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, 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 March 31, 1996, there were issued and outstanding 27,091,464 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 6
Management's Discussion and
Analysis of Financial
Condition and Results
of Operations 7
Part II. Other Information 11
Signature 12
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,
1996 1995
---------- ----------
(In Thousands)
ASSETS
Current assets:
Cash and short-term investments $ 24,005 $ 23,496
Accounts receivable 83,405 100,994
Inventories 134,399 119,010
Prepaid expenses and other 2,555 4,499
---------- ----------
Total current assets 244,364 247,999
Property, plant and
equipment, net 983,715 999,840
Other assets 59,544 72,631
---------- ----------
Total assets $1,287,623 $1,320,470
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and
accrued liabilities $ 161,012 $ 180,766
Long-term debt, less
current portion 379,101 359,501
Accrued postretirement
benefits and pension costs 167,949 170,542
Reclamation and mine
shutdown reserves 121,852 128,981
Other liabilities and
deferred credits 82,271 92,722
Minority interest 193,629 196,021
Stockholders' equity 181,809 191,937
---------- ----------
Total liabilities and
stockholders' equity $1,287,623 $1,320,470
========== ==========
The accompanying notes are an integral part of these financial
statements.
FREEPORT-McMoRan INC.
STATEMENTS OF INCOME (Unaudited)
Three Months Ended
March 31,
------------------------
1996 1995
---------- ----------
(In Thousands, Except
Per Share Amounts)
Revenues $ 256,827 $ 254,479
Cost of sales:
Production and delivery 169,948 172,502
Depreciation and amortization 11,422 14,340
---------- ----------
Total cost of sales 181,370 186,842
Gain on IMC-Agrico investment (11,917) -
General and
administrative expenses 17,635 17,763
---------- ----------
Total costs and expenses 187,088 204,605
---------- ----------
Operating income 69,739 49,874
Interest expense, net (8,025) (15,711)
Other income (expense), net 748 211
---------- ----------
Income before minority
interest and income taxes 62,462 34,374
Minority interest in net income
of consolidated subsidiaries (29,102) (31,284)
Income tax provision (12,135) (840)
---------- ----------
Income from continuing operations 21,225 2,250
Discontinued operations - 22,610
---------- ----------
Net income 21,225 24,860
Preferred dividends (1,096) (5,469)
---------- ----------
Net income applicable to
common stock $ 20,129 $ 19,391
========== ==========
Net income per primary share:
Continuing operations $.77 $.10
Discontinued operations - .99
Preferred dividends (.04) (.24)
---- ----
$.73 $.85
==== ====
Net income per fully diluted share:
Continuing operations $.72 $.10
Discontinued operations - .99
Preferred dividends - (.24)
---- ----
$.72 $.85
==== ====
Average common and common equivalent shares outstanding:
Primary 27,577 22,888
====== ======
Fully diluted 29,417 22,888
====== ======
Dividends per common share:
Cash $.09 $ -
Property - 1.56
---- -----
$.09 $1.56
==== =====
The accompanying notes are an integral part of these financial
statements.
FREEPORT-McMoRan INC.
STATEMENTS OF CASH FLOW (Unaudited)
Three Months Ended
March 31,
------------------------
1996 1995
---------- ----------
(In Thousands)
Cash flow from operating activities:
Net income $ 21,225 $ 24,860
Adjustments to reconcile
net income to net cash provided by
operating activities:
Depreciation and amortization 11,497 37,008
Gain on IMC-Agrico investment (11,917) -
Recognition of unearned income (1,092) (36,207)
Amortization of debt discount
and financing costs 463 8,544
Deferred income taxes 9,135 11,875
Minority interests' share
of net income 29,102 70,740
Cash distribution from
IMC-Agrico in excess of
interest in capital 11,777 12,800
Reclamation and mine
shutdown expenditures (2,411) (2,121)
(Increase) decrease in
working capital, net of
effect of acquisitions
and distributions:
Accounts receivable 21,907 35,289
Inventories (15,389) 7,633
Prepaid expenses and other 1,941 352
Accounts payable and accrued
liabilities (22,556) (28,899)
Other (861) 3,487
---------- ----------
Net cash provided by
operating activities 52,821 145,361
---------- ----------
Cash flow from investing activities:
Capital expenditures:
FRP (7,501) (6,367)
FCX - (168,952)
Other (1,058) (2,742)
Sale of assets 4,000 -
---------- ----------
Net cash used in investing
activities (4,559) (178,061)
---------- ----------
Cash flow from financing activities:
Purchase of FTX common shares (30,084) (12,317)
Purchase of FRP units (924) (2,061)
Purchase of FCX Class A
common shares - (58,906)
Distributions paid to minority interests:
FRP (31,337) (30,239)
FCX - (30,032)
Proceeds from (repayments of)
debt, net (130,400) 180,089
Proceeds from sale of FRP
7% Senior Notes 147,831 -
Cash dividends paid:
Common stock (2,400) -
Preferred stock (1,096) (5,469)
