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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
1993 FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993 Commission file number 1-164
ASARCO Incorporated
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(Exact name of registrant as specified in its charter)
New Jersey 13-4924440
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
180 Maiden Lane, New York, N. Y. 10038
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 510-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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Name of each exchange on
Title of each class which registered
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Common Stock, without par value New York Stock Exchange
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 _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
As of March 16, 1994, there were of record 41,800,237 shares of Common Stock,
without par value, outstanding, and the aggregate market value of the shares of
Common Stock (based upon the closing price of Asarco Common Stock on the New
York Stock Exchange - Composite Transactions) of ASARCO Incorporated held by
nonaffiliates was approximately $1,108 million.
PORTIONS OF THE FOLLOWING DOCUMENTS ARE INCORPORATED BY REFERENCE:
Part III: Proxy statement in connection with the Annual Meeting to be held
on April 27, 1994.
Part IV: Exhibit index is on pages D1 through D3.
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A1
PART I
ITEM 1. BUSINESS
Asarco, a New Jersey corporation organized in 1899, is one of the world's
leading producers of nonferrous metals, principally copper, lead, zinc, silver
and gold. Asarco also produces specialty chemicals, minerals and provides
environmental services. Asarco has substantial interests in three mining
companies; a 17.2% stake in M.I.M. Holdings Limited (MIM) in Australia, a 52.3%
interest in Southern Peru Copper Corporation (SPCC) and a 28.3% holding in
Mexico Desarrollo Industrial Minero, S.A. de C.V. (MEDIMSA).
Asarco or its associated companies operate mines in the United States,
Australia, Mexico and Peru. Asarco and its associated companies together in
1993 accounted for about 13% of western world mine production of copper, 13% of
silver, 22% of lead and 13% of zinc.
All tonnages are expressed in short tons. All ounces are troy ounces. Dollar
amounts are expressed in U.S. dollars unless otherwise indicated. "Asarco" or
"the Company" includes Asarco and its consolidated subsidiaries.
Reference is made to the following Financial Statement footnotes included in
this report: Acquisitions on page A40, Investments on pages A40 through A43, and
Business Segments on pages A49 through A51.
Additional business information follows:
PRIMARY METALS
PRINCIPAL PRODUCTS AND MARKETS
COPPER
The primary domestic uses of copper are in the building and construction
industry, electrical and electronic products and, to a lesser extent, industrial
machinery and equipment, consumer and general products and transportation. A
substantial portion of Asarco's copper sales are made under annual contracts to
industrial users. In the second quarter of 1993, the Company was reorganized to
bring under common management all of the Company's copper properties. This
organizational change coincided with the completion of Asarco's copper
modernization and expansion program, begun in 1989. That program raised the
Company's mined copper production sufficiently to fully supply its smelter
capacity. The Company's copper operations are now managed from Tucson, Arizona.
The principal focus of copper operations management's attention in 1993 was to
establish operating goals for all employees, defining what each needed to
accomplish daily for the Company to meet its long-term production and cost
objectives. Today, employees in the copper operations know specifically what is
required of them and improvements in production are becoming increasingly
evident.
The Mission and Ray mines and the Hayden smelter in Arizona, and the El Paso
smelter and the Amarillo refinery in Texas are the Company's principal copper
operating units. Asarco also owns a 49.9% interest in Montana Resources, which
supplies copper concentrates to the Company's smelters, and owns the Silver Bell
mine in Arizona and the Troy mine in Montana, which are temporarily shut down.
Since 1985, the Company has increased its ore reserves eight fold to more than 2
billion tons at the end of 1993. Mine production of 332,600 tons of contained
copper, including electrowon cathodes, in 1993 was five times the 1985 level of
production.
The Ray mine is Asarco's largest copper mine, which can produce 165,000 tons per
year of contained copper. Last year was the first full year of production for
Ray's expanded copper concentrate operation. Concentrate capacity has been
increased by two-thirds at Ray since its acquisition by Asarco in 1986.
Production at the mine was hampered in late 1992 and early 1993 by severe rains
and flooding. Flooding severed the rail line to the Hayden concentrator for
three weeks in the first quarter and disrupted mining operations, resulting in
lost production and added costs totalling $22 million after-tax. While the
severe effect of the rains was overcome by the second quarter, substantial
amounts of water retained in the pit continued to affect operations for the
balance of the year.
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A2
The Ray mine produced 159,300 tons of copper in 1993. Production of copper in
concentrates in 1993 was 122,700 tons which, despite the rain and flooding, was
about the same level of production as in 1992. Production of solvent
extraction/electro-winning (SX/EW) copper in 1993 decreased 13% from 1992 to
36,600 tons of copper in cathodes. This reduction represented both rain-related
production losses and a reduction in the rate at which silicate ore is being
processed. As a result of the reduction in the processing of silicate ore,
future SX/EW production rates will be approximately the same level as 1993
production. Ray's ore reserves at year-end were 1.1 billion tons.
Asarco's Mission mine has more than doubled its capacity since 1985. Asarco
began production at the Mission mine in 1961. Over the last several years the
contiguous Eisenhower and Pima mines were acquired and incorporated into a
single open pit. Production at the Mission Complex in 1993 increased 14% over
1992 to 117,900 tons of copper contained in concentrates. Mission's ore
reserves at year-end were 543 million tons.
Production of copper concentrates from the Ray and Mission mines and Montana
Resources in 1993 fully met the concentrate feed requirements at the Hayden and
newly modernized El Paso smelters.
The Hayden smelter processes copper concentrate from the Mission and the Ray
Mines, using oxygen flash furnace technology. Production of copper in anodes at
Hayden decreased 7% to 194,200 tons in 1993 due to scheduled maintenance during
the first quarter of the year.
The El Paso plant uses a new continuous top-feed oxygen process (CONTOP) to
produce copper in anode. The new system, which expanded smelter capacity from
80,000 to 110,000 tons per year of copper in anode, also improved the sulfur
dioxide recapture rate from 65% to 98%. Sulfur dioxide is recovered and treated
at El Paso's acid plants. The new furnace achieved 90% of design capacity by
year-end, following modifications during a nine month shakedown period.
Although production was affected by the startup, the 272,700 tons of
concentrates smelted at El Paso in 1993 equalled the amount smelted in 1992.
Anode production at El Paso was 15% lower due to lower copper content in
concentrates processed and lower blister and scrap treated. Anodes produced by
the El Paso and Hayden smelters are refined at Asarco's Amarillo refinery, which
produces copper cathodes.
Late in the year, the Amarillo Copper Refinery completed installation and
startup of a new electrolyte purification facility to improve copper quality and
permit the refinery to operate at a higher rate. The facility removes
impurities, principally antimony and bismuth from the electrolyte. Amarillo's
1993 cathode production of 460,000 tons was slightly below that of 1992.
Asarco also processes about half of the output of Montana Resources, in which
the Company has a 49.9% interest. Montana Resources produced 47,200 tons of
copper in concentrates in 1993.
LEAD, ZINC, SILVER AND MINERAL OPERATIONS
The Company's lead, zinc, silver and mineral operations also were integrated
under common management in the second quarter of 1993.
Management's attention was focused principally on spending and production
targets and on fully utilizing existing capacity. Each operation developed
plans identifying the resources needed to meet these targets and specific
responsibilities were established with each employee. Progress toward achieving
these targets is monitored through new reporting techniques developed to track
results and to provide feedback. As a result, operations during the second half
of 1993 improved and became more consistent and predictable. Total Quality
Management programs, emphasizing employee empowerment, were used extensively in
1993 to improve purchasing practices and reduce costs.
LEAD
The primary domestic uses of lead are for automotive and industrial batteries
and, to a lesser extent, for lead oxide for glass, solder and other industrial
users. A substantial portion of Asarco's lead sales are made under annual
contracts to industrial users. Asarco's lead business consists of two quite
distinct operations. In Missouri, the Company operates an integrated lead
circuit consisting of the West Fork and Sweetwater mines which provide over 90%
of the feed for the nearby Glover smelter and refinery. In the west, the
Company operates a custom lead business, processing concentrates for others at
the East Helena smelter and the Omaha refinery. This circuit also is supplied
with
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A3
concentrates from the Company's mine in Leadville, Colorado and the Quiruvilca
mine in Peru.
The West Fork and Sweetwater mines produce lead concentrates and achieved record
concentrate production of 158,900 tons, 16% more than in 1992. Refined
production at the Glover smelter declined 5% to 124,200 tons due to equipment
failures early in the year. During the second half of the year, the consistency
of operations at Glover and production rates improved significantly. The 73,500
tons of refined lead production from the custom lead circuit declined 2% from
1992 due to interruptions of concentrate deliveries from South America early in
the year. These interruptions were eliminated later in 1993 due to changes in
shipping arrangements, resulting in improved production.
