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 June 30, 1996
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 June 30, 1996, there were issued and outstanding 26,364,358 shares
of the registrant's Common Stock, par value $0.01 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 12
Signature 14
Exhibit Index E-1
FREEPORT-McMoRan INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
FREEPORT-McMoRan INC.
CONDENSED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1996 1995
---------- ----------
(In Thousands)
ASSETS
Current assets:
Cash and short-term investments $ 7,339 $ 23,496
Accounts receivable 93,591 100,994
Inventories 136,654 119,010
Prepaid expenses and other 4,849 4,499
---------- ----------
Total current assets 242,433 247,999
Property, plant and equipment, net 974,430 999,840
Other assets 52,359 72,631
---------- ----------
Total assets $1,269,222 $1,320,470
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 149,232 $ 180,766
Long-term debt, less current portion 385,695 359,501
Accrued postretirement benefits and
pension costs 182,169 170,542
Reclamation and mine shutdown reserves 120,772 128,981
Other liabilities and deferred credits 85,287 92,722
Minority interest 181,639 196,021
Stockholders' equity 164,428 191,937
---------- ----------
Total liabilities and stockholders'
equity $1,269,222 $1,320,470
========== ==========
The accompanying notes are an integral part of these financial
statements.
FREEPORT-McMoRan INC.
STATEMENTS OF INCOME (Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
------------------------ ------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(In Thousands, Except Per Share Amounts)
Revenues $ 242,793 $ 233,398 $ 499,620 $ 487,877
Cost of sales:
Production and delivery 172,573 165,924 342,521 338,426
Depreciation and
amortization 9,385 7,072 20,807 21,412
---------- ---------- ---------- ----------
Total cost of sales 181,958 172,996 363,328 359,838
Gain on IMC-Agrico
investment - - (11,917) -
General and administrative
expenses 14,405 13,218 32,040 30,981
---------- ---------- ---------- ----------
Total costs and
expenses 196,363 186,214 383,451 390,819
---------- ---------- ---------- ----------
Operating income 46,430 47,184 116,169 97,058
Interest expense, net (8,413) (15,519) (16,438) (31,230)
Other income (expense),
net 607 440 1,355 651
---------- ---------- ---------- ----------
Income before minority
interest and income
taxes 38,624 32,105 101,086 66,479
Minority interest in net
income of consolidated
subsidiaries (18,639) (19,127) (47,741) (50,411)
Income tax provision (6,764) (5,717) (18,899) (6,557)
---------- ---------- ---------- ----------
Income from continuing
operations 13,221 7,261 34,446 9,511
Discontinued operations - 292,847 - 315,457
---------- ---------- ---------- ----------
Net income 13,221 300,108 34,446 324,968
Preferred dividends (1,095) (34,623) (2,191) (40,092)
---------- ---------- ---------- ----------
Net income applicable to
common stock $ 12,126 $ 265,485 $ 32,255 $ 284,876
========== ========== ========== ==========
Net income per primary share:
Continuing operations $.49 $.29 $1.26 $.40
Discontinued operations - 11.89 - 13.28
Preferred dividends (.04) (1.40) (.08) (1.69)
---- ------ ----- ------
$.45 $10.78 $1.18 $11.99
==== ====== ===== ======
Net income per fully diluted share:
Continuing operations $.49 $.47 $1.26 $.86
Discontinued operations - 9.91 - 10.64
Preferred dividends (.04) (1.13) (.08) (1.13)
---- ----- ---- -----
$.45 $9.25 $1.18 $10.37
==== ===== ===== ======
Average common and common equivalent shares outstanding:
Primary 27,145 24,637 27,412 23,753
====== ====== ====== ======
Fully diluted 27,145 29,560 27,412 29,638
====== ====== ====== ======
Dividends per common share:
Cash $.09 $- $.18 $ -
Property - - - 1.5612
---- -- ---- -------
$.09 $- $.18 $1.5612
==== == ==== =======
The accompanying notes are an integral part of these financial
statements.
FREEPORT-McMoRan INC.
STATEMENTS OF CASH FLOW (Unaudited)
Six Months
Ended June 30,
------------------------
1996 1995
---------- ----------
(In Thousands)
Cash flow from operating activities:
Net income $ 34,446 $ 324,968
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 20,807 72,892
Gain on IMC-Agrico investment (11,917) -
Recognition of unearned income (363) (36,207)
Amortization of debt discount and
financing costs 1,043 15,211
Deferred income taxes 18,798 83,715
Minority interests' share of net
income 47,741 133,403
Cash distribution from IMC-Agrico in
excess of interest in capital 24,897 21,347
Reclamation and mine shutdown
expenditures (6,476) (4,928)
Gain on FCX securities transactions - (391,224)
Loss on recapitalization of FTX
securities - 43,316
(Increase) decrease in working capital,
net of effect of acquisitions and
distributions:
Accounts receivable 22,359 2,006
Inventories (17,644) (21,419)
Prepaid expenses and other (353) 3,471
Accounts payable and accrued
liabilities (40,855) 12,078
Other 8,926 10,299
---------- ----------
Net cash provided by operating activities 101,409 268,928
---------- ----------
Cash flow from investing activities:
Capital expenditures:
FRP (16,649) (15,484)
FCX - (308,099)
Other (926) (1,821)
Sale of assets 4,000 375
---------- ----------
Net cash used in investing activities (13,575) (325,029)
---------- ----------
Cash flow from financing activities:
Purchase of FTX common shares (57,672) (12,317)
Purchase of FRP units (1,305) (2,061)
Purchase of FCX Class A common shares - (111,747)
Purchase/Redemption of FTX securities:
ABC Debentures - (280,826)
6.55% Senior Notes - (14,955)
Distributions paid to minority interests:
FRP (61,898) (61,150)
FCX - (59,970)
Net proceeds from infrastructure
financing - 228,899
Repayments of debt, net (123,768) (65,009)
Proceeds from sale of FRP 7% Senior
Notes 147,831 -
Proceeds from sale of FCX Class A
common shares - 447,006
Cash dividends paid:
Common stock (4,832) -
Preferred stock (2,191) (6,565)
Other (156) (628)
---------- ----------
Net cash provided by (used in) financing
activities (103,991) 60,677
---------- ----------
Net increase (decrease) in cash and
short-term investments (16,157) 4,576
Net decrease attributable to
discontinued operations - 13,098
Cash and short-term investments at
beginning of year 23,496 13,810
---------- ----------
Cash and short-term investments at
end of period $ 7,339 $ 31,484
========== ==========
The accompanying notes are an integral part of these financial
statements.