Other 657 1,180
---------- ----------
Net cash provided by (used in)
financing activities (47,753) 42,245
---------- ----------
Net increase in cash and
short-term investments 509 9,545
Net decrease attributable
to discontinued operations - 9,944
Cash and short-term investments
at beginning of year 23,496 13,810
---------- ----------
Cash and short-term investments
at end of period $ 24,005 $ 33,299
========== ==========
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 March 31, 1996 follows (in thousands):
Cash and short-term investments $ 98
Note receivable from FRP 11,400
Other current assets 16,617
Property, plant and
equipment, net 43,315
Investment in FRP 209,583
Other assets 8,596
--------
Total assets $289,609
========
Accounts payable and
accrued liabilities $ 39,286
Long-term debt -
Other liabilities and
deferred credits 68,514
Stockholders' equity 181,809
--------
Total liabilities and
stockholders' equity $289,609
========
2. LONG-TERM DEBT
In February 1996, Freeport-McMoRan Resource Partners, Limited
Partnership (FRP) sold $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
FTX/FRP's credit facility was reduced from $400 million to $300
million, $75 million of which is available to FTX. As of March 31,
1996, $240 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 resulting from the increased
share of IMC-Agrico's net assets.
-----------------
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.
RESULTS OF OPERATIONS
First Quarter
-------------------
1996 1995
------- -------
(In Millions, Except
Per Share Amounts)
Revenues $256.8 $254.5
Operating income 69.7 49.9
Income from continuing
operations 21.2 2.3
Discontinued operations - 22.6
Preferred dividends (1.1) (5.5)
------ ------
Net income to common
stock $ 20.1 $ 19.4
====== ======
Freeport-McMoRan Inc. (FTX) operates primarily through its 51.6
percent interest in Freeport-McMoRan Resource Partners, Limited
Partnership (FRP). Operating results for the first quarter of 1996
benefited from higher earnings by FRP's agricultural minerals and oil
operations. The improvement in earnings was caused by an increase in
average phosphate fertilizer and oil realizations from their 1995
period levels. Additionally, FRP recognized an $11.9 million gain
resulting from the increase in FRP's ownership of IMC-Agrico Company
(Note 3). Partially offsetting these positive factors were lower
sales volumes for each of FRP's products and charges totaling $3.0
million representing miscellaneous asset valuations at IMC-Agrico.
Depreciation and amortization for the 1996 quarter decreased $2.9
million from the 1995 period amount, primarily attributable to a $2.3
million decline related to FRP's disproportionate interest in the IMC-
Agrico joint venture cash distributions and a $1.1 million reduction
from Main Pass oil operations caused by the decline in sales volumes
between periods. These decreases were partially offset by
depreciation totaling $0.6 million associated with the Mallinckrodt
animal feed ingredients operations purchase in October 1995.
First-quarter 1996 general and administrative expenses decreased
slightly from the 1995 quarter amount. Costs of stock appreciation
rights, caused by the increase in the FTX common stock price during
the periods, totaled $2.0 million in the 1996 quarter versus $2.2
million in the 1995 quarter. The 1996 quarter also includes the
Mallinckrodt operations, whereas the 1995 period included a $1.2
million charge for the reorganization of IMC-Agrico's marketing
function.
Interest expense for the 1996 period decreased $7.7 million from
the year-ago amount as a result of the elimination of FTX's parent
company debt in connection with its 1995 recapitalization efforts.
Minority interest's share of net income represents the FRP public
unitholders' pro rata share of FRP earnings, with the 1996 quarter
including a $1.2 million gain and the 1995 quarter including an $8.8
million charge resulting from a disproportionate share of FRP
distributions received by FTX during the periods. 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.
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 first-quarter 1996 operating income of $76.2 million on
revenues of $247.2 million compared with operating income of $55.4
million on revenues of $244.7 million for the 1995 period. Significant
items impacting operating income are as follows (in millions):
Agricultural minerals operating income -1995 $ 55.4
------
Increases (decreases):
Sales volumes (37.3)
Realizations 43.1
Other (3.3)
------
Revenue variance 2.5
Cost of sales 4.4a
Gain on IMC-Agrico investment 11.9
General and administrative 2.0
------
20.8
------
Agricultural minerals operating income -1996 $ 76.2
======
a. Includes a reduction to depreciation of $7.1 million and $4.8
million for the first quarter of 1996 and 1995, respectively, caused
by FRP's disproportionate interest in IMC-Agrico cash distributions.
