of year 41,548 39,785
-------- --------
Cash and short-term investments at end of
period $ 57,597 $ 80,781
======== ========
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan INC.
NOTES TO FINANCIAL STATEMENTS
1. OWNERSHIP OF FCX COMMON STOCK
Freeport-McMoRan Inc. (FTX) plans to separate its two principal businesses,
copper/gold and agricultural minerals, into two independent financial and
operating entities. FTX will effect a pro-rata distribution (the
Distribution) to its common stockholders of all the Freeport-McMoRan Copper &
Gold Inc. (FCX) Class B common stock which it owns resulting in FTX no longer
owning any interest in FCX. The Distribution is contingent on a number of
factors, including the recapitalization of FTX, discussed below. In order for
FTX to make the Distribution on a tax-free basis, the FCX stockholders
recently approved changes to FCX's capital structure and stockholder voting
rights.
In connection with FTX's recapitalization, the RTZ Corporation PLC (RTZ)
is to acquire from FTX 21.5 million shares of FCX Class A common stock (10.4
percent of the outstanding common stock of FCX) with an option to acquire an
additional approximately 3.5 million shares of FCX Class A common stock from
FTX. Further, RTZ may acquire certain of FTX's convertible debt securities
for conversion to FTX common stock. RTZ could own over 18 percent of the FCX
common stock outstanding after completion of the Distribution; however, the
total number of FCX shares outstanding will not change, resulting in no
dilution to the current holders of FCX Class A common stock. Additionally,
FCX, its Indonesian subsidiaries and RTZ have agreed in principle to establish
joint ventures whereby RTZ is to become a 40 percent joint venture partner in
FCX's future production expansions and exploration and development activities
in Indonesia. FCX's Indonesian subsidiaries have received Indonesian
government approval to assign an interest in their Contracts of Work (COWs) to
RTZ. RTZ is to pay the next $100 million of exploration expenses with
expenditures beyond $100 million shared ratably. Development projects in
Block B of PT-FI's COW area and the P.T. Irja Eastern Minerals Corporation
(Eastern Mining) COW area will be undertaken 60 percent by PT-FI or Eastern
Mining and 40 percent by RTZ. In PT-FI's Block A, RTZ is to fund up to $750
million for future expansion projects and receive 100 percent of incremental
cash flow until RTZ recoups its costs with interest, after which the cash flow
would be shared 60 percent by PT-FI and 40 percent by RTZ. RTZ is also to
acquire a 25 percent interest in both the Rio Tinto Minera, S.A. Huelva
smelter and the Spanish mineral exploration program. The transactions with
RTZ will enable FTX to complete its recapitalization and the Distribution by
mid-1995.
2. PREFERRED STOCK EXCHANGE
As part of FTX's recapitalization, FTX completed an exchange offer in April
1995 whereby $199.9 million of its $4.375 Convertible Exchangeable Preferred
Stock (the Preferred Stock) was converted into 11.4 million FTX common shares.
FTX will record a noncash charge to preferred dividends of approximately $35
million related to the increased exchange rate offered. After the exchange, 1
million shares ($50.1 million) of Preferred Stock remained outstanding and are
convertible into FTX common stock at a conversion price of $21.26 per share or
the equivalent of 2.35 shares of FTX common stock for each share of Preferred
Stock.
3. ACQUISITION
In January 1995, Freeport-McMoRan Resource Partners, Limited Partnership (FRP)
acquired essentially all of the domestic assets of Pennzoil Co.'s sulphur
division. Pennzoil will receive quarterly payments from FRP over 20 years
based on the prevailing price of sulphur. The installment payments may be
terminated earlier by FRP through the exercise of a $65 million call option or
by Pennzoil through a $10 million put option. Neither option may be exercised
prior to 1999. The purchase price allocation follows (in thousands):
Current assets $ 5,635
Current liabilities (14,216)
Property, plant and equipment 60,054
Accrued long-term liabilities (51,473)
-------
Net cash investment $ -
=======
Accrued long-term liabilities include the estimated future installment
payments based on the prevailing sulphur price upon acquisition and estimated
future reclamation and mine shutdown costs.