FREEPORT-McMoRan INC.
NOTES TO FINANCIAL STATEMENTS
1. PARENT COMPANY BALANCE SHEET
The unaudited, unconsolidated condensed balance sheet of Freeport-
McMoRan Inc. (FTX) as of June 30, 1996 follows (in thousands):
Cash and short-term investments $ 72
Note receivable from FRP 9,000
Other current assets 16,523
Property, plant and equipment, net 42,856
Investment in FRP 197,275
Other assets 5,373
----------
Total assets $ 271,099
==========
Accounts payable and accrued liabilities $ 26,069
Long-term debt -
Other liabilities and deferred credits 80,602
Stockholders' equity 164,428
----------
Total liabilities and stockholders' equity $ 271,099
==========
2. LONG-TERM DEBT
In February 1996, Freeport-McMoRan Resource Partners, Limited
Partnership (FRP) sold publicly $150 million of its 7% Senior Notes
due 2008. Net proceeds of $147.8 million were used to reduce bank
indebtedness. Following the sale of the 7% Senior Notes, the
committed amount under the FTX/FRP revolving credit facility was
reduced from $400 million to $300 million, all of which is available
to FRP and $75 million of which is available to FTX. As of June 30,
1996, $255.0 million was available under the credit facility.
3. INVESTMENT IN IMC-AGRICO COMPANY
In March 1996, FRP and its joint venture partner in IMC-Agrico
increased FRP's ownership in IMC-Agrico by 0.85 percent. As a result,
FRP recognized a gain of $11.9 million in the first quarter of 1996
resulting from the increased share of IMC-Agrico's net assets.
4. PROPOSED MERGER
On August 7, 1996, FTX, the administrative managing general partner
and 51.6 percent owner of FRP, announced that it had entered into a
non-binding letter of intent with Arcadian Corporation regarding a
possible combination of their businesses into a newly formed
corporation. Although it is not a condition to the combination, it is
intended that FRP will be offered an opportunity to participate in a
transaction that would convert the publicly held FRP units into
capital stock of the new corporation.
The proposed combination is subject to the negotiation and
execution of a definitive merger agreement, completion of due
diligence, approval of the boards of directors of FTX and Arcadian,
approval by the shareholders of FTX and Arcadian, and approval under
the Hart-Scott-Rodino Anti-Trust Improvements Act. Completion of the
combination is also subject to such rights as IMC Global Inc. may have
to participate in the transaction under its partnership agreement with
FRP governing their IMC-Agrico joint venture. The proposed
transaction with FRP would also be subject to approval of a special
committee of the FTX board of directors representing the interests of
FRP public unitholders and to a vote of those unitholders. The
companies intend to complete the definitive agreement in approximately
30 days.
-----------------
Remarks
The information furnished herein should be read in conjunction with
FTX's financial statements contained in its 1995 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.
PROPOSED MERGER
On August 7, 1996, Freeport-McMoRan Inc. (FTX), the administrative
managing general partner and 51.6 percent owner of Freeport-McMoRan
Resource Partners, Limited Partnership (FRP), announced that it had
entered into a non-binding letter of intent with Arcadian Corporation
regarding a possible combination of their businesses into a newly
formed corporation. Although it is not a condition to the
combination, it is intended that FRP will be offered an opportunity to
participate in a transaction that would convert the publicly held FRP
units into capital stock of the new corporation.
The proposed combination is subject to the negotiation and
execution of a definitive merger agreement, completion of due
diligence, approval of the boards of directors of FTX and Arcadian,
approval by the shareholders of FTX and Arcadian, and approval under
the Hart-Scott-Rodino Anti-Trust Improvements Act. Completion of the
combination is also subject to such rights as IMC Global Inc. may have
to participate in the transaction under its partnership agreement with
FRP governing their IMC-Agrico joint venture. The proposed
transaction with FRP would also be subject to approval of a special
committee of the FTX board of directors representing the interests of
FRP public unitholders and to a vote of those unitholders. The
companies intend to complete the definitive agreement in approximately
30 days.
RESULTS OF OPERATIONS
Second Quarter Six Months
---------------------- ----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(In Millions, Except Per Share Amounts)
Revenues $ 242.8 $ 233.4 $ 499.6 $ 487.9
Operating income 46.4 47.2 116.2 97.1
Income from continuing
operations 13.2 7.3 34.4 9.5
Discontinued operations - 292.8 - 315.5
Preferred dividends (1.1) (34.6) (2.1) (40.1)
---------- ---------- ---------- ----------
Net income to common
stock $ 12.1 $ 265.5 $ 32.3 $ 284.9
========== ========== ========== ==========
FTX operates primarily through its 51.6 percent interest in FRP.