ZINC
Zinc is primarily used in the United States to make galvanized metal products,
zinc-based alloys, brass products, zinc oxide, rolled zinc and for other
industrial uses. Zinc is sold in concentrate form under contracts of 1-3 years
duration. Asarco is one of the nation's leading zinc miners producing 61,800
tons of zinc contained in concentrates from its four mines in Tennessee. In
addition, the Sweetwater, West Fork and Leadville mines produced 32,800 tons of
zinc contained in concentrate. The Company sells all of its zinc concentrates
to smelters owned by others.
A failure of the ball mill at the Young mill in July suspended operations at
three of the Tennessee mines for over three months. The production lost was
partially offset by improved zinc production in Missouri. The Company's
Quiruvilca mine in Peru produced 18,600 tons of zinc contained in concentrates.
Total zinc production declined 6%, to 113,200 tons, from the previous year.
SILVER
The principal uses for silver in the United States are for photographic,
electrical and electronic products and, to a lesser extent, brazing alloys and
solder, jewelry, coinage, silverware, catalysts and other miscellaneous uses.
Silver is sold under monthly contracts or in spot sales to industrial users.
While silver is found as a co-product in the ores mined at various Asarco
properties, Asarco put its last major silver-producing mine, the Troy mine, on
standby in April 1993 due to low silver prices. Asarco's two silver mines in
Idaho, Coeur and Galena, also are on standby. Silver production declined 29% in
1993 as a result of these mine closures. While the price of silver rose in 1993
to $4.22 per ounce, from $3.97 per ounce in 1992, it will take higher sustained
silver prices to justify the reopening of the Company's silver mines.
GOLD
The Company's principal gold mining activities have been conducted through
Asarco Australia Limited (Asarco Australia). In mid 1993, Asarco sold a portion
of its previously 60% owned subsidiary and shortly after year-end sold its
remaining interest in Asarco Australia. The results of the final sale will be
recorded in 1994. In the last eight years Asarco has realized over $106 million
in cash from its original investment of $4 million in Asarco Australia.
MINERALS
Sales of American Limestone Company, Asarco's wholly owned construction
aggregate and ready-mixed concrete and agricultural limestone subsidiary, grew
slightly in 1993 due to increased construction activity in its operating area in
the southeastern part of the United States. Earnings, however, remained level
due to increased competition and higher production costs.
SPECIALTY CHEMICALS
Enthone-OMI produces high performance coating technologies for engineering,
functional and decorative applications which it supplies worldwide to the
electronics and metal finishing industries. Earnings improved in 1993 as a
result of the recovery in U.S. chemical sales and continued growth in Asia.
European operations were restructured in mid 1993 in response to sales declines
in that region. This restructuring brought European operations to break-even by
year-end 1993 and places Enthone-OMI in a good position to capitalize on the
expected recovery in European business levels in 1994.
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A4
ENVIRONMENTAL SERVICES
Asarco's Environmental Services business include: Encycle/Texas, Inc. of Corpus
Christi, Texas, Hydrometrics, Inc. of Helena, Montana and Biotrace Laboratories,
Incorporated of Salt Lake City, Utah. Encycle operates a waste recycling
facility in Corpus Christi which recovers and recycles nonferrous metals from
hazardous and nonhazardous inorganic solids and solutions. The recovered metals
are returned to commerce. Hydrometrics, with several offices in the west,
provides a wide range of professional consulting services for industrial
clients, municipalities and public agencies. The construction division of
Hydrometrics provides complete remediation and cleanup services for contaminated
industrial sites as well as Superfund sites. Biotrace specializes in biological
laboratory analysis for trace metals and chemicals. The three companies, while
small, are growing.
ASSOCIATED COMPANIES
Asarco made good progress in 1993 in its efforts to improve the cash returns on
its investments in associated companies.
M.I.M Holdings Limited (MIM) of Australia, in which Asarco has a 17.2% interest,
had net earnings in its latest fiscal year of A$74.0 million, compared with
prior year earnings of A$106.3 million. Sales for the most recent fiscal year
were A$1.93 billion, compared with A$1.75 billion the year earlier. Asarco
received $8.3 million in dividends from MIM in 1993, compared with $8.8 million
in 1992. MIM has been pursuing cost-reduction measures throughout its copper,
lead, zinc, silver, gold and coal operations. MIM, which also has interests in
metals companies in Europe and North America, completed a five-year program of
capital expenditures in 1993 that increases mine capacity and production and
enhances processing technology and environmental performance.
In November 1993, Asarco reached agreement with Grupo Industrial Minera Mexico,
S.A. de C.V. (Grupo Mexico) to restructure Asarco's 28.3% holding in Mexico
Desarrollo Industrial Minero S.A. de C.V. (MEDIMSA). Under the terms of the
agreement, MEDIMSA will be combined with Grupo Mexico, a publicly traded
company, and Asarco will own a 23.6% stake in the new public corporation. The
agreement is subject to governmental and regulatory approvals. The agreement
with Grupo Mexico, by giving Asarco access to public international financial
markets for a portion of its investment in Grupo Mexico, will improve the
liquidity of Asarco's investment.
Southern Peru Copper Corporation (SPCC), 52.3% owned by Asarco, operates two
open-pit copper mines and a smelter in Peru. SPCC paid dividends to Asarco of
$9.4 million in 1993, compared with $7.8 million in 1992. During 1993, Peru
reached agreement with a number of major international financial organizations,
including the World Bank and the IMF, and in November, following a national
referendum, a constitutional government was restored. As a consequence of these
and other favorable developments, Asarco resumed equity accounting for its
investment in SPCC in the fourth quarter of 1993.
SPCC signed an agreement in May 1993 for $60 million of financing for a 41,000
ton solvent extraction/electro-winning operation near its Cuajone and Toquepala
mines. The plant, which will cost $106 million, is part of a five-year, $300
million capital program to expand production, replace equipment and improve the
environmental operations at SPCC's facilities. SPCC also received commitments
from Peruvian banks for $25 million of financing. In January 1994, SPCC signed
an agreement for $115 million of financing with a group of European banks which,
combined with previously completed financing, provides SPCC with a total of $200
million of financing for its expansion program.
ENVIRONMENTAL PROTECTION AT ASARCO
Asarco's objective is not only to comply with existing environmental, safety and
health laws and regulations but also to support activities that contribute to
environmental protection, responsible resource management and the safety and
health of employees, customers and members of the community. The Company policy
states: "ASARCO Incorporated recognizes and believes that all operations and
activities of the Company should be conducted responsibly and in a manner
designed to protect the health and safety of its employees, its customers, the
public and the environment. Asarco's operations interact with the environment
daily, and consideration of these concerns must be a way of life within the
Company. Asarco is committed to responsible management of our natural
resources."
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A5
To assure compliance with this policy, a senior executive was named in 1993 to
oversee all of Asarco's environmental efforts. The Company has extensive
internal compliance review programs and all domestic units will have been
visited by mid-1994 by compliance review teams.
BACKLOG OF ORDERS
Substantially all of the Company's metal production is sold under annual
contracts. To the extent not sold under annual contracts, production can be
sold in terminal markets or on commodities exchanges. Sales values cannot be
determined until the sale is priced based on prevailing commodity prices at the
time the price is fixed under the terms of the contract. The backlog for other
product classes and services is not material.
COMPETITIVE CONDITIONS
In the United States and abroad, Asarco and its foreign nonconsolidated asso-
ciated companies are subject to competition from other producers in all major
product lines. Asarco's metal products also compete with other materials,
including aluminum, stainless steel, plastics, glass and wood.
Competition in nonferrous metals is principally on a price and service basis,
with price being by far the most important consideration when supplies of the
commodities involved are ample. In construction aggregates, geographic location
of facilities in relation to the point of consumption, and price are by far the
most important competitive factors. In specialty chemicals, Asarco competes
against a substantial number of large and small companies both in the United
States and overseas.
EMPLOYEES
At December 31, 1993, Asarco employed about 8,500 persons, of whom about 3,900
were covered by contracts with various unions, most of which were affiliated
with the AFL-CIO.
ENERGY MATTERS
Asarco's energy requirements are met from a variety of sources, including fuel
oil, diesel fuel, gasoline, natural gas, coke and electric power. Asarco has a
large number of contracts of varying duration for its energy needs, typically
negotiated on an individual basis from time to time. Generally, substitute
sources are available except where requirements are guaranteed by local utility
companies.