4. INTEREST COSTS
Interest expense excludes capitalized interest of $20.5 million and $10.1
million in the first quarter of 1995 and 1994, respectively.
5. RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the first quarter of 1995 and 1994
was 2.4 to 1 and 1.9 to 1, respectively. For this calculation, earnings are
income from continuing operations before income taxes, minority interests and
fixed charges. Fixed charges include 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 1994 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.
RESTRUCTURE AND RECAPITALIZATION
Freeport-McMoRan Inc. (FTX) is presently pursuing a restructuring plan which
involves the pro-rata distribution of its ownership in Freeport-McMoRan Copper
& Gold Inc. (FCX) to FTX common shareholders on a tax-free basis. As a result
of this distribution, FTX would no longer own any interest in FCX. Following
the distribution of FCX common shares to FTX common shareholders, FTX's
business activity would essentially consist of its 51.4 percent ownership in
Freeport-McMoRan Resource Partners, Limited Partnership (FRP). Significant
progress on the restructuring was made during the quarter by arranging for
separate bank facilities for FTX and FCX and announcing a plan to complete the
recapitalization of FTX's liabilities. To accomplish this recapitalization,
RTZ Corporation PLC (RTZ) is to acquire 21.5 million common shares of FCX from
FTX for approximately $450 million with an option to acquire and additional
approximately 3.5 million common shares. FTX will use proceeds from the FCX
common share sales to pay down bank debt and call certain debt securities.
Further, RTZ may acquire certain of FTX's outstanding convertible debt
securities and, if so, could acquire additional FCX shares through conversion
of the debt securities to FTX common shares prior to the distribution of FCX
common shares to FTX shareholders. The transactions with RTZ and the
distribution of FCX shares are expected to be completed by mid-1995.
RESULTS OF OPERATIONS
First Quarter
-------------------
1995 1994
------ ------
(In Millions, Except
Per Share Amounts)
Revenues $663.3 $449.6
Operating income 171.4 65.5
Net income to common stock 19.4 a 12.4 b
Net income per share .14 a .09 b
Operating income (loss) by segment:
Metals $121.9 $53.5
Agricultural minerals 55.4 20.9
Energy 1.4 (7.1)
Other (7.3) (1.8)
------ -----
$171.4 $65.5
====== =====
a. Includes an $8.8 million minority interest charge ($5.7 million to net
income or $0.04 per share) because FTX did not receive its proportionate
share of distributions from FRP, discussed later.
b. Includes a gain of $44 million ($28.6 million to net income or $0.20 per
share) related to the conversion of FCX securities and a $5.5 million
($0.04 per share) extraordinary loss on early extinguishment of debt.
FTX's first-quarter 1995 operating results benefited from higher earnings
at its metals segment primarily because of significantly improved copper
realizations and increased copper and gold sales volumes and from its
agricultural minerals segment primarily because of increased realizations and
sales volumes on phosphate fertilizers.
Exploration expenditures declined in the 1995 quarter reflecting the May
1994 formation of McMoRan Oil & Gas Co. (MOXY). General and administrative
expenses rose in the 1995 quarter primarily because of the additional
personnel and administrative efforts required to manage FCX's expanding
operations.
Metals Operations
- -----------------
FTX's metals operations are conducted through its affiliate FCX and FCX's
operating units P.T. Freeport Indonesia Company (PT-FI), Rio Tinto Minera,
S.A. (RTM) and P.T. Irja Eastern Minerals Corporation (Eastern Mining).