First-quarter 1996 also includes $3.0 million of asset valuation
charges from IMC-Agrico.
FRP's first-quarter 1996 phosphate fertilizer sales volumes were
12 percent lower than those in the 1995 period, as IMC-Agrico
experienced reduced demand for diammonium phosphate (DAP), its
principal fertilizer product. Although IMC-Agrico's export sales
continued strong because of its 1996 sales agreement with China,
domestic sales declined as dealers, whose inventories were sufficient
for the start of the cooler than normal spring season, delayed
purchases. This decline in demand prompted IMC-Agrico to temporarily
idle its Taft, Louisiana phosphate fertilizer facility in mid-March
and reduce DAP production at its New Wales, Florida facility in mid-
April to manage its increasing product inventory. Although fertilizer
prices weakened late in the first quarter of 1996, FRP's average DAP
realization for the current quarter increased 22 percent from year-ago
levels resulting in improved cash margins. The price improvement was
primarily the result of the tight supply/demand situation experienced
during late 1995 that moved prices higher into early 1996.
Additionally, because of a change in contract terms, FRP's 1996 DAP
sales included large volumes to China at market-related prices at the
time of shipment, whereas contracted sales to China in 1995 were made
at prices which ultimately were below market at the time of shipment.
FRP's phosphate fertilizer unit production costs were higher than in
the 1995 period, primarily reflecting increased costs for phosphate
rock.
Near-term sales volumes are expected to be seasonally strong as
U.S. farmers begin planting. Record high grain prices combined with
higher planted acreage should yield above normal product movement to
the field during the second quarter. Fertilizer prices for the
balance of the year will depend on developments during the growing
season and the level of demand in export markets. The long-term
fundamental market outlook remains favorable considering record low
global grain stocks and higher commodity prices. As a result, global
phosphate fertilizer demand is expected to continue to increase.
FRP's current quarter phosphate rock sales volumes declined 44
percent primarily reflecting the previously reported October 1995
expiration of a contract providing annual sales of 1.5 million tons
net to FRP. Because the expired contract was priced on a cost-plus
formula that resulted in below market realizations, the impact to
earnings was not significant and caused a 24 percent increase in
first-quarter 1996 average realizations. Also contributing to the
reduction in sales volumes were lower sales in the export market.
Phosphate rock sales volumes are expected to decline further,
beginning in the second half of 1996, as IMC-Agrico does not intend to
renew certain long-term sales contracts as they expire in order to
maximize the value of its phosphate rock reserves through internal
use.
FRP's first-quarter 1996 sulphur sales volumes declined slightly
from the 1995 quarter level, which benefited from reduced domestic
recovered sulphur production. FRP's sulphur realizations rose
slightly from the year-ago period. FRP reduced its sulphur production
in mid-March by approximately 0.2 million tons annually in response to
prospects for lower domestic sulphur demand from phosphate fertilizer
producers. FRP's future sulphur sales volumes and realizations will
continue to depend on the level of demand from the domestic phosphate
fertilizer industry and the supply of recovered sulphur.
First Quarter
------------------------------
1996 1995
---------- ----------
Phosphate fertilizers -primarily DAP
Sales (short tons) a 790,000 899,900
Average realized price b
All phosphate fertilizers $197.08 $163.80
DAP 205.56 169.18
Phosphate rock
Sales (short tons) a 751,800 1,338,700
Average realized price b $26.28 $21.12
Sulphur
Sales (long tons) c 738,100 760,600
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 186,000 tons and 178,900
tons for the first quarter of 1996 and 1995, respectively.
Oil Operation -
First Quarter
-------------------
1996 1995
------- -------
Sales (barrels) 542,200 620,800
Average realized price $17.45 $15.36
Operating income (in millions) $2.2 $1.1
Main Pass oil production declined from the 1995 period, although
improving slightly from the previous quarter. Net production for 1996
is expected to be slightly lower than 1995 levels. Main Pass
operating income benefited from a $2.09 per barrel increase in average
realizations caused by a similar rise in world market prices.