No reductions or interruptions of any operations because of energy shortages
were experienced in 1993. The cost of coke decreased; fuel oil, diesel fuel and
natural gas increased, while cost of gasoline and electric power remained about
the same on average.
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A6
ENVIRONMENTAL, SAFETY AND HEALTH MATTERS
Asarco's operations are subject to environmental regulation by various federal,
state, local, and foreign governments. Asarco's principal involvement in this
area concerns compliance by its existing and former operations with federal and
state air and water quality and solid and hazardous waste regulations. The
Company believes that its operations are currently in substantial compliance
with applicable environmental laws and regulations.
As of December 31, 1993, there remained $11.6 million of previously appropriated
funds yet to be expended for ongoing environmental control projects at the
Company's operating units. The majority of these funds are scheduled to be
expended during 1994. Capital expenditures by Asarco at its operating U.S.
mines and plants in order to comply with environmental standards in the past
three years have been (in millions): 1993-$21.3; 1992-$8.3; 1991-$4.8. In 1993,
these expenditures included modernization and improvement of environmental
controls at the Amarillo, Texas, East Helena, Montana, Glover, Missouri, Omaha,
Nebraska, Hayden, Arizona, El Paso, Texas plants, the Ray and Mission mines in
Arizona and the Immel Mine in Tennessee. Estimated environmental operating
costs before taxes and depreciation but including interest on environmental
improvement bonds and other debt incurred for environmental control facilities
reduced pre-tax earnings by (in millions): 1993-$96; 1992-$87; 1991-$73.
Environmental matters are discussed in the Contingencies and Litigation Note to
the Financial Statements on page A43 and A44 of this report and in Management's
Discussion and Analysis of Operations and Financial Condition on pages A28
through A31.
The following is additional information with respect to notices that Asarco has
received from the United States Environmental Protection Agency ("EPA") that it
and, in most instances, numerous other parties are potentially responsible to
correct alleged hazardous substance releases under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA") at the
following locations on the dates indicated: the Commencement Bay and related
areas in Tacoma, Washington (1982 and subsequent years); the Leadville, Colorado
site, including the Yak drainage tunnel (1983); the Company's former Tacoma
smelter site (1984); lead and zinc mining areas in the Picher Mining Field in
southeastern Cherokee County, Kansas (1985); the East Helena smelter (1987); the
Ruston, Washington area (1988); the Kansas City smelter site in Kansas (1989);
the Bunker Hill mining and smelting site in Kellogg, Idaho (1990); Jasper
County, Missouri (1990); the Summitville site in Rio Grande County, Colorado
(1993); the Circle Smelting site in Beckemeyer, Illinois (1993); the Apache
Powder site in Benson, Arizona (1993); the Colorado School of Mines Research
Institute in Golden, Colorado (1993); the ILCO Superfund site in Leeds, Alabama
(1993); the Mingo smelter site in Sandy, Utah (1993); the Triumph Mine Tailings
Pile proposed site in Triumph, Idaho (1993). In December 1992 and June 1993,
the Company received similar notices from the United States Forest Service with
respect to, respectively, the Bonanza mining site in Saguache County, Colorado
and a former exploration project known as the Buckskin Mine located in Humboldt
County, Nevada. In addition, as a result of the acquisition in June 1989 of a
49.9% partnership interest in the Montana copper mine owned by Montana
Resources, Inc., Asarco and a subsidiary have been named as potentially
responsible parties for certain CERCLA sub-sites in Butte, Montana. In 1993,
the Murray smelter site in Murray, Utah, formerly owned by the Company, and the
Company's Globe plant have been proposed for inclusion on the EPA's National
Priority List.
In 1987, part of a subsidiary's former plant site in Houston was listed on the
Texas "Superfund Registry." In 1991, the State of Washington named the Company
as a potentially liable person at a site in Everett, Washington where the
Company operated a smelter early in the century. The State of Montana notified
Asarco in 1991 that it had been identified as a potentially liable person for
hazardous or deleterious substance contamination of the Upper Blackfoot River
allegedly resulting from the release of materials from Asarco's former Mike
Horse mine in Lewis and Clark County, Montana, a property previously mined by
Asarco and several others. In June 1992, the State of Mississippi informed the
Company it may be responsible for remediation at the Pascagoula Marine Terminal
at the Port of the same name. In March 1992 the New Mexico Environmental
Department notified the Company that it was evaluating sites near Deming and
Magdalena for potential inclusion on the National Priorities List and invited
the Company to negotiate investigation and remediation actions at the sites.
In April 1993, the State of Texas notified the Company that it and ten other
persons were potentially responsible parties with respect to the Col-Tex
Refinery State Superfund Site in Mitchell County, Texas, where the Company
stored diesel fuel in the mid-1970's. The
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A7
Company has also been named as one of a number of other defendants in eleven
lawsuits filed by or on behalf of 188 persons who have lived or owned property
near the Col-Tex Refinery Site seeking compensatory and punitive damages for
alledged wrongful death, personal injury, and property damage.
The Company and certain of its subsidiaries are cooperating with environmental
authorities at other sites to undertake studies of the sites and remediate where
necessary. Remedial action is being undertaken by the Company at the Yak
drainage tunnel, Ruston, Bunker Hill, Mike Horse, Deming, Magdalena and Everett
sites. At the Everett site, the Company has offered to purchase approximately
20 residences located on the former smelter site. The Company is discussing
with the United States Forest Service a voluntary remedial action for the
Bonanza mine. At the Yak drainage tunnel, the Res-Asarco Joint Venture has been
ordered to conduct a remediation program which was substantially completed in
1992. The Company's fifty percent share of this program is expected to cost
approximately $13.7 million most of which has been expended. Over the next
several years, additional remedial programs not included in this order, and
remedial programs addressing other areas in and around Leadville, will be
required. With respect to Leadville, the Company is currently involved in
detailed multi-party settlement negotiations with the EPA and several others and
has included in its environmental reserves a provision for the anticipated cost
of a settlement to the extent that a reasonable estimate can be made. At the
Jasper, Missouri site the Company and other potentially responsible parties have
been ordered to supply bottled water to over 60 residences because of
contamination in the shallow aquifer.
At Ruston, Washington, remediation consisting of removal and replacement of
soils at ten public access sites as part of an expedited response action has
been completed. In 1993, the EPA issued an Administrative Order to the Company
to remediate residential soils in the town.
At the Bunker Hill site, remediation is currently being undertaken as part of an
emergency response action. The Company and at least five other potentially
responsible parties are negotiating with the EPA an overall long-term
remediation program that will involve substantial additional costs to be shared
among the parties. Resolution of this matter is expected later in 1994.
The Company signed a Consent Decree with the EPA on August 28, 1991 in which the
Company agreed to undertake partial remediation, including certain stabilization
and demolition activities, at the Company's former Tacoma, Washington smelter.
The program commenced in January 1993 and is estimated to cost approximately $12
million over a period of two to three years.
The Company signed a Consent Decree with EPA on July 16, 1991 to resolve some of
the issues in proceedings involving the Company's East Helena, Montana smelter.
In the Consent Decree, the Company agreed to take certain remedial actions with
regard to residential soils surrounding the smelter involving approximately $10
million in ongoing remediation costs over the next three to five years. In
addition, other remediation activities at East Helena are taking place pursuant
to a 1990 Consent Decree.
In early 1992, the Company notified the EPA that it would not contest an order
issued by the EPA to undertake remediation work at a former Kansas City, Kansas
smelter site which had been owned by a former subsidiary early in this century.
The remediation work has been completed. In 1992, the Company completed initial
remediation work at a former smelter site in Everett, Washington pursuant to an
order from the Washington Department of Ecology. Additional sampling is
ongoing.
With respect to the Circle Smelting Superfund site in Beckemeyer, Illinois, on
March 9, 1994, the Company and Federated Metals Corporation ("Federated"), a
wholly-owned subsidiary, were notified that the EPA is planning to conduct a
time-critical emergency removal action at the site. The notice requested the
Company and Federated to perform or finance those actions and reimburse the EPA
for its costs. The Company is negotiating with EPA concerning implementation of
the removal at the site.
The Company is involved in litigation under CERCLA and state law involving
alleged hazardous substance releases at the Leadville site, various log sort
yards and a landfill in Tacoma, the Company's Globe Plant in Denver, and
Everett, Washington. The suits seek substantial damages and remediation costs.