First-quarter 1995 metals operating income was $121.9 million on revenues of
$408.8 million compared with $53.5 million on revenues of $266.2 million for
the 1994 period. Significant items affecting operating income follow (in
millions):
Metals operating income - 1994 $ 53.5
------
Increases (decreases):
Price realizations:
Copper 70.1
Gold (1.8)
Sales volumes:
Copper 36.5
Gold 26.6
Treatment charges (2.3)
Adjustments to prior period concentrate sales (3.0)
RTM, net of eliminations 20.6
Other (4.1)
------
Revenue variance 142.6 *
Cost of sales (64.5)
Exploration expenses 0.1
General and administrative expenses (9.8)
------
68.4
------
Metals operating income - 1995 $121.9
======
* Includes net reductions totaling $12.4 million in 1995 and $3.3 million
in 1994 recognized under PT-FI's copper price protection program and
RTM's gold hedging program.
FCX's first-quarter 1995 revenues rose significantly compared to the 1994
period reflecting higher copper realizations, increased production levels
caused by expanding mill throughput and improved gold grades and recoveries.
Mill throughput averaged 85,000 metric tons of ore per day (MTPD) for the 1995
quarter, 107,200 MTPD in March and for several days exceeded 115,000 MTPD.
PT-FI expects to sustain 115,000 MTPD by mid-year. Treatment charges
increased primarily because of the higher copper sales volumes, partially
offset by lower per pound rates. Adjustments to prior period concentrate
sales during the first quarter of 1995 were immaterial because of PT-FI's
copper price protection program.
Unit site production and delivery costs for the first quarter of 1995
rose slightly from the 1994 period level. However, as the expansion is
completed and PT-FI focuses on maximizing efficiencies, it expects unit site
production and delivery costs to decline. Following attainment of 115,000
MTPD, PT-FI intends to fine-tune its operations to achieve cost efficiencies
and maximum cash flows from its expanded operations. During this optimization
period, PT-FI will continue to review the feasibility of further expansions as
well as the results of exploration activities to ascertain where best to make
future investments.
Gold and silver credits increased primarily from higher sales volumes.
Per pound treatment charges declined because of reduced rates negotiated at
the end of 1994 resulting from the overall tightness in the copper
concentrates market, somewhat offset by higher price participation. Unit
royalties rose because of higher copper prices, as PT-FI's copper royalty rate
varies from 1.5 percent to 3.5 percent depending on the price of copper.
PT-FI OPERATIONS First Quarter
------------------
1995 1994
------- -------
Ore milled (metric tons per day) 85,000 73,400
Copper grade (%) 1.37 1.37
Gold grade (grams per metric ton) 1.45 1.34
Recovery rate (%)
Copper 81.8 83.0
Gold 72.6 69.7
Copper (000s of recoverable pounds)
Production 182,900 160,500
Sales 196,300 155,700
Average realized price a $1.26 $.90
Gold (recoverable ounces)
Production 249,500 190,800
Sales 271,000 201,300
Average realized price $374.99 $381.67
Gross profit per pound of copper (cents):
Average realized price a 125.7 90.0
----- ----
Production costs:
Site production and delivery 62.9 59.4
Gold and silver credits (53.0) (48.9)
Treatment charges 19.5 23.1
Royalty on metals 4.4 1.4
----- ----
Cash production costs 33.8 35.0
Depreciation and amortization 8.1 7.5
----- ----
Total production costs 41.9 42.5
----- ----
Revenue adjustments b (1.4) .6
----- ----
Gross profit per pound of copper 82.4 48.1
===== ====
a. Excluding amounts recognized under PT-FI's copper price protection
program, realizations would have been $1.33 and $0.86 per pound for the
first quarter of 1995 and 1994, respectively.
b. Reflects adjustments primarily for prior period concentrate sales (net of
related amounts recognized under the copper price protection program) and
amortization of the cost of the copper price protection program.
The depreciation rate is currently 8.1 cents per pound, reflecting the
additional capital expenditures to support current operating levels. Upon
completion of the 115,000 MTPD expansion, the depreciation rate is expected to
increase by approximately 35 percent taking into account the related capital
additions. The actual depreciation rate will be determined based on the final
project cost, together with consideration of any changes in ore reserve
estimates.