Operating results for the 1996 periods benefited from higher average
realizations on phosphate fertilizer, phosphate rock and oil sales.
The animal feed ingredients business, acquired in October 1995, also
contributed to operating results. Offsetting the impact of these
positive factors were lower production and sales volumes for phosphate
rock, sulphur and oil. The six-month 1996 period was impacted by an
$11.9 million gain resulting from the increase in FRP's ownership of
IMC-Agrico Company (Note 3) and charges totaling $3.0 million
representing miscellaneous asset valuations at IMC-Agrico.
Depreciation and amortization for the 1996 quarter rose $2.3
million from the 1995 period amount, primarily attributable to a $2.8
million increase related to FRP's disproportionate interest in the
IMC-Agrico cash distributions and $0.5 million associated with the
animal feed ingredients operations, partially offset by a $0.9 million
reduction from phosphate rock activities caused by the decline in
sales volumes. For the six-month 1996 period, depreciation and
amortization decreased $0.6 million from the 1995 period, reflecting a
$1.5 million reduction from Main Pass oil operations and a $1.4
million reduction from phosphate rock activities caused by the decline
in sales volumes. These decreases were partially offset by $1.0
million of depreciation associated with the animal feed ingredients
business.
General and administrative expenses for the second-quarter
and six-month 1996 periods rose $1.2 million and $1.1 million,
respectively, from the 1995 period amounts primarily reflecting the
inclusion of the animal feed ingredients operations. The six-month
1996 period also includes $1.3 million higher stock appreciation
rights costs (second-quarter 1995 included a $1.5 million reduction to
expense), whereas the 1995 period included a $1.2 million charge for
the reorganization of IMC-Agrico's marketing function.
Interest expense for the 1996 periods decreased from the year-ago
amounts as a result of the elimination of FTX's parent company debt in
connection with its 1995 recapitalization and reorganization
activities. Minority interest's share of net income represents the
FRP public unitholders' pro rata share of FRP earnings, with the
quarter by periods including a $0.5 million gain in 1996 and a $0.8
million gain in 1995 resulting from a disproportionate share of FRP
distributions received by FTX during the periods (a gain of $1.7
million for the six-month 1996 period versus an $8.0 million charge
for the six-month 1995 period). FTX's income tax provision for 1996
increased from the 1995 period amount, primarily resulting from the
rise in pretax, after-minority interest earnings. Preferred stock
dividends were lower, reflecting the impact of the 1995
recapitalization activities.
Agricultural Minerals Operations FTX's agricultural minerals
operations, which includes FRP's fertilizer and phosphate rock
operations (conducted through IMC-Agrico) and its sulphur business,
reported second-quarter 1996 operating income of $50.1 million on
revenues of $233.0 million compared with operating income of $48.8
million on revenues of $224.2 million for the 1995 period. Operating
income for the first six months of 1996 was $126.3 million on revenues
of $480.2 million compared with operating income of $104.2 million on
revenues of $468.9 million for the year-ago period. Significant items
impacting operating income are as follows (in millions):
Second Six
Quarter Months
---------- -----------
Agricultural minerals operating
income -1995 $ 48.8 $ 104.2
---------- -----------
Increases (decreases):
Sales volumes (11.4) (48.7)
Realizations 16.4 59.5
Other 3.8 .5
---------- ----------
Revenue variance 8.8 11.3
Cost of sales (8.1)a (3.7)a
Gain on IMC-Agrico investment - 11.9
General and administrative .6 2.6
---------- ----------
1.3 22.1
---------- ----------
Agricultural minerals operating income
-1996 $ 50.1 $ 126.3
========== ==========
a. Includes a reduction to depreciation of $8.5 million and $11.3
million for the second quarter of 1996 and 1995, respectively, and
$15.8 million and $16.1 million for the six-month period of 1996 and
1995, respectively, caused by FRP's disproportionate interest in IMC-
Agrico cash distributions. The six-month 1996 period also includes
$3.0 million of asset valuation charges from IMC-Agrico.
FRP's second-quarter 1996 phosphate fertilizer sales volumes were
7 percent higher than those in the 1995 period, with IMC-Agrico's
realization for diammonium phosphate (DAP), its principal fertilizer
product, averaging 6 percent higher. The improvement in average price
realizations resulted from the tight supply/demand situation
experienced during late 1995 that moved prices higher in early 1996.
After near record high fertilizer prices, price weakness began late in
the first quarter and continued into the current quarter as industry
exports and domestic sales volumes were lower than anticipated. In
response to market conditions, IMC-Agrico temporarily idled its Taft,
Louisiana plant and reduced DAP production at its New Wales, Florida
plant in March and April, respectively, and also idled its Nichols,
Florida phosphate plant in mid-May. However, near the end of the
second quarter, North American and international demand strengthened,
resulting in improved market prices. In response to these improving
market conditions, in July IMC-Agrico resumed full capacity operations
at its New Wales, Florida plant and commenced production at its Taft,
Louisiana plant. FRP's phosphate fertilizer unit production costs
were essentially unchanged as lower costs for ammonia and sulphur were
offset by higher phosphate rock production, chemical processing and
natural gas costs.
The long-term fundamental market outlook for phosphate
fertilizers remains favorable because of record low global grain
stocks and historically high grain prices. Global fertilizer demand
is expected to continue to increase. With many international
phosphate suppliers sold out through the third quarter, global supply
and demand should result in favorable prices throughout the balance of
the year.