With respect to the Globe case, on February 18, 1993, the State of Colorado
issued its Record of Decision regarding its proposed remediation plan for the
Company's plant located in Denver, Colorado. The Record of Decision has been
approved by the U.S. District Court. With respect to the log sort yard cases,
in 1991 a federal court and jury in Tacoma determined that Asarco's
responsibility
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A8
for remediation costs at six log yards and a landfill ranges from 75 percent to
100 percent. The cost of the remediation at one log yard has been determined to
be approximately $5.6 million. The costs at the other yards and at the landfill
are expected to be determined in future proceedings. Asarco was also found
responsible for attorneys' fees and interest in the amount of approximately $5
million. Asarco appealed these rulings to the United States Court of Appeals
for the Ninth Circuit which in September 1993 affirmed the lower court rulings
except for certain elements of the state law claims, the award of attorneys'
fees, and damages for the loss of use of the properties in question. Certain
claims were also remanded to the trial court for further proceedings. Petitions
for rehearing of certain aspects of the decision remain pending. The Company is
considering whether to seek further judicial review.
Certain events and circumstances arising in 1990 and 1992 allowed Asarco to make
reasonable estimates of the extent and cost of environmental contingencies at
the above and other sites and thus record additional reserves. At Tacoma,
Leadville, Bunker Hill, and East Helena there were developments such as draft
feasibility studies, work plans and negotiations or agreements with the EPA.
Based on these and other developments, the reserves for these and other sites
were increased. In total, the Company's environmental and closed plant reserves
were increased by $75.5 million in 1990, $7.3 million in 1991, $72.4 million in
1992 and $6.2 million during 1993.
In October 1992, the United States Department of Justice on behalf of EPA
notified the Company that it intends to sue seeking civil penalties for alleged
violation of the Company's water discharge permit at the Company's Ray Complex.
Under the Clean Water Act civil penalties may amount to $25,000 per day for each
violation. The Company is negotiating with EPA and the Department of Justice to
resolve this matter.
On March 2, 1994, the Company was notified by the United States Department of
Justice that it was seeking a civil penalty of $389,000 in connection with
emissions from the ore storage building baghouse at the East Helena Plant. The
Company is currently negotiating with EPA and the Department of Justice to
resolve this matter.
Also in 1993, the Company's Glover Smelter and West Fork Mine were issued
Notices of Violation of their National Pollution Discharge Elimination System
("NPDES") permits by the State of Missouri Department of Natural Resources. The
Company is negotiating settlements in both matters. In January 1994, the
Company received a notice from the EPA regarding alleged violations of the
Resource Conservation and Recovery Act ("RCRA") at the smelter facility in El
Paso, Texas. The proposed civil penalty in this matter is $140,400. The
citation relates to sand-blasting material utilizing slag from the smelter's
operations left on site by a contractor prior to May 1993. The Company is
cooperating with the EPA to resolve this matter.
In January 1994 the Company received notification dated January 13, 1994 from an
attorney that upon the expiration of a 60-day statutory notice period a suit on
behalf of two citizens would be filed against it under the Clean Water Act for
operating the Company's Omaha plant without a NPDES permit unless the Nebraska
Department of Environmental Quality ("NDEQ") took appropriate enforcement
action. Asarco had applied to NDEQ for a NPDES permit in 1982 and had been
operating the plant under stipulations with NDEQ entered in 1985 and 1988. On
March 14, 1994 the Company filed an action in federal district court in Lincoln,
Nebraska with the NDEQ as defendant, seeking a declaration that by reason of the
stipulations with NDEQ, and actions taken in conjunction with the stipulations,
Asarco is not discharging in violation of the Clean Water Act. On March 15,
1994 the citizens' suit was filed in the federal district court in Omaha,
Nebraska seeking to enjoin further discharges from the Omaha Plant, penalties of
up to $25,000 per day for past and future discharges, and costs and fees. On
March 16 Asarco moved to consolidate the two actions in federal court in
Lincoln, Nebraska and to stay the citizens' suit until the underlying issues in
the first action are decided.
On March 4, 1992 the Company's Glover, Missouri lead smelter and refinery
received a Notice of Violation for monitored levels of lead in excess of the
ambient air lead standard at two off-site monitoring stations. The Company is
investigating the cause of these excess levels and intends to work with the
Missouri Department of Natural Resources to develop a new State Implementation
Plan for lead. Additionally, the Missouri Department of Natural Resources
ordered the Company to conduct stack testing at the plant to determine whether
the plant is in compliance with applicable emission regulations.
State implementation plans designed to achieve compliance within two to three
years with the EPA ambient air quality standard for lead of 1.5 micrograms per
cubic meter of air have been or are being developed in each state in which
Asarco has a facility. These plans will require the construction of additional
controls at Asarco's East Helena,
<PAGE>
A9
Glover, and Omaha facilities. The Omaha Plant has been issued a complaint and
compliance order by the Nebraska Department of Environmental Quality for
violating the lead standard. A request for a hearing before the Department has
been filed.
With respect to regulation of the Company's wastes under RCRA, the Company is
studying means of compliance through process changes at its facilities, where
feasible, to manage the wastes not presently excluded from regulation. Mine
tailings; slag and slag tailings from primary copper processing; calcium sulfate
wastewater treatment plant sludge from primary copper processing; and slag from
primary lead processing of the Company's operations are still automatically
excluded from RCRA regulation. The Company's Glover smelter has executed a
proposed Consent Decree with the Missouri Department of Natural Resources, in
which the Company has agreed to implement certain process changes and conduct
various sampling and testing plans to remain in compliance with RCRA
requirements.
Asarco is subject to federal and state legislation and regulations pertaining to
plant and mine safety and health conditions, including the Occupational Safety
and Health Act of 1970 and the Federal Mine Safety and Health Act of 1977.
Asarco has made, and is likely to continue to make, expenditures to comply with
such legislation and regulations.
<PAGE>
A10
ITEM 2. PROPERTIES
ASARCO WORLDWIDE OPERATIONS
METALS
COPPER
MINES(1)
Mission; Sahuarita, Arizona
Montana Resources; Butte, Montana
Ray; Hayden Arizona
Silver Bell(3); Silver Bell, Arizona
PLANTS
Amarillo, Texas (Refinery)
(Also Selenium, Tellurium)
El Paso, Texas (Smelter)
(Also Sulfuric Acid)
Hayden, Arizona (Smelter)
(Also Sulfuric Acid)
Ray; Hayden, Arizona (Smelter(3))
(Electrowinning Plant)
LEAD
MINES (1)
Leadville; Leadville, Colorado
Sweetwater; Reynolds County,
Missouri
West Fork, Reynolds County,
Missouri
PLANTS
East Helena, Montana
(Smelter) (Also Sulfuric Acid)
Glover, Missouri (Smelter, Refinery)
Omaha, Nebraska (Refinery)
(Also Bismuth)
ZINC
MINES (1)
Coy; Jefferson County,
Tennessee
Immel; Knox County,
Tennessee
New Market; Jefferson
County, Tennessee
Young; Jefferson County,
Tennessee
<PAGE>
A11
SILVER
MINES (1)
Coeur(3); Wallace, Idaho
Galena(3); Wallace, Idaho
Troy(3); Troy, Montana
Quiruvilca (Corporacion
Minera Nor Peru, S.A.)
(Also Copper, Lead and
Zinc); Peru
GOLD
MINES (1)
Aquarius(3); Timmins,
Ontario, Canada
Asarco Australia Limited(4);
Wiluna, Western Australia
Jundee, Western Australia
PRECIOUS METALS PLANTS
SILVER AND GOLD,
Amarillo, Texas (Refinery)
PALLADIUM AND PLATINUM (CRUDE)
Amarillo, Texas
SPECIALTY CHEMICALS
ENTHONE-OMI
North America
Long Beach, California
Bridgeview, Illinois
West Haven, Connecticut
Orange, Connecticut
Warren, Michigan
Toronto, Canada
Mexico City, Mexico
Europe
Barcelona, Spain
s-Hertogenbosch, Netherlands
Woking, United Kingdom
Milan, Italy
Turin, Italy
Marne-La-Vallee, France
Brunn Am Gebirge, Austria
Erkrath, Germany
Norrkoping, Sweden
Geneva, Switzerland
Pacific Rim
Thomastown, Australia
Kowloon, Hong Kong
Singapore (2)
Shen Zhen, People's Republic
of China (2)
Tokyo, Japan (2)
Taipei, Taiwan
MINERALS
AMERICAN LIMESTONE COMPANY
Construction Aggregates
Concrete, Agricultural Limestone
Knoxville, Tennessee
Tri-Cities, Tennessee
Nashville, Tennessee
Abingdon, Virginia
<PAGE>
A12
ENVIRONMENTAL SERVICES
Encycle/Texas, Inc.
Corpus Christi, Texas
Hydrometrics, Inc.