PT-FI has commitments from various parties to purchase virtually all of
its estimated 1995 production of approximately 900 million pounds of copper
and 1.2 million ounces of gold, depending on the timing of completion of the
115,000 MTPD expansion, at market prices. PT-FI has implemented a copper
price protection program that reflects a philosophy of providing for an
assurance of realizing the benefits of higher copper prices for a significant
portion of its production while it is expanding its operations. As a result
of this program, PT-FI will realize $1.23 per pound on 82.7 million pounds of
copper sales in the second quarter of 1995. An additional 62.8 million pounds
of copper sales during the second quarter will be priced at a minimum average
price of $0.88 per pound, with full participation in prices above an average
of $0.99 per pound. During the second half of 1995, PT-FI will realize $1.15
per pound on 241.4 million pounds of copper sales and has established a
minimum average price of $0.83 per pound on the remaining second half copper
sales with full participation in prices above that amount. Following
completion of the 115,000 MTPD expansion, management's present intention is to
provide a floor price for its production, if attainable at an acceptable cost,
to protect operating cash flow from the impact of potentially significant
declines in copper prices, while providing for full participation in
potentially higher prices. For 1996 and through the first quarter of 1997,
PT-FI's program has currently established a minimum average price of $0.90 per
pound on approximately 1 billion pounds of copper sales, with full
participation in prices above that amount. At March 31, 1995, the cost of PT-
FI's price protection program was $37.1 million and the unrecognized cost to
unwind its hedging positions was approximately $75 million, net of deferred
gains on closed contracts. At March 31, 1995, copper sales totaling 211.7
million pounds remained to be contractually priced in 1995. As a result of
PT-FI's hedging activities, only 64.8 million of those pounds, which are
currently recorded at $1.33 per pound, are subject to changes in the price of
copper. As conditions warrant, PT-FI may modify or extend its existing
programs.
During the first quarter of 1995, PT-FI implemented a gold pricing
strategy designed to take advantage of the premium which exists between the
spot and futures gold price. As of March 31, 1995, PT-FI will earn an average
premium of $9.79 per ounce above the average February through April 1995
closing gold price on 280,000 ounces of gold. These premiums will be recorded
as gold revenues when the contracts settle.
RTM OPERATIONS First Quarter
--------------------
1995 1994
------- -------
Smelter operations
Concentrate treated (metric tons) 118,400 118,000
Anode production (000s of pounds) 83,900 83,600
Cathode production (000s of pounds) 75,400 76,300
Mining operations
Ore milled (MTPD) 10,200 18,100
Gold grade (grams per metric ton) 1.07 1.04
Gold sales (recoverable ounces) 26,600 37,400
Average realized price * $368.59 $364.22
* Excluding adjustments related to RTM's gold loans and forward sales
contracts, realizations would have been $375.59 and $383.30 for the first
quarter of 1995 and 1994, respectively.
RTM losses totaled $2.4 million in 1995 compared with earnings of $1.7
million in the 1994 period. RTM's results were adversely affected by
significantly lower treatment charge rates somewhat offset by greater price
participation. Second quarter smelter operations will be negatively affected
by expansion tie-ins and the planned shutdown of RTM's smelter for normal
maintenance turnarounds. Results from RTM's mining operations reflect lower
gold and silver production and higher unit costs as the mine nears the end of
its economic life. First-quarter 1995 results were also negatively impacted
by the strengthening of the Spanish peseta against the U.S. dollar which, at
current operating levels, has an approximately $1 million impact on RTM's
annual earnings and cash flow for each one peseta change in the exchange rate.
FCX's exploration costs were $8 million for both quarters. FCX and RTZ
have agreed to establish exploration joint ventures whereby RTZ would be a 40
percent joint venture partner and will pay for all further approved
exploration expenditures until it has paid an aggregate $100 million (Note 1).