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 April 19, 1996, FRP declared a distribution of 61
cents per publicly held unit ($30.6 million) and 63 cents per FTX-
owned unit ($33.6 million), payable May 15, 1996, reducing the unpaid
distributions to FTX by $1.0 million. The remaining $378.9 million of
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 and cash flow from FRP's
sulphur and oil operations. Distributable cash in April 1996 included
$69.3 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 presently 53.95 percent through June 30, 1996, changing to 54.35
percent for the twelve months ended June 30, 1997 and declining 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 yearend
financial statements. FTX anticipates that its cash distributions
from FRP and amounts available to it 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 ($225 million of
additional borrowings available at April 19, 1996), $75 million of
which is available to FTX. In August 1995, the FTX Board of Directors
established a new dividend policy for FTX common stock, declaring a
regular quarterly cash dividend of 9 cents per common share. The new
dividend policy allows FTX to use additional available funds to
purchase FTX stock, purchase FRP units and/or invest in new growth
opportunities. The timing of 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 three
months of 1996 declined to $52.8 million, compared with $61.8 million
in the 1995 period (excludes $83.6 million from discontinued
operations), primarily caused by the increase in FRP's product
inventories discussed earlier. Net cash used in investing activities
was $4.6 million compared with $9.1 million in the 1995 quarter
(excludes $169.0 million from discontinued operations). Based on
current estimates, capital expenditures for 1996 will approximate $40
million. Net cash used in financing activities totaled $47.8 million
in the 1996 period compared with cash generated totaling $42.2 million
in the 1995 period. Net debt borrowings (including debt offerings and
infrastructure sales) totaled $17.4 million in the 1996 quarter
compared with $180.1 million in the 1995 period. During the first
three months of 1996, FTX's equity purchases totaled $31.0 million,
acquiring 0.8 million of its common shares for an aggregate $30.1
million and 43,200 FRP units for an aggregate $0.9 million. During the
1995 period, FTX's equity purchases totaled $73.3 million, consisting
of 0.1 million of its common shares for $12.3 million, 2.8 million FCX
Class A common shares for $58.9 million and 137,000 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 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) No reports on Form 8-K were filed by the registrant during
the quarter for which this report is filed.
FREEPORT-McMoRan INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
FREEPORT-McMoRan INC.
By: /s/ Charles W. Goodyear
-----------------------
Charles W. Goodyear
Executive Vice President and
Chief Financial Officer
(authorized signatory and
Principal Accounting Officer)
Date: April 26, 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
EXHIBIT 11.1
FREEPORT-McMoRan INC.
COMPUTATION OF NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE
Three Months Ended March 31,
--------------------------------
1996 1995
----------- -----------
(In Thousands, Except Per Share Amounts)
Primary:
Net income applicable
to common stock $ 20,129 $ 19,391
=========== ===========
Average common shares outstanding 27,253 22,805
Common stock equivalents:
Stock options 324 83
---------- ----------
Common and common equivalent shares 27,577 22,888
========== ==========
Net income per common and
common equivalent share $0.73 $0.85
===== =====
Fully diluted:
Net income applicable to common stock:
Net income $ 20,129 $ 19,391
Plus preferred dividends 1,096 -
Plus interest, net of tax effect,
on convertible subordinated
debentures - -
----------- -----------
Net income applicable
to common stock $ 21,225 $ 19,391
=========== ===========
Average common shares outstanding 27,253 22,805
Common stock equivalents:
Stock options 333 83
Convertible securities:
Preferred stock 1,831 -
Convertible subordinated debentures - -
---------- ----------
Common and common equivalent shares 29,417 22,888
========== ==========
Net income per common and
common equivalent share $0.72 $0.85
===== =====
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Freeport-McMoRan Inc. financial statements at March 31, 1996 and 1995
and for the 3 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> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> MAR-31-1996 MAR-31-1995
<CASH> 24,005 33,299
<SECURITIES> 0 0
<RECEIVABLES> 53,495 42,787
<ALLOWANCES> 0 0
<INVENTORY> 134,399 108,339
<CURRENT-ASSETS> 244,364 261,226
<PP&E> 1,941,065 1,964,080
<DEPRECIATION> 957,350 958,411
<TOTAL-ASSETS> 1,287,623 1,770,666
<CURRENT-LIABILITIES> 161,012 167,166
<BONDS> 379,101 1,220,361
0 0
50,084 250,000
<COMMON> 339 166,456
<OTHER-SE> 131,386 (671,857)
<TOTAL-LIABILITY-AND-EQUITY> 1,287,623 1,770,666
<SALES> 256,827 254,479
<TOTAL-REVENUES> 256,827 254,479
<CGS> 181,370 186,842
<TOTAL-COSTS> 181,370 186,842
<OTHER-EXPENSES> (11,917) 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 8,025 15,711
<INCOME-PRETAX> 62,462 34,374
<INCOME-TAX> 12,135 840
<INCOME-CONTINUING> 21,225 2,250
<DISCONTINUED> 0 22,610
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 21,225 24,860
<EPS-PRIMARY> .73 .85
<EPS-DILUTED> .72 .85
</TABLE>