Helena, Montana
Biotrace Laboratories, Inc.,
Salt Lake City, Utah
OTHER
ANTIMONY OXIDE,
Omaha, Nebraska
HIGH PURITY METALS,
Denver, Colorado
LEAD FABRICATION
Lone Star Lead Construction Corp.
Houston, Texas
ASSOCIATED COMPANIES
M.I.M. HOLDINGS LIMITED (17.2%)
Australia
Mount Isa (copper, silver, lead, zinc)
Hilton (silver, lead, zinc)
Townsville (copper refinery)
Newlands, Collinsville (coal)
(75% MIM interest)
Oaky Creek (coal) (86.5% MIM interest)
Ravenswood, Tick Hill (gold)
England
Britannia Refined Metals Limited
(lead and silver refiners, secondary
lead plant)
Britannia Recycling Limited
(secondary lead plant)
Avonmouth (zinc smelter)
Datteln, Germany
Zinc refinery (45% MIM interest)
Zinc products (33.3% MIM interest)
Hamburg, Germany
(Copper smelter, copper, lead and
gold refineries) (35% MIM interest)
Duisburg, Germany
(50% MIM interest)
zinc-lead smelting/refining
Brixlegg, Austria
Copper refinery, recycling
(25.5% MIM interest)
Papua New Guinea
Highlands Gold Limited
(65% MIM interest)
30% Porgera mine (gold)
Investments in resources companies:
ASARCO Incorporated (25.0%),
Cominco Ltd. (effectively 22.5%),
Granges Inc. (37.5%) and
Metallgesellschaft AG (3.5%) and
Metal Trader Metallgesellschaft
Limited (33.3%).
<PAGE>
A13
MEXICO DESARROLLO INDUSTRIAL MINERO, S.A. de C.V. (MEDIMSA) (28.3%)
Thirteen mines, nine metallurgical
plants throughout Mexico,
including: La Caridad and Cananea
(Copper, Lead, Zinc, Silver, Gold,
Coal, Coke, Fluorspar, Sulfuric Acid)
SOUTHERN PERU COPPER CORPORATION (52.3%)
Cuajone (Copper, Silver,
Molybdenum)
Toquepala (Copper, Silver,
Molybdenum)
Ilo (Copper Smelter)
(1)Interest in mines is shown in Mineral Reserves tables starting on page A15
(2)Joint venture interests
(3)On standby
(4)Asarco's investment in Asarco Australia was sold in January 1994.
(5)(Percent ownership of companies shown in parentheses)
COEUR, GALENA AND LEADVILLE
These mines are operated by Asarco under lease and joint venture agreements. In
Coeur (50%) and Leadville (53.1%), Asarco has a interest in operating expenses
and profits or losses in proportion to the related ownership interest. In
Galena, Asarco receives 75% of profits remaining after royalty payments to the
lessor of 50% of operating profits before depletion, depreciation and Idaho tax.
The Coeur mine was temporarily shut down commencing in April 1991 due to
depressed silver prices. The Galena mine was temporarily shut down commencing
in July, 1992, also due to depressed silver prices.
TROY
Troy is operated by Asarco under a lease agreement. Asarco retains 75% of net
proceeds after operating expenses but before depletion, depreciation and income
taxes. The Troy mine was temporarily shut down commencing in April 1993 due to
depressed silver prices.
QUIRUVILCA
The Quiruvilca mine is operated under a Peruvian government concession held by
Corporacion Minera Nor Peru, S.A., an 80% owned subsidiary of a wholly owned
Asarco subsidiary.
MISSION MINE
A portion of the mine is held under long-term leases in which the lessors have
retained a royalty interest.
SILVER BELL
Only copper precipitates are currently produced.
WEST FORK
A portion of the mine is held under a long-term lease in which the lessor has
retained a royalty interest.
ASSOCIATED COMPANIES
Southern Peru Copper Corporation, a 52.3% owned associated company, operates the
Cuajone and Toquepala mines under Peruvian government concessions.
Mexico Desarrollo Industrial Minero, S.A. de C.V. (MEDIMSA), a 28.3% owned
associated company, operates thirteen mines under concessions granted by the
Mexican government.
The Company sold its remaining 45.3% interest (66.5 million shares) in Asarco
Australia for $79.5 million, in January 1994.
<PAGE>
A14
The following production information is provided:
<TABLE>
<CAPTION>
1993 1992 1991
--------------------------- -------------------------- --------------------------
Avg Mill Avg Mill Avg Mill
Ore Milled Recovery Ore Milled Recovery Ore Milled Recovery
ASARCO (000s Tons) Rate (000s Tons) Rate (000s Tons) Rate
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Coeur - - - - 37 92.9%
Galena - - 92 95.7% 183 96.2%
Troy 668 85.7% 2,735 84.7% 3,095 86.0%
Quiruvilca 440 84.0% 374 81.9% 423 82.2%
Mission 13,973 83.8% 14,322 84.2% 9,936 87.7%
Mission South 7,556 79.3% 5,537 81.7% 4,310 83.9%
Hayden
Concentrator 9,807 80.3% 10,714 83.0% 10,616 83.7%
Ray Concentrator 11,594 84.6% 8,512 85.4% - -
Montana Resources 16,829 84.1% 17,751 88.6% 17,562 89.2%
Leadville 219 91.2% 226 91.8% 228 90.8%
Sweetwater 1,148 98.5% 1,195 97.4% 1,208 98.2%
West Fork 1,018 98.0% 1,034 98.1% 1,047 98.2%
Tennessee 2,850 92.1% 3,061 93.3% 3,073 93.9%
Wiluna 1,033 83.0% 1,453 86.6% 1,303 86.8%
SPCC
Toquepala 15,835 87.6% 15,338 87.4% 15,122 88.2%
Cuajone 21,405 85.1% 21,596 85.1% 21,442 87.1%
</TABLE>
<TABLE>
<CAPTION>
PRODUCTIVE CAPACITY
Defined Defined
Smelters Capacity (a) Refineries Capacity (a)
-------- -------- ---------- --------
<S> <C> <C> <C>
Anode Copper (tons) Copper (tons)
El Paso 115,000 Amarillo 480,000
Hayden 175,000 Ray SX-EW 40,000
------- ------
Total 290,000 Total 520,000
Lead Bullion (tons) Lead (tons)
East Helena 75,000 Omaha 156,000
Glover 130,000 Glover 130,000
------- -------
Total 205,000 Total Lead 286,000
Silver (000s ounces)
Amarillo 60,000
Gold (ounces)
Amarillo 600,000
<FN>
(a) Asarco's estimate of actual capacity under normal operating conditions with
allowance for normal downtime for repairs and maintenance and based on the
average metal content of input material for the three years shown. No
adjustment is made for shutdowns or production curtailments due to strikes
or air quality emissions restraints.