FRP's second-quarter 1996 phosphate rock sales volumes declined
39 percent primarily reflecting the previously reported October 1995
expiration of a cost-plus contract that resulted in below market
realizations on annual sales of 1.5 million tons net to FRP. Also
contributing to the reduction in sales volumes were lower sales in the
export market. The 18 percent increase in second-quarter 1996
realizations, primarily caused by the below market contract
expiration, was offset by lower sales volumes and higher rock mining
costs, resulting in lower earnings from its phosphate rock operations.
Phosphate rock sales volumes are expected to decline further as IMC-
Agrico does not intend to renew certain long-term sales contracts as
they expire in order to maximize the long-term value of its phosphate
rock reserves through internal use.
Sulphur sales volumes in the second quarter of 1996 declined 14
percent from the 1995 period level, as FRP operated its Main Pass and
Culberson mines at reduced rates (equivalent to 350,000 tons lower
annual production) in response to lower domestic sulphur demand from
phosphate fertilizer producers. Sulphur market prices were negatively
affected by the lower demand. FRP's future sulphur sales volumes and
realizations will continue to depend on the level of demand from the
domestic phosphate fertilizer industry.
Second Quarter Six Months
------------------------ ------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
Phosphate fertilizers -primarily DAP
Sales (short tons) a 809,900 760,400 1,599,900 1,660,300
Average realized price b
All phosphate
fertilizers $174.96 $163.53 $185.88 $163.68
DAP 178.37 169.01 192.05 169.10
Phosphate rock
Sales (short tons) a 740,700 1,221,500 1,492,500 2,560,200
Average realized
price b $27.27 $23.18 $26.77 $22.10
Sulphur
Sales (long tons) c 665,700 772,700 1,403,800 1,533,300
a. Reflects FRP's 43.6 percent and 45.1 percent share of the IMC-
Agrico assets for the years ended June 30, 1996 and 1995,
respectively.
b. Represents average realization f.o.b. plant/mine.
c. Includes internal consumption totaling 169,000 tons and 189,700
tons for the second quarter of 1996 and 1995, respectively, and
355,000 tons and 368,600 tons for the six-month period of 1996 and
1995, respectively.
Oil Operations -
Second Quarter Six Months
----------------- -------------------
1996 1995 1996 1995
------- ------- --------- ---------
Sales (barrels) 502,300 541,000 1,044,500 1,161,800
Average realized price $19.26 $16.71 $18.32 $15.99
Operating income (in millions) $2.5 $1.4 $4.7 $2.5
Main Pass oil production declined slightly from the 1995 period,
as expected. Net production for 1996 is expected to be slightly lower
than 1995 levels. Main Pass operating income for the 1996 periods
benefited from an increase in average realizations caused by higher
world market prices.
During the quarter, FRP, a significant consumer of natural gas in
its sulphur and fertilizer operations, acquired a 25 percent leasehold
interest in an oil and gas joint venture to explore a 35,000 acre
project area in south Terrebonne Parish, Louisiana. Two high-
potential, high-risk prospects have been identified, with drilling on
the East Fiddler's Lake prospect begun in July 1996 and drilling on
the North Bay Junop prospect anticipated to begin in late 1996. A 3-D
seismic survey has indicated additional potential prospects which may
be drilled in 1997. In connection with the acquisition of this
interest, FRP reimbursed McMoRan Oil & Gas Co., a formerly owned
affiliate of FTX, $2.1 million for certain costs previously incurred
on the project area. FRP acquired its interest on the same
proportionate basis as Phillips Petroleum, which has a 50 percent
leasehold interest in the project area and is the operator of the
initial two drilling prospects. FRP will continue to evaluate
opportunities for additional investments.
CAPITAL RESOURCES AND LIQUIDITY
FTX's main source of cash flow is distributions from its ownership in
FRP. 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 before any distributions may
be made to FTX. On July 19, 1996, FRP declared a distribution of 60
cents per publicly held unit ($30.0 million) and 23 cents per FTX-
owned unit ($12.5 million), payable August 15, 1996, increasing the
total unpaid distributions to FTX to $398.4 million. As a result, an
additional $9.4 million minority interest charge will be recognized by
FTX during the third quarter of 1996. Unpaid distributions to FTX are
recoverable from one-half of any excess of future quarterly FRP
distributions over 60 cents per unit for all units. FRP's future
distributions will be dependent on the distributions received from
IMC-Agrico, cash flow from FRP's sulphur and oil operations, and on
the level of and methods of financing its capital expenditure needs
including reclamation and growth projects. Distributable cash in July
1996 included $49.8 million from IMC-Agrico. Future distributions
from IMC-Agrico will depend primarily on the phosphate fertilizer
market, discussed earlier, and FRP's share of IMC-Agrico cash
distributions (Current Interest). In March 1996, FRP and its joint
venture partner in IMC-Agrico amended the IMC-Agrico Partnership
Agreement to (1) increase FRP's ownership in IMC-Agrico by 0.85
percent, (2) alter the management structure of the joint venture and
(3) modify certain product pricing arrangements between IMC-Agrico and
other of the joint venture partner's business units. As a result,
FRP's Current Interest is 54.35 percent for the twelve months ended
June 30, 1997 and declines to 41.45 percent thereafter. The
partnership agreement changes were made in recognition of changes in
IMC-Agrico's business and in connection with a merger transaction
between the joint venture partner and another company.