FCX (60 percent) and RTZ (40 percent) will then pay ratably for any additional
exploration costs and costs to develop projects within PT-FI's Block B
Contract of Work (COW) area and Eastern Mining's COW area.
FCX's general and administrative expenses were $32.9 million in 1995 and
$23.1 million in 1994. The increase results from the additional personnel and
administrative efforts required to manage the expanding operations. Once the
expansion is completed, general and administrative expenses are expected to
remain relatively constant.
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 1995
operating income of $55.4 million on revenues of $244.7 million compared with
$20.9 million on revenues of $172.5 million for the 1994 period. Significant
items affecting operating income follow (in millions):
Agricultural minerals operating income - 1994 $ 20.9
------
Increases (decreases):
Sales volumes 33.2
Realizations 38.9
Other .1
------
Revenue variance 72.2
Cost of sales (37.4)*
General and administrative and other (.3)
------
34.5
------
Agricultural minerals operating income - 1995 $ 55.4
======
* First-quarter 1995 and 1994 include a reduction to depreciation and
amortization of $4.8 million and $0.9 million, respectively, caused by
FRP's disproportionate interest in IMC-Agrico cash distributions.
FRP's phosphate fertilizer sales volumes were 13 percent higher when
compared to the year-ago quarter, as IMC-Agrico had significantly improved
export sales for diammonium phosphate (DAP), its principal fertilizer product.
Increased industrywide export sales activity, together with strong domestic
fertilizer requirements, caused domestic producer inventories to decline over
10 percent from year-ago levels despite industrywide operating rates at 100
percent. These factors resulted in a continued strengthening of DAP prices
into 1995, with FRP's average DAP realization increasing 21 percent from the
year-ago period (8 percent from the previous quarter). FRP's first-quarter
1995 DAP realizations include a portion of a large first-half 1995 forward
sale to China contracted in November 1994 at then current market prices. Unit
production costs benefited from ongoing cost savings achieved at IMC-Agrico,
somewhat offset by higher raw material costs for ammonia.
DAP realizations declined slightly during April but still remain strong.
Near-term sales levels and prices will depend on development of the domestic
planting season and the level of demand in export markets. IMC-Agrico is
committed to maintaining a reasonable balance between supply and demand and
will continue to monitor market conditions and make production level
adjustments as necessary.
FRP's first-quarter 1995 phosphate rock sales volumes increased 33
percent from the 1994 period, reflecting increased demand and the addition of
a long-term supply contract in October 1994.
Main Pass sulphur production averaged nearly 6,100 tons per day (TPD)
during the first quarter of 1995, compared with 5,600 TPD during the 1994
quarter. Additionally, FRP's Culberson mine, acquired in January 1995 as part
of the Pennzoil sulphur asset purchase (Note 3), produced an average of 2,200
TPD during the 1995 quarter. FRP's increased production capacity, combined
with continued strong demand from the domestic phosphate fertilizer industry,
resulted in a 48 percent increase in sales volumes. FRP also benefited from
the continued strengthening in Tampa, Florida sulphur prices, with prices
presently about $25 per long ton over year-ago levels. To the extent U.S.
phosphate fertilizer production remains strong, improved sulphur demand is
expected to continue, although the availability of Canadian sulphur impacts
the potential for significant price increases.
First Quarter
---------------------
1995 1994
--------- ---------
Phosphate fertilizers - primarily DAP
Sales (short tons)a 899,900 794,100
Average realized priceb
All phosphate fertilizers $163.80 $134.68
DAP 169.18 139.76
Phosphate rock
Sales (short tons)a 1,338,700 1,006,500
Average realized priceb $21.12 $21.71
Sulphur
Sales (long tons)c 760,600 515,500
a. Reflects FRP's 46.5 percent share of the IMC-Agrico assets for the year
ended June 30, 1994, while FRP received 58.6 percent of the cash flow
generated during such period. FRP's share of the IMC-Agrico assets for
the year ended June 30, 1995 is 45.1 percent, while it will receive 55
percent of the cash flow.
b. Represents average realization f.o.b. plant/mine.
c. Includes 178,900 tons and 187,100 tons for the first quarter of 1995 and
1994, respectively, which represent internal consumption that are not
included in sales for accounting purposes.