</TABLE>
<PAGE>
A15
METAL PRODUCTION STATISTICS
COPPER
<TABLE>
<CAPTION>
Average Metal Production & Sales
Associated Mineral Mineral Contained Metal
Asarco Company's Reserves Content (000s tons)
Interest Interest (000s tons) (%) ----------------------------
(%) (%) 12/31/93 12/31/93 1993 1992 1991
---------------------------------------------------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
MINES
Domestic
Mission 100 542,935 .67 117.9 103.2 88.5
Ray 100 1,097,229 .63 159.3 165.1 117.3
Montana Resources 49.9 547,117 .35 47.2 52.4 50.4
Silver Bell 100 101,344 .47 3.6 3.3 4.0
Troy 75 11,996 .65 3.6 13.1 17.2
Coeur 50 360 .80 - - 0.2
Galena 37.5 717 .52 - 0.5 1.0
------------------------------
Total Domestic 331.6 337.6 278.6
Foreign
Quiruvilca-Peru 80 4,378 .53 1.0 0.8 1.3
------------------------------
Total 332.6 338.4 279.9
------------------------------
Asarco Beneficial Production 307.8 308.4 249.4
SMELTERS
El Paso 100 91.9 107.9 105.9
Hayden 100 194.2 208.4 184.7
------------------------------
Total 286.1 316.3 290.6
------------------------------
REFINERIES
Amarillo 100 460.0 467.2 450.2
Ray 100 36.6 42.2 42.6
------------------------------
Total 496.6 509.4 492.8
------------------------------
SALES OF REFINED COPPER
Tons of Refined Copper
Sold 528.1 502.6 486.5
Toll Metal Deliveries 45.3 43.6 41.6
Realized Price ($/lb.) $0.87 $1.04 $1.07
Refined Copper Sold ($ in millions) $917 $1,045 $1,037
ASSOCIATED COMPANIES
MIM 17.2
Mount Isa 100 105,821 3.33 173.9 158.6 179.6
SPCC 52.3
Toquepala 100 217,487 .85 115.8 112.8 113.9
Cuajone 100 176,726 .87 149.2 155.6 160.7
From Concentrates
Purchased 47.7 35.5 25.6
MEDIMSA 28.3
Base Metal Mines 100 72,434 22.9 19.5 22.0
Mexicana de Cobre 94.8 1,653,000 .39 173.1 166.7 162.9
Mexicana de Cananea 76.1 1,841,000 .62 84.7 73.0 102.3
Asarco's & associated companies'
share of western world mine
production 13% 13% 13%
</TABLE>
<PAGE>
A16
METAL PRODUCTION STATISTICS
(continued)
LEAD
<TABLE>
<CAPTION>
Average Metal Production & Sales
Associated Mineral Mineral Contained Metal
Asarco Company's Reserves Content (000s tons)
Interest Interest (000s tons) (%) ----------------------------
(%) (%) 12/31/93 12/31/93 1993 1992 1991
---------------------------------------------------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
MINES
Domestic
Leadville 53.1 664 3.17 5.4 6.1 6.4
Sweetwater 100 19,701 4.83 69.9 50.9 49.9
West Fork 100 6,397 5.72 53.6 56.2 54.5
Galena 37.5 234 8.80 - - 1.0
------------------------------
Total Domestic 128.9 113.2 111.8
Foreign
Quiruvilca-Peru 80 4,378 1.55 6.1 4.1 4.6
------------------------------
Total 135.0 117.3 116.4
------------------------------
Asarco Beneficial
Production 131.1 113.6 111.7
SMELTERS
East Helena 100 69.7 71.6 72.7
Glover 100 124.1 130.1 129.5
------------------------------
Total 193.8 201.7 202.2
------------------------------
REFINERIES
Omaha 100 73.5 75.0 78.5
Glover 100 124.2 130.1 129.5
------------------------------
Total 197.7 205.1 208.0
------------------------------
SALES OF REFINED LEAD
Tons of Refined
Lead Sold 211.5 201.6 211.5
Toll Metal Deliveries 0 0.7 13.9
Asarco Realized
Price ($/lb.) $0.20 $0.26 $0.26
Refined Lead Sold ($ in
millions) $87 $106 $109
ASSOCIATED COMPANIES
MIM 17.2
Mount Isa 100 40,785 5.20 171.0 180.4 152.3
Hilton 100 20,944 6.15 71.6 35.1 30.0
MEDIMSA 28.3
Base Metal Mines 100 72,434 45.2 39.4 43.9
Asarco's & associated companies'
share of western world mine
production 22% 14% 13%
</TABLE>
<PAGE>
A17
METAL PRODUCTION STATISTICS
(continued)
ZINC (000s TONS)
<TABLE>
<CAPTION>
Average Metal Production & Sales
Associated Mineral Mineral Contained Metal
Asarco Company's Reserves Content (000s tons)
Interest Interest (000s tons) (%) ----------------------------
(%) (%) 12/31/93 12/31/93 1993 1992 1991
---------------------------------------------------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
MINES
Domestic
Leadville 53.1 664 8.10 15.3 16.3 14.8
Sweetwater 100 19,701 .62 4.6 1.7 1.8
Tennessee 100 5,345 3.28 61.8 74.9 73.9
West Fork 100 6,397 1.61 12.9 13.6 13.9
------------------------------
Total Domestic 94.6 106.5 104.4
Foreign
Quiruvilca-Peru 80 4,378 4.27 18.6 13.6 15.0
------------------------------
Total 113.2 120.1 119.4
------------------------------
Asarco Beneficial Production 102.4 109.6 109.0
ZINC Sales Price (LME-HG $/lb.) $0.44 $0.56 $0.51
ASSOCIATED COMPANIES
MIM 17.2
Mount Isa 100 40,785 6.40 176.8 202.9 221.2
Hilton 100 20,944 8.37 94.5 48.9 42.1
MEDIMSA 28.3
Base Metal Mines 100 72,434 189.8 174.9 179.0
Asarco's & associated
companies' share of western
world mine production 13% 9% 9%
- --------------------------------------------------------------------------------------------------------------------------------
MOLYBDENUM (000's POUNDS)
MINES
Domestic
Montana Resources 49.9 547,117 .03 7,200 9,800 12,700
Asarco Beneficial Production 3,600 4,900 6,400
ASSOCIATED COMPANIES
SPCC 52.3
Toquepala 100 217,487 .06 2,600 3,600 3,000
Cuajone 100 176,726 .03 3,700 3,500 3,700
MEDIMSA 28.3
Mexicana de Cobre 94.8 1,653,000 .03 3,200 2,800 3,800
Asarco's & associated
companies' share of western
world mine production 13% 12% 12%
</TABLE>
<PAGE>
A18
METAL PRODUCTION STATISTICS
(continued)
SILVER
<TABLE>
<CAPTION>
Average Metal Production & Sales
Associated Mineral Mineral Contained Metal
Asarco Company's Reserves Content (000s troy ounces)
Interest Interest (000s tons) (Oz/ton) ----------------------------
(%) (%) 12/31/93 12/31/93 1993 1992 1991
---------------------------------------------------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
MINES
Domestic
Coeur 50 360 17.32 - - 381
Galena 37.5 951 15.07 - 1,573 3,279
Leadville 53.1 664 1.38 338 339 320
Mission 100 542,935 .16 1,869 1,661 1,366
Montana Resources 49.9 547,117 .07 763 893 819
Ray 100 1,097,229 .05 827 872 598
Sweetwater 100 19,701 .10 159 92 100
Troy 75 11,996 1.42 812 3,044 3,950
West Fork 100 6,397 .30 251 306 317
Others 5 6 2
------------------------------
Total Domestic 5,024 8,786 11,132
------------------------------
Foreign
Quiruvilca-Peru 80 4,378 6.12 2,468 1,814 2,454
------------------------------
Total 7,492 10,600 13,586
------------------------------
Asarco Beneficial Production 6,252 7,883 9,298
REFINERY
Amarillo 100 35,666 39,805 32,107
SALES OF REFINED SILVER
Ounces Sold 32,754 34,775 37,325
Toll Metal Deliveries 816 631 -
Realized Price ($/oz) $4.22 $3.97 $4.12
Refined Silver Sold ($ in millions) $138 $138 $ 154
ASSOCIATED COMPANIES
MIM 17.2
Mount Isa 100 40,785 3.73 14,146 15,923 13,453
Hilton 100 20,944 3.91 5,208 2,452 2,176
SPCC 52.3
Toquepala 100 217,487 1,400 1,191 1,255
Cuajone 100 176,726 1,413 1,484 1,539
From Concentrates Purchased 445 346 305
MEDIMSA 28.3
Base Metal Mines 100 72,434 11,131 10,564 12,016
Mexicana de Cobre 94.8 1,653,000 2,787 2,471 2,171
Mexicana de Cananea 76.1 1,841,000 388 276 703
Asarco's & associated
companies' share of western
world mine production 13% 12% 13%
</TABLE>
<PAGE>
A19
METAL PRODUCTION STATISTICS
(continued)
GOLD
<TABLE>
<CAPTION>
Average Metal Production & Sales
Associated Mineral Mineral Contained Metal
Asarco Company's Reserves Content (000s troy ounces)
Interest Interest (000s tons) (Oz/ton) ----------------------------
(%) (%) 12/31/93 12/31/93 1993 1992 1991
---------------------------------------------------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
MINES
Domestic
Leadville 53.1 664 .07 13.3 13.7 13.3
Other 0.4 0.2 0.4
------------------------------
Total Domestic 13.7 13.9 13.7
Foreign
Quiruvilca-Peru 80 4,378 .02 0.8 0.5 0.8
Wiluna and Jundee-Australia 45.3 3,918 0.14 98.5 110.4 111.5
Aquarius-Canada 100 179 .18 - - -
------------------------------
Total Foreign 99.3 110.9 112.3
------------------------------
Total 113.0 124.8 126.0
------------------------------
Asarco Beneficial Production 39.9 74.0 74.6
REFINERY
Amarillo 100 226.9 225.4 195.2
SALES OF REFINED GOLD
Ounces Sold 162.3 191.2 189.4
Toll Metal Deliveries - 0.4 41.4
Realized Price ($/oz) $358.59 $360.53 $397.85
Refined Gold Sold ($ in millions) $58 $69 $75
ASSOCIATED COMPANIES
MIM 17.2
Porgera 25 54,751 .017 1,269.3 1,461.7 763.8
Tick Hill 100 353 .52 191.1 109.1 -
Ravenswood 100 98 .32 27.5 21.8 28.6
Tom's Gully 100 - - - - 22.1
MEDIMSA 28.3
Base Metal Mines 100 72,434 14.7 8.7 10.8
Mexicana de Cobre 94.8 1,653,000 9.6 7.8 -
Mexicana de Cananea 76.1 1,841,000 5.7 8.1 13.9
Asarco's & associated companies'
share of western world mine
production 3.2% 3.1% 1.7%
</TABLE>
<PAGE>
A20
All mineral reserves represent 100% of the reserves for that mine and the
percentage ownership of Asarco and associated companies is separately indicated.