FTX's parent company obligations were significantly reduced as a
result of the recapitalization and restructuring activities completed
in 1995. FTX retained certain cash requirements related to its past
business activities, including oil and gas property abandonment
obligations and employee benefit liabilities. Also, FTX could
potentially incur future cash payments relating to its FM Properties
Inc. debt guarantee, discussed in Note 9 to FTX's 1995 year-end
financial statements. FTX anticipates that its cash distributions
from FRP and its amounts available under the credit facility will be
sufficient to meet these obligations. FTX's credit facility (Note 2)
provides $300 million of credit available to FRP ($252.0 million of
additional borrowings available at July 26, 1996), $75 million of
which is available to FTX. FTX's regular quarterly cash dividend of 9
cents per common share, initiated in August 1995, allows FTX to use
additional available funds to purchase FTX stock, purchase FRP units
and/or invest in new growth opportunities. Since the change in its
dividend policy through June 30, 1996, FTX has purchased approximately
2.4 million FTX shares and 181,200 FRP units for an aggregate cost of
$93.7 million. The timing of additional FTX stock and FRP unit
purchases is dependent upon many factors, including their price, FTX's
financial condition and general economic and market factors.
Net cash provided by continuing operations during the first six
months of 1996 declined to $101.4 million, compared with $130.3
million in the 1995 period (excludes $138.6 million from discontinued
operations), primarily caused by the increase in FRP's product
inventories. Net cash used in investing activities was $13.6 million
compared with $16.9 million in the 1995 period (excludes $308.1
million from discontinued operations). Capital expenditures for 1996,
including amounts associated with the North Bay Junop/East Fiddler's
Lake oil and gas exploration area, are currently estimated to
approximate $45 million. Net cash used in financing activities
totaled $104.0 million in the 1996 period compared with net cash
generated of $60.7 million in the 1995 period. Net debt borrowings
(including debt offerings and infrastructure sales) totaled $24.1
million in the 1996 period compared with repayments totaling $131.9
million in the 1995 period, with the 1995 period including net
proceeds of $447.0 million from the sale of Freeport-McMoRan Copper &
Gold Inc. (FCX) Class A common shares as part of FTX's restructuring
activities. During the first six months of 1996, equity purchases
totaled $59.0 million, acquiring approximately 1.6 million of its
common shares for an aggregate $57.7 million and 63,200 FRP units for
an aggregate $1.3 million. During the 1995 period, equity purchases
totaled $126.1 million, consisting of 0.7 million of its common shares
for $12.3 million, 2.8 million FCX Class A common shares for $111.7
million and 137,500 FRP units for $2.1 million.
--------------------------------
The results of operations reported and summarized above are not
necessarily indicative of future operating results.
FREEPORT-McMoRan INC.
PART II. Other Information
Item 1. Legal Proceedings.
Tom Beanal v. Freeport-McMoRan Inc. and Freeport-McMoRan Copper & Gold
Inc., Civ. No. 96-1474 (E.D. La. filed Apr. 29, 1996) and Yosefa
Alomang v. Freeport-McMoRan Inc. and Freeport-McMoRan Copper & Gold
Inc., Civ. No. 96-9962 (Orleans Civ. Dist. Ct. La. filed June 19,
1996) and Civ. No. 96-2139 (E.D. La. removed June 24, 1996).
In both actions, the plaintiffs allege substantially
identical environmental, human rights and social/cultural violations
in Indonesia. Tom Beanal seeks $6 billion in monetary damages and
other equity relief and Yosefa Alomang seeks unspecified monetary
damages and other equitable relief. The registrant denies the
allegations, which have been refuted by a series of independent
examinations of the Indonesian mining operations of P.T. Freeport
Indonesia Company. The registrant believes that the actions are
baseless and will vigorously defend such actions.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of Stockholders of the registrant was
held on April 30, 1996 (the Annual Meeting). Proxies for the Annual
Meeting were solicited pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended.
(b) At the Annual Meeting Robert W. Bruce III, Robert A. Day and
Bobby Lee Lackey were elected to serve until the 1999 annual meeting
of stockholders. In addition to the directors elected at the Annual
Meeting, the terms of the following directors continued after the
Annual Meeting: Richard C. Adkerson, Thomas B. Coleman, William B.
Harrison, Jr., Henry A. Kissinger, Rene L. Latiolais, Gabrielle K.
McDonald, James R. Moffett, George Putnam, B. M. Rankin, Jr., J.
Taylor Wharton and Ward W. Woods, Jr.
(c) At the Annual Meeting the stockholders voted to elect three
directors. Set forth below is the number of shares voted for or
withheld from each nominee. There were no abstentions or broker non-
votes with respect to the election of directors.
Name For Withheld
- ------------------- ---------- --------
Robert W. Bruce III 24,557,311 192,040
Robert A. Day 24,551,536 197,815
Bobby Lee Lackey 24,551,827 197,524
At the Annual Meeting, the stockholders also voted on and
approved a proposal to ratify the appointment of Arthur Andersen LLP
as the independent auditors to audit the financial statements of the
registrant and its subsidiaries for the year 1996. Holders of
24,653,261 shares voted for, holders of 51,710 shares voted against
and holders of 44,380 shares abstained from voting on, such proposal.
There were no broker non-votes with respect to such proposal.
At the Annual Meeting the stockholders voted on and approved
a proposal to amend to the registrant's Annual Incentive Plan.
Holders of 23,504,046 shares voted for, 885,546 shares voted against
and holders of 359,759 shares abstained from voting on, such proposal.
There were no broker non-votes with respect to such proposal.
At the Annual Meeting the stockholders voted on and approved
the amendments to the 1992 Long-Term Performance Incentive Plan.
Holders of 23,473,379 shares voted on, holders of 908,677 shares voted
against and holders of 367,295 shares abstained from voting on, such
proposal. There were no broker non-votes with respect to such
proposal.