Oil And Gas Operations
- ----------------------
Prior to the May 1994 distribution of MOXY shares, FTX's oil and gas
operations (excluding the Main Pass oil operation) involved 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.
Subsequent to the MOXY distribution, FTX's only significant oil and gas
operations are at Main Pass, which were as follows:
First Quarter
-----------------
1995 1994
------- -------
Sales (barrels) 620,800 823,200
Average realized price $15.36 $11.65
Earnings (in millions) $1.1 $1.0
Main Pass oil production was below the year-ago quarter level, as
expected. Net production for 1995 is estimated to total approximately 2.4
million barrels, as the benefits of a 1994 redevelopment program are expected
to partially offset declining reservoir production. FRP's first-quarter 1995
average oil realization was higher than the depressed 1994 period amount.
CAPITAL RESOURCES AND LIQUIDITY
Cash flow from operating activities increased during the first three months of
1995 to $145.4 million, compared with $97.5 million for the 1994 period,
primarily because of a significant increase in operating income partially
offset by an increase in working capital. Net cash used in investing
activities was $178.1 million compared with $151.9 million for the 1994
period. The 1995 period reflects lower expenditures at PT-FI as the 115,000
MTPD expansion nears completion and the 1994 period includes the early receipt
of proceeds from the geothermal notes receivable. Net cash provided by
financing activities was $48.7 million compared with $95.4 million in the 1994
period. During the first quarter of 1995, FTX acquired 0.7 million of its
shares for an aggregate $12.3 million and 2.8 million FCX Class A common
shares for an aggregate $58.9 million under its established program to acquire
shares when warranted by market conditions. The 1995 period also included net
proceeds from debt of $88.1 million and proceeds from infrastructure financing
at the metals segment totaling $98.5 million. The 1994 period included
proceeds totaling $304.6 million from the public sales of FCX and FRP
securities and payments for the 10 7/8% Senior Subordinated Debentures.
PT-FI's capital expenditures for the remainder of 1995 are expected to
approximate $300 million. Expenditures will be funded by operating cash flow,
sales of infrastructure assets, the bank credit facility ($310 million of
availability at March 31, 1995) and other financing sources. In connection
with FTX's proposed restructuring plan (Note 1), the existing FTX credit
agreement in which PT-FI participates is being modified to become a separate
facility for PT-FI and a new facility is being arranged for FCX and PT-FI
which will provide greater access to credit markets and reduce financing
costs. For further expansion projects in the current Block A mining area,
beyond the current 115,000 MTPD expansion, RTZ will provide up to a maximum of
$750 million for 100 percent of costs to develop such projects. RTZ will
receive the incremental cash flow attributed to the expansion projects until
it has received an amount equal to the funds it had provided plus interest
based on RTZ's cost of borrowing. Subsequently, FCX (60 percent) and RTZ (40
percent) will share incremental cash flow ratably in proportion to their
ownership.
PT-FI has entered into joint ventures to purchase and manage certain of
its infrastructure assets for $270 million and its power-related assets for
$215 million. In March 1995, PT-FI sold certain of its port, marine,
logistics and construction equipment and facilities for $100 million. As of
March 31, 1995, $75.1 million of infrastructure assets and $115 million of
power-related assets remain to be sold during 1995. PT-FI has guaranteed
certain minimum rates of return in each of the above transactions. PT-FI is
proceeding with plans to sell other nonoperating assets whereby the purchaser
will operate the assets and provide services to PT-FI and its designees.