All mineral reserves are as of December 31, 1993, except for M.I.M. Holdings
Limited which are as of June 30, 1993, and MEDIMSA which are as of December 31,
1992. Reserves are estimated quantities of proven and probable ore that under
present and anticipated conditions may be economically mined and processed for
the extraction of their mineral content. The data for MIM and MEDIMSA are as
published by those companies and supplemental information to support the
reserves for those companies has not been reviewed by the U.S. Securities and
Exchange Commission. Controlled mineral deposits include those owned, directly
or indirectly through subsidiaries, partnerships or joint ventures, optioned,
leased, or held under government concession.
All production figures represent entire amounts of operations, including those
under lease, joint venture, government concessions or operated by subsidiaries
or associated companies. Metal production figures for associated companies are
from mines. Data for MIM are based on its June 30 fiscal year.
OTHER OPERATIONS
The following is additional information on other operations of the Company. The
principal activities included in the business segment entitled "Other" are those
of Capco Pipe Company, Inc. ("Capco"), a wholly owned subsidiary that
manufactures polyvinyl chloride pipe, ("PVC") the environmental services
operations of other subsidiaries and the zinc oxide production of a unit
operating in Hillsboro, Illinois. None of these operations constitute a
significant portion of the total operations of the Company. During 1993 Capco
permanently shut down its asbestos cement pipe business. The Company plans to
dispose of its PVC and zinc oxide operations in 1994.
ITEM 3. LEGAL PROCEEDINGS
Reference is made to the Contingencies and Litigation Note to the Financial
Statements on page A43 and A44 of this report.
The following is additional information with respect to the asbestos personal
injury litigation. While no one personal injury action is exactly like any
other, the following three pending lawsuits are typical of those in which
employees of other companies allege death or injury resulting from alleged
exposure to asbestos fiber supplied by Lac d'Amiante du Quebec, Ltee ("LAQ"), a
wholly-owned subsidiary, and other suppliers to their employers' manufacturing
operations:
1) In POGORZELSKI, ET AL. V. AMTORG TRADING CORPORATION, ET AL., Docket No.
L-12274-91, pending since October 31, 1991 in the Superior Court of New Jersey,
Middlesex County, 19 primary and 8 secondary plaintiffs sued LAQ and 25 other
defendants that allegedly supplied asbestos fiber or asbestos containing
products to Johns-Manville's Manville, New Jersey facility for substantial
compensatory and punitive damages for death or injuries allegedly resulting from
the primary plaintiffs' exposure to asbestos fiber while employed at that
facility. The claims of seven of the primary plaintiffs were dismissed as to
LAQ in June 1992. The plaintiffs allege a broad range of respiratory and other
injuries including disabling lung changes, asbestosis, cancer, and mesothelioma.
Liability is alleged on theories of strict liability, negligence, breach of
warranty, misrepresentation, ultra hazardous activity and conduct, conspiracy,
concert of action, market share or enterprise liability, and alternative
liability. The thrust of the complaint is that the defendants, individually or
collectively, failed to warn the primary plaintiffs of the possible hazards
associated with inhalation of asbestos fibers while working with or being
exposed to such fibers.
2) In CAMPBELL V. W.R. GRACE AND COMPANY, ET AL., Docket No. CV-92-0295147S,
pending since May 14, 1992 in the Superior Court of Connecticut for the Judicial
District of Fairfield at Bridgeport, one primary and one secondary plaintiff
sued LAQ and 14 other defendants that allegedly supplied asbestos fiber or
asbestos containing products to various job sites in Connecticut including the
Raybestos-Manhattan facility in Stratford, Connecticut. Plaintiffs seek
substantial compensatory and punitive damages for pleural plaques allegedly
resulting from primary plaintiff's exposure to asbestos fiber while employed at
these job sites. The thrust of the complaint is similar to the POGORZELSKI
case.
<PAGE>
A21
3) In RETTBERG V. ARMSTRONG WORLD INDUSTRIES, INC., ET AL., Case No. May Term
1993, No. 1734, pending since May 11, 1993 in the Pennsylvania Court of Common
Pleas, Philadelphia County, one primary and one secondary plaintiff sued LAQ and
nine other defendants that allegedly supplied asbestos fiber or asbestos
containing products to Owens-Corning Fiberglas Corporation's Berlin, New Jersey
facility or various other job sites including Quaker Shipyard, R.T.C. Shipyard,
Universal-Dundle, New York Shipyard, and RCA. The plaintiffs demand substantial
compensatory and punitive damages for "bilateral pleural thickening" allegedly
resulting from primary plaintiff's exposure to asbestos fiber while employed at
these facilities. The thrust of the complaint is similar to the POGORZELSKI
case.
The WELSH V. ASBESTOS CORPORATION, LTD., ET AL. case described in Item 3 of
Asarco's 1992 Form 10-K was settled in February 1993 and the BATTEN V. GARLOCK,
INC. ET AL. case also described in the same item was administratively dismissed
in October 1993.
In addition to these personal injury lawsuits arising out of alleged asbestos
exposure to employees of other companies using asbestos fiber in their
manufacturing operations, included in the asbestos product liability lawsuits
pending against LAQ and Asarco are numerous lawsuits arising from products (such
as insulation and brake linings) manufactured by others. These cases typically
allege a failure to warn of possible health hazards associated with those
products and proceed on theories similar to those asserted in the POGORZELSKI
case. In many such cases LAQ and Asarco, having never manufactured such
products, have obtained dismissals. Typical of lawsuits in which plaintiffs
allege asbestos exposure due to products manufactured by others are:
1) BITTINGER V. ACME SAFETY PRODUCTS, ET AL., Case No. 88-7-2206, pending
since July 10, 1989 in the Ohio Court of Common Pleas, Summit County, where 120
primary and 99 secondary plaintiffs sued LAQ and 69 other defendants that
allegedly supplied asbestos, talc and/or products or components containing
asbestos or talc, to the primary plaintiffs' employers in the tire and rubber
industry in Ohio. (The claims of two of the primary plaintiffs were dismissed
as to all defendants in 1992 and 1993). The plaintiffs demand substantial
compensatory and punitive damages for injuries allegedly resulting from their
exposure to talc and asbestos. The thrust of the complaint is similar to the
POGORZELSKI case.
2) ABRAMS, ET AL. V. OWENS-CORNING FIBERGLAS CORP., ET AL., Civil Action Nos.
93-C-6152 through 93-C-6265 (made part of IN RE: MASS III KANAWHA COUNTY
ASBESTOS CASES, Civil Action No. 92-C-8888), pending since September 22, 1993 in
the Circuit Court of Kanawha County, West Virginia, where 114 primary and 91
secondary plaintiffs sued LAQ, Asarco and 65 other defendants that allegedly
supplied asbestos and/or products containing asbestos to the primary plaintiffs'
employers in West Virginia. The plaintiffs demand substantial compensatory and
punitive damages for injuries allegedly resulting from their exposure to
asbestos. The thrust of the complaint is similar to the POGORZELSKI case.
3) ABERNATHY V. AC&S, INC., ET AL., Case No. A9209667-C, pending since
September 17, 1992 in the District Court of Orange County, Texas, where 2,733
primary and 2,229 secondary plaintiffs sued Asarco and its wholly-owned
subsidiary Capco as well as 70 other defendants that allegedly supplied asbestos
and/or products containing asbestos (or that were allegedly alter egos to or
"controlling producers" of such suppliers) to the primary plaintiffs' employers
in Alabama. The plaintiffs demand substantial compensatory and punitive damages
for injuries allegedly resulting from their exposure to asbestos. The thrust of
the complaint is similar to the POGORZELSKI case. During 1993 the case was
settled as to Asarco. Capco remains a defendant in this and 69 other cases
brought by 1,399 additional primary plaintiffs.
The total of 13,940 pending primary plaintiffs reported for the Company and two
of its subsidiaries at December 31, 1993 includes approximately 8,100 primary
plaintiffs' claims in West Virginia, that were settled in February 1994.