At the Annual Meeting the stockholders voted on and approved
the registrant's 1996 Stock Option Plan. Holders of 21,879,965 shares
voted on, 2,153,763 shares voted against, and holders of 715,623
shares abstained from voting on, such proposal. There were no broker
non-votes with respect to such proposal.
Item 5. Other Events.
On August 7,1996, the registrant issued a press release
announcing that it had entered into a non-binding letter of intent
with Arcadian Corporation regarding a possible combination of their
businesses into a newly formed corporation. Although it is not a
condition to the combination, it is intended that Freeport-McMoRan
Resource Partners, Limited Partnership (FRP) will be offered an
opportunity to participate in a transaction that would convert the
publicly held limited partnership units of FRP into capital stock of
the new corporation. Copies of the letter of intent and the press
release are filed with this report as Exhibits 99.1 and 99.2,
respectively.
Item 6. Exhibits and Reports on Form 8-K.
(a) The exhibits to this report are listed on the Exhibit Index
appearing on page E-1 hereof.
(b) No reports on Form 8-K have been 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/ William J. Blackwell
------------------------
William J. Blackwell
Controller - Financial Reporting
(authorized signatory and
Principal Accounting Officer)
Date: August 9, 1996
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
99.1 Press Release dated August 7, 1996
99.2 Letter of Intent between
Freeport-McMoRan Inc. and
Arcadian Corporation
Exhibit 11.1
FREEPORT-McMoRan INC.
COMPUTATION OF NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE
Three Months Six Months
Ended June 30, Ended June 30,
------------------------- ------------------------
1996 1995 1996 1995
---------- ----------- ---------- ----------
(In Thousands, Except Per Share Amounts)
Primary:
Net income applicable
to common stock $12,126 $265,485 $32,255 $284,876
========== =========== ========== ==========
Average common shares
outstanding 26,806 24,487 27,029 23,636
Common stock equivalents:
Stock options 339 150 383 117
---------- ---------- ---------- ----------
Common and common equivalent
shares 27,145 24,637 27,412 23,753
========== ========== ========== ==========
Net income per common and common
equivalent share $0.45 $10.78 $1.18 $11.99
===== ====== ===== ======
Fully diluted:
Net income applicable to
common stock:
Net income $12,126 $265,485 $32,255 $284,876
Plus preferred dividends - 1,096 - 6,564
Plus interest, net of tax
effect, on convertible
subordinated debentures - 6,707 - 15,921
---------- ----------- ---------- ----------
Net income applicable to
common stock $12,126 $273,288 $32,255 $307,361
========== =========== ========== ==========
Average common shares
outstanding 26,806 24,487 27,029 23,636
Common stock equivalents:
Stock options 339 155 383 119
Convertible securities:
Preferred stock - 393 - 1,176
Convertible subordinated
debentures - 4,525 - 4,707
---------- ----------- ---------- ----------
Common and common
equivalent shares 27,145 29,560 27,412 29,638
========== =========== ========== ==========
Net income per common and common
equivalent share $0.45 $9.25 $1.18 $10.37
===== ===== ===== ======
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Freeport-McMoRan Inc. financial statements at June 30, 1996 and 1995
and for the 6 month periods then ended, and is qualified in its entirety
by reference to such financial statements. Additionally, the 1995
amounts have been restated.
</LEGEND>
<RESTATED>
<CIK> 0000351116
<NAME> FREEPORT-MCMORAN INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> JUN-30-1996 JUN-30-1995
<CASH> 7,339 31,484
<SECURITIES> 0 0
<RECEIVABLES> 65,476 42,212
<ALLOWANCES> 0 0
<INVENTORY> 136,654 105,800
<CURRENT-ASSETS> 242,433 321,745
<PP&E> 1,942,362 1,962,906
<DEPRECIATION> 967,932 974,392
<TOTAL-ASSETS> 1,269,222 1,698,632
<CURRENT-LIABILITIES> 149,232 199,339
<BONDS> 385,695 491,409
0 0
50,084 50,084
<COMMON> 340 197,862
<OTHER-SE> 114,004 144,748
<TOTAL-LIABILITY-AND-EQUITY> 1,269,222 1,698,632
<SALES> 499,620 487,877
<TOTAL-REVENUES> 499,620 487,877
<CGS> 363,328 359,838
<TOTAL-COSTS> 363,328 359,838
<OTHER-EXPENSES> (11,917) 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 16,438 31,230
<INCOME-PRETAX> 101,086 66,479
<INCOME-TAX> 18,899 6,557
<INCOME-CONTINUING> 34,446 9,511
<DISCONTINUED> 0 315,457
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 34,446 324,968
<EPS-PRIMARY> 1.18 11.99
<EPS-DILUTED> 1.18 10.37
</TABLE>
Exhibit 99.1
FREEPORT-McMoRan INC. AND ARCADIAN CORPORATION
ANNOUNCE BUSINESS COMBINATION
NEW ORLEANS, LA. and MEMPHIS, TN., August 7, 1996 --
Freeport-McMoRan Inc. (NYSE:FTX) and Arcadian Corporation (NYSE:
ACA; ACA PRA) announced today that they have signed a non-binding
letter of intent for the combination of their businesses into a
newly formed corporation, pursuant to which it is contemplated
that (i) the outstanding common stock of FTX and Arcadian would
be converted into common stock of the new company, (ii) the new
company would become the ultimate parent corporation of FTX and
Arcadian, and (iii) FTX and Arcadian would become wholly-owned
direct or indirect subsidiaries of the new company. Although it
is not a condition to the combination, it is also intended that
Freeport-McMoRan Resource Partners, Limited Partnership
(NYSE:FRP) will be offered an opportunity to participate in a
transaction that would convert the publicly held limited
partnership units of FRP into capital stock of the new company.