RTM has a turnkey contract to expand its smelter capacity to 270,000
metric tons of metal per year by early 1996 at a cost of $215 million and has
obtained $290 million of project financing, nonrecourse to FCX, including a
working capital line. RTM's future operating cash flow will be determined by
the supply and demand for copper smelter capacity, smelter and refining
production rates, the exchange rate between the U.S. dollar and Spanish peseta
and prices and sales volumes of gold. PT-FI has a long-term contract to
provide the smelter with a significant portion of its copper concentrate
requirements.
In January 1995, FCX agreed in principle to form a joint venture, 20
percent owned by FCX, to develop a 200,000 metric tons of metal per year
copper smelter in Gresik, Indonesia. Alternatives for financing the estimated
$550 million aggregate project cost, plus approximately $100 million of
working capital, are being reviewed. Upon completion of RTM's smelter
expansion and the proposed Gresik smelter, FCX anticipates that approximately
70 percent of PT-FI's expanded annual concentrate production will be sold to
affiliates at market prices.
FRP had agreed in principle to acquire Fertiberia, S.L., the restructured
nitrogen and phosphate fertilizer business of Ercros, S.A., a Spanish
conglomerate. Since September 1993, FRP managed this company with the goal of
establishing Fertiberia as a financially viable concern. In April 1995,
Ercros announced that it was pursuing an offer from Spanish private interests
to acquire the majority of FESA, a subsidiary of Ercros, which includes
Fertiberia and certain other assets and substantial liabilities. FRP is
unwilling to improve the terms for its acquisition of Fertiberia. As a
result, FRP terminated its efforts to acquire Fertiberia. This development
will have no effect on FRP's distributable cash capabilities since any cash
flow which may have been generated by Fertiberia was to have been reinvested
for the foreseeable future.
Publicly owned FRP units have cumulative rights to receive quarterly
distributions of 60 cents per unit through the distribution for the quarter
ending December 31, 1996 (the Preference Period) before any distributions may
be made to FTX. During the first quarter of 1995, FTX received less than a 60
cents per unit distribution on the FRP units that it owned, resulting in an
additional minority interest charge of $8.8 million. On April 18, 1995, FRP
declared a distribution of 61.5 cents per publicly held unit ($30.9 million)
and 64.5 cents per FTX-owned unit ($34.3 million), payable May 15, 1995,
reducing the unpaid distribution to FTX by $1.6 million. As a result, no
additional minority interest charge will be recognized by FTX during the
second quarter of 1995. The remaining $351.5 million of unpaid distributions
to FTX will be recoverable from one-half of the excess of future quarterly FRP
distributions over 60 cents per unit for all units. The April 1995
distributable cash included $63.1 million from IMC-Agrico. As discussed
earlier, IMC-Agrico's first-quarter 1995 operations enjoyed significantly
higher sales volumes and realizations. FRP's future distributions will be
dependent on the distributions received from IMC-Agrico and future cash flow
from FRP's sulphur and oil operations. In future periods, FTX's share of the
reported financial results of FRP will depend on the extent to which FTX
receives its proportionate share of FRP distributions. To the extent that
public unitholders receive a disproportionately large share of FRP
distributions, FTX will recognize a smaller share of FRP's reported earnings
than would be represented by its percentage ownership of FRP.
FTX is primarily a holding company and its sources of cash flow are
dividends and distributions from its ownership in FCX and FRP. Through mid-
1994, FTX borrowed 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.
Since the second quarter of 1994, in lieu of paying a $0.3125 quarterly cash
dividend to its common stockholders, FTX distributed quarterly one FCX Class A
common share for each 80 FTX common shares owned.
Subsequent to the spinoff of FCX (Note 1), FTX's business activity will
essentially consist of its 51.4 percent ownership in FRP and its source of
cash flow will be distributions from FRP, which are subject to the FRP public
unitholders' preferential distribution right discussed above. FTX will have
certain obligations relating to its past business activities including income
tax settlements, oil and gas payments and employee benefit liabilities. It
may also have obligations relating to its guarantee of the debt of FM
Properties Inc. FTX anticipates that its cash distributions from FRP and
amounts available to it under the new FTX/FRP credit facility will be
sufficient to meet these obligations. FTX's Board of Directors will determine
its new dividend policy based on the availability of cash to FTX.