An application will be made to list the common stock of the new
company on the New York Stock Exchange, and its aggregate market
value would be approximately $3 billion based on current trading
prices and assuming that FRP public unitholders elect to
participate in the transaction.
In the proposed combination, each share of common stock of
FTX would be exchanged for one share of the new company's common
stock, and each share of common stock of Arcadian would be
exchanged for 0.658 shares of the new company's common stock.
FTX's common stock closed yesterday at $36.50 per share, and
Arcadian's common stock closed yesterday at $20.625 per share.
In addition, each share of Arcadian's Mandatorily Convertible
Preferred Stock, Series A, outstanding immediately prior to the
combination would be converted into one share of a newly created
Mandatorily Convertible Preferred Stock of the new company with
substantially equivalent rights and preferences as the Arcadian
stock, except that it would be convertible into up to 0.658
shares of the new company's common stock. In the proposed
transaction with FRP, each public limited partnership unit would
be converted into capital stock of the new company at a
conversion rate to be agreed upon by FTX, FRP and Arcadian, and
approved by a vote of the FRP public unitholders. The
transactions are expected to be tax-free to FTX, Arcadian and FRP
as well as to the shareholders of Arcadian and FTX and the public
unitholders of FRP.
James R. Moffett, Chairman of the Board of Freeport-McMoRan
Inc. said: "The combination of Freeport-McMoRan and Arcadian
would create an enterprise with over $2 billion in estimated
consolidated annual revenues, over $500 million of estimated
consolidated annual operating cash flow (including the revenues
and cash flow attributable to FRP) and a very strong capital
structure, which would be an industry leader in its current
operations and an aggressive participant in worldwide
agricultural mineral opportunities." The reporting of these
amounts on a consolidated basis is consistent with FTX's
historical presentation.
William A. McMinn, Chairman of the Board of Arcadian
Corporation said: "This proposed transaction would combine
leading participants in two of the three major fertilizer
nutrients. Freeport-McMoRan's leadership role in phosphates
through IMC-Agrico, and Arcadian's position as the largest
producer and marketer of nitrogen fertilizers and chemicals in
the Western Hemisphere would create a unique platform to
participate in the world's expanding needs for fertilizer inputs
which make efficient food production possible."
Rene L. Latiolais, Chief Executive Officer of Freeport-
McMoRan Inc. and Freeport-McMoRan Resource Partners said: "This
transaction, if approved by FRP public unitholders, would
simplify the corporate structure of Freeport-McMoRan while
allowing the FRP public unitholders an enhanced opportunity to
participate in the growing demand for crop nutrients brought on
by the worldwide agricultural revolution."
Among other required conditions contained in the letter of
intent, the proposed combination of FTX and Arcadian is subject
to the negotiation and execution of a definitive merger agreement
(which would include customary conditions to closing), completion
of due diligence, approval of the Boards of Directors of
Freeport-McMoRan Inc. and Arcadian Corporation, approval by the
shareholders of Arcadian Corporation and Freeport-McMoRan Inc.,
and approval under the Hart-Scott-Rodino Anti-Trust Improvements
Act. Completion of the combination is also subject to such
rights as IMC Global, Inc. (NYSE:IGL) may have to participate in
the transaction under its partnership agreement with FRP
governing their IMC-Agrico Company joint venture. The proposed
transaction with FRP would also be subject to approval of a
special committee of the FTX Board of Directors representing the
interests of FRP public unitholders and to a vote of those
unitholders. The companies intend to complete the definitive
agreement in approximately 30 days.
The terms of the transaction , including the offering of the
new company's shares, will be set forth by means of a joint proxy
statement/prospectus.
Arcadian Corporation is the largest producer and marketer of
nitrogen fertilizers and chemicals in the Western Hemisphere.
Freeport-McMoRan Inc. owns a 51.6% interest in Freeport-
McMoRan Resource Partners, which is engaged in the production and
sale of phosphate fertilizers and animal feed ingredients as well
as the mining and sale of phosphate rock through IMC-Agrico
Company; the mining, transporting, terminalling and marketing of
sulphur and the development and production of oil and gas
reserves.
Exhibit 99.2
August 5, 1996
Arcadian Corporation
6750 Poplar Avenue, Suite 600
Memphis, Tennessee 38138-7419
Attention: Mr. William A. McMinn
Chairman of the Board
Re: Business Combination of Arcadian Corporation
and Freeport-McMoRan Inc.
Gentlemen:
This Letter of Intent, when executed by you, will constitute
a non-binding statement of the intention of Arcadian Corporation
("Arcadian") and Freeport-McMoRan Inc. ("Freeport") concerning
the proposed combination (the "Combination") of the businesses of
Arcadian and Freeport into a newly-formed corporation ("Newco"),
pursuant to which it is contemplated that (i) the outstanding
capital stock of Arcadian and Freeport will be converted into
capital stock of Newco, (ii) Newco will become the ultimate
parent corporation of Arcadian and Freeport, and (iii) Arcadian
and Freeport will become wholly-owned direct or indirect
subsidiaries of Newco. It is also intended that, while not a
condition to the Combination, Freeport will provide to Freeport-
McMoRan Resource Partners, Limited Partnership ("FRP") an
opportunity to participate in a transaction that would convert
the publicly-held limited partnership units of FRP into common
stock of Newco.
There will be a period (the "Negotiation Period") commencing
on the date of this Letter of Intent and ending one month
thereafter during which (i) each of the parties will complete its
due diligence and evaluation of the other party and of FRP and
(ii) the parties will use their reasonable good faith efforts to
negotiate a mutually acceptable definitive agreement to implement
the Combination. During the Negotiation Period and thereafter
until two weeks following receipt by Arcadian or Freeport of
written notice from the other that the notifying party has
terminated this Letter of Intent, neither Arcadian nor Freeport
shall, directly or indirectly, through any director, officer,
employee, affiliate, or other representative, solicit, encourage,
Arcadian Corporation
August 5, 1996
Page 2
furnish any information concerning, participate in negotiations
or discussions concerning, consider, entertain, accept or
consummate any proposal of any person relating to the acquisition
of its business in whole or in part, whether through the purchase
of assets or stock, or through a merger, consolidation, share
exchange or otherwise; provided, however that the foregoing
limitation shall not apply to Freeport's discussions with IMC
Global, Inc. regarding any role that IMC Global may play in the
Combination; and provided further that the foregoing limitation
shall not apply to Arcadian or Freeport if, in the good faith
judgment of its Board of Directors after consultation with legal
counsel and financial advisors, compliance with such limitation
would not be prudent in view of such directors' duties under
applicable law. During the Negotiation Period, Arcadian and
Freeport will consult with each other and use their good faith
efforts to agree upon the form and substance of all public
statements or announcements with respect to the Combination
(except that, after such consultation, either Arcadian or
Freeport may make such statements as it in good faith deems to be
required by applicable law, stock exchange rules or otherwise).
Either party may terminate this Letter of Intent at any time by
written notice to the other party, and upon such termination
(except as stated above), neither party shall have any obligation
with respect to the Combination hereunder or otherwise or any
liability to the other party hereunder or relating in any way to
the proposed Combination.
The definitive agreement will, among other things, provide:
1. That the Combination will constitute a tax-free
transfer to a controlled corporation under Section 351 and/or a
reorganization under Section 368 of the Internal Revenue Code of
1986, as amended. Subject to the conditions set forth below, in
the Combination (i) each outstanding share of common stock of
Arcadian (including shares of common stock resulting from the
exercise of the Holders' Opt-Out Right as described in Arcadian's
Certificate of Incorporation) shall be converted into 0.658
shares of common stock of Newco, (ii) each outstanding share of
common stock of Freeport shall be converted into one share of
common stock of Newco, (iii) each outstanding share of Arcadian's
Mandatorily Convertible Preferred Stock, Series A will be
converted into one share of Mandatorily Convertible Preferred
Stock of Newco containing substantially equivalent terms and
privileges as the Arcadian issue, except that such shares will be
convertible into 0.658 shares of Newco common stock (subject to
adjustment as set forth in Arcadian's Certificate of
Incorporation), and (iv) appropriate mutually agreeable
provisions will be made for Arcadian's and Freeport's outstanding
options, warrants, SARS and other similar rights.
2. For representations, warranties and covenants
acceptable to Arcadian and Freeport, concerning, among other
things, the organization, business, and financial condition of,
Arcadian Corporation
August 5, 1996
Page 3
and litigation affecting, Arcadian and Freeport and, if the
parties so agree, appropriate provisions governing fiduciary
responsibilities, termination fees and voting arrangements. Such
representations and warranties will not survive the closing of
the Combination.
3. That the closing of the Combination shall be subject
to, among other things: (a) board of directors' approvals by each
of Freeport and Arcadian; (b) requisite approval by the
stockholders of Freeport and Arcadian; (c) the completion of
appropriate filings under the Hart-Scott-Rodino Antitrust
Improvements Act and the expiration or termination of all
applicable waiting periods thereunder; and (d) the obtaining of
all other necessary governmental and third party consents and
approvals.
While not a condition to the Combination, it is the intent
of the parties that Newco will provide to FRP an opportunity to
participate in a transaction that would convert the publicly-held
limited partnership units of FRP into common stock of Newco at a
conversion rate that is satisfactory to Freeport, Arcadian and
FRP. In its capacity as Administrative Managing General Partner
of FRP, Freeport will appoint a special committee of its Board of
Directors to act on behalf of the holders of limited partnership
units of FRP and will authorize such committee to engage
independent financial advisors and counsel to assist such
committee in evaluating the proposed transaction.
Please confirm that this letter accurately sets forth our
mutual understanding by executing two copies of this letter and
returning a fully executed copy to Freeport. It is recognized
that the definitive agreement will include terms, provisions,
conditions, representations and warranties in addition to and in
modification of those discussed above. It is our expectation
that the parties would enter into a definitive agreement within
one month after your execution and return of this letter, that
the stockholders' meetings of Arcadian and Freeport will be held
as soon as practicable thereafter and that the closing will take
place as soon as practicable after such meetings.
Except for the obligations of Arcadian and Freeport set
forth in the second and third sentences of the second paragraph
of this letter, this letter shall not be deemed to be a binding
agreement and shall create no legal obligation on the part of
Freeport, Arcadian or any of their respective officers,
directors, employees, agents or affiliates. Any such agreement
or obligation shall be created solely by a written, executed and
delivered definitive agreement.
Arcadian Corporation
August 5, 1996
Page 4
If the foregoing is in accordance with your understanding,
kindly execute and return the enclosed copy of this letter as
provided above.
Very truly yours,
FREEPORT-MCMORAN INC.
By: /s/James R. Moffett
--------------------
James R. Moffett
Chairman of the Board
Confirmed:
ARCADIAN CORPORATION
By: /s/William A. McMinn
--------------------
William A. McMinn
Chairman of the Board