--------------------------------
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 exhibits to this report are listed in the Exhibit Index
appearing on page E-1 hereof.
(b) During the quarter for which this report is filed, the registrant
filed (1) one Current Report on Form 8-K, dated January 18, 1995, reporting
information under Item 2 and Item 7; (2) one Form 8-K/A dated February 23,
1995, reporting information under Item 7 and including the following financial
statements:
Pennzoil Assets Acquired
Balance Sheets as of December 31, 1993 (Audited) and
September 30, 1994 (Unaudited)
Statements of Operations and Divisional Equity for the
Year Ended December 31, 1993 (Audited) and for the
Nine Months Ended September 30, 1994 (Unaudited)
Statements of Cash Flows for the Year Ended
December 31, 1993 (Audited) and for the Nine Months
Ended September 30, 1994 (Unaudited)
Notes to Financial Statements
Freeport-McMoRan Inc.
Unaudited Pro Forma Statement of Operations for the Year
Ended December 31, 1993
Unaudited Pro Forma Statement of Operations for the Nine
Months Ended September 30, 1994
Unaudited Pro Forma Condensed Balance Sheet as of
September 30, 1994
Notes to Pro Forma Financial Statements;
and (3) one Current Report on Form 8-K, dated March 7, 1995,
reporting information under Item 5 and Item 7.
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 25, 1995
FREEPORT-McMoRan INC.
EXHIBIT INDEX
Sequentially
Numbered
Number Description Page
- ------ ----------- ------------
11.1 Freeport-McMoRan Inc.
Computation of Net Income per Common
and Common Equivalent Share
27.1 Freeport-McMoRan Inc.
Financial Data Schedule
Exhibit 11.1
FREEPORT-McMoRan INC.
COMPUTATION OF NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE
Three Months Ended
March 31,
---------------------
1995 1994
------- --------
Primary:
Net income applicable to common stock $19,391 $12,373
======= =======
Average common shares outstanding 136,826 140,063
Common stock equivalents:
Stock options 500 1,000
------- -------
Common and common equivalent shares 137,326 141,063
======= =======
Net income per common and common
equivalent share $.14 $.09
==== ====
Fully diluted:
Net income applicable to common stock:
Net income $19,391 $12,373
Plus preferred dividends - -
Plus interest, net of tax effect, on
convertible subordinated debentures - -
------- -------
Net income applicable to common stock $19,391 $12,373
======= =======
Average common shares outstanding 136,826 140,063
Common stock equivalents:
Stock options 500 1,000
Convertible securities:
Preferred stock - -
Convertible subordinated debentures - -
------- -------
Common and common equivalent shares 137,326 141,063
======= =======
Net income per common and common
equivalent share $.14 $.09
==== ====
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 57,597
<SECURITIES> 0
<RECEIVABLES> 182,199
<ALLOWANCES> 0
<INVENTORY> 451,513
<CURRENT-ASSETS> 806,713
<PP&E> 5,162,597
<DEPRECIATION> 1,581,176
<TOTAL-ASSETS> 4,606,035
<CURRENT-LIABILITIES> 586,476
<BONDS> 1,830,212
<COMMON> 166,456
0
250,000
<OTHER-SE> (672,999)
<TOTAL-LIABILITY-AND-EQUITY> 4,606,035
<SALES> 663,285
<TOTAL-REVENUES> 663,285
<CGS> 433,346
<TOTAL-COSTS> 433,346
<OTHER-EXPENSES> 8,125
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,059
<INCOME-PRETAX> 145,727
<INCOME-TAX> 50,127
<INCOME-CONTINUING> 24,860
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,860
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