In 1991, the Judicial Panel on Multidistrict Litigation transferred all asbestos
cases pending in federal court to the United States District Court for the
Eastern District of Pennsylvania for coordinated and consolidated pretrial
proceedings. Cases containing approximately 2 percent of LAQ's primary
plaintiffs are affected by this action.
As of December 31, 1993, LAQ, Asarco and Capco have settled or been dismissed
from a total of approximately 4,357 asbestos personal injury lawsuits brought by
approximately 18,114 primary and approximately 10,554 secondary plaintiffs.
<PAGE>
A22
With respect to the actions relating to asbestos-containing products in
structures reported in the Contingencies and Litigation Note, the following
supplemental information is provided. THE SCHOOL DISTRICT OF LANCASTER, ET AL.
V. LAKE ASBESTOS OF QUEBEC, LTD., ET AL., Civil Action No. 83-0286, was filed in
1983 in United States District Court for the Eastern District of Pennsylvania.
Subsequently, cases were filed by different school districts in the same court
seeking the same relief on behalf of the same class (BARNWELL SCHOOL DISTRICT
NO. 45 V. U.S. GYPSUM, ET AL., Civil Action No. 83-1395, filed in 1983; BOARD OF
EDUCATION OF THE MEMPHIS CITY SCHOOLS, ET AL. V. U.S. GYPSUM, ET AL., Civil
Action No. 84-2312, filed in 1984). In 1984, these actions were consolidated as
IN RE ASBESTOS SCHOOL LITIGATION, Civil Action No. 83-0268, and the case was
certified to proceed on behalf of a class of all public school districts and
private primary and secondary educational institutions in the United States.
LAQ settled this action in March 1989, and all necessary court approvals have
been obtained. The other actions, including some purported class actions,
involve colleges and universities, real estate companies, transit corporations,
private buildings under lease to the federal government, schools, and public
buildings in cities and states. Each of these actions seeks substantial actual
damages, and most but not all seek punitive damages.
As of December 31, 1993, LAQ has settled four and been dismissed from another 79
actions involving asbestos in structures. Asarco has been dismissed from all
eleven actions in which it had been named.
In 1987, LAQ began litigation against certain excess liability insurers for a
declaration of insurance coverage for its asbestos cases similar to the one that
had been obtained by LAQ against certain other insurers in a 1985 court ruling
that held that the comprehensive continuous theory of coverage applies to those
insurers' policies as regards LAQ's asbestos personal injury and property damage
litigation. Settlements have been reached with certain of these insurers and
the case remains pending in federal court in the Southern District of New York.
In June 1993, the Company was sued by two of its liability insurance carriers,
the Insurance Company of North America and California Union Insurance Company,
in state court in New Brunswick, New Jersey for a declaration that the insurance
companies have no insurance obligation for environmental matters for which the
Company is seeking coverage. The insurance companies also included Asarco's
other liability insurers in the lawsuit, and they have sought similar
declaratory relief. Asarco has filed cross claims and counterclaims in this
lawsuit seeking a court declaration that insurance coverage of its environmental
matters does exist. In November 1990 the Company filed a lawsuit against
several of its liability insurers in state court in King County, Washington
seeking insurance coverage for the Tacoma log sort yard cases. In January 1994
the Company filed a similar lawsuit in state court in Denver, Colorado seeking
insurance coverage for a class action lawsuit concerning the Company's Globe
Plant that had been settled during 1993.
In March 1993 a lawsuit was filed in United States District Court in Tacoma,
Washington on behalf of classes of persons who own or rent residential property
within two miles of the Company's former Tacoma plant. In May 1993, it was
transferred to the United States District Court in Seattle, Washington. The
action asserts claims of trespass, nuisance, negligence, strict liability, and
unjust enrichment, as well as under CERCLA, for property damage due to past
emissions of metals from the plant. The action also seeks the establishment of
a fund to pay for the medical monitoring of an alleged class of persons who now
reside or who in the future will reside on property located within two miles of
the plant. In September 1993 the court certified the action to proceed as a
class action. Plaintiffs' counsel has represented that the Medical Monitoring
Class consists of an estimated 18,000 individuals, and the other two classes
consist of more than 5,000 owners or renters. The Company has legal and factual
defenses including the comprehensive remediation programs that have been and
will be taken under EPA Superfund proceedings regarding the subject matter of
the lawsuit.
In April 1993, the Town of Ruston, Washington filed a lawsuit against the
Company in United States District Court in Tacoma, Washington. The lawsuit
asserts claims for damage to property owned by the town due to the operation of
the Company's former Tacoma plant similar to the claims asserted in the class
action lawsuit referred to in the immediately preceding paragraph, and it has
been consolidated with that suit and transferred to the United States District
Court in Seattle. The lawsuit had originally stated claims for lost tax
revenue, but these claims were dismissed by the court on Asarco's motion.
<PAGE>
A23
In May 1989, a lawsuit was filed in state court in Butte, Montana by Montana
Mining Properties ("MMP") which claims to have had a contractual first right of
refusal on the 49.9% interest in the Montana copper mining business of Montana
Resources, Inc. that was sold to Asarco in June 1989. MMP seeks an injunction
and compensatory and punitive damages from Asarco for alleged tortious
interference with its contract with Montana Resources, Inc.
On October 8, 1991, ARCO Incorporated ("ARCO") filed suit in federal court in
Montana against Montana Resources and its partners, including Asarco and one of
its subsidiaries, alleging breach of contract resulting from defendants' failure
to reclaim contaminated water in an abandoned mining pit (the Berkeley Pit) at
partnership-owned property in Butte, Montana. ARCO demanded compensation for
study costs under CERCLA with respect to such water, and a determination that
defendants are responsible for reclamation of the pit. The defendants assert
that ARCO is responsible for such CERCLA and reclamation costs. Trial has been
set for mid-1995.
In March 1993 the Arizona Department of Environmental Quality notified the
Company that it was seeking fines of approximately $700,000 for alleged
violations of the Clean Air Act at the Company's Ray Complex in Arizona relating
to disposal of asbestos cement pipe. On July 6, 1993 the State of Arizona filed
suit seeking civil penalties for the alleged violations and other relief. The
Company is negotiating to resolve this matter.
The opinion of management regarding the outcome of legal proceedings and
environmental contingencies, set forth in the Contingencies and Litigation Note
(Note 8) to the Financial Statements, is based on considerations including
experience relating to previous court judgments and settlements and remediation
costs and terms. The financial viability of other potentially responsible
parties has been considered when relevant and no credit has been assumed for any
potential insurance recoveries when availability of insurance is not
established. The Company considered such factors in establishing its
environmental reserve in December of 1990 and in determining modifications to
its reserve in 1991, 1992 and 1993.
See also Item 1, "Environmental, Safety and Health Matters," for further
information concerning pending legal or administrative proceedings involving
Asarco.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
A24
EXECUTIVE OFFICERS OF ASARCO AND BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
(As of February 23, 1994)
Officer
Name Office and Experience Age Since
- ---- --------------------- --- -------
Richard de J. Osborne 1989-1994 Chairman of the Board, Chief 59 1975
Executive Officer and
President
Francis R. McAllister 1993-1994 Executive Vice President, 51 1978
Copper Operations
1992-1993 Executive Vice President,
Finance and Administration
and Chief Financial Officer
1989-1992 Vice President, Finance and
Administration and Chief
Financial Officer
Robert J. Bothwell, Jr. 1989-1994 Vice President, Sales 56 1987
Thomas J. Findley, Jr. 1991-1994 Treasurer 46 1991
1989-1990 Director of Management
Information Services
James J. Kerr 1992-1994 Vice President, Commercial 63 1991
1991-1992 Vice President, Ore
1989-1991 Vice President-Elders Raw
Materials Limited
Augustus B. Kinsolving 1989-1994 Vice President, General 54 1983
Counsel and Secretary
Kevin R. Morano 1993-1994 Vice President, Finance and 40 1993
Chief Financial Officer
1991-1993 General Manager, Ray Complex
1989-1991 Treasurer
Robert J. Muth 1989-1994 Vice President, Government 60 1977
and Public Affairs
Robert M. Novotny 1993-1994 Vice President, Lead, Zinc, 45 1988
Silver and Mineral
Operations
1989-1993 Vice President, Operations
Ronald J. O'Keefe 1989-1994 Controller 52 1982
Gerald D. Van Voorhis 1992-1994 Vice President, Exploration 55 1992
1989-1991 Vice President-Socorro Mining
Company
Michael O. Varner 1993-1994 Vice President, Environmental 52 1993
Operations
1992-1993 General Manager, Western
Metals
1989-1992 Director, Technical Services
James L. Wiers 1989-1994 General Auditor 49 1987
David B. Woodbury 1993-1994 Vice President, Human 53 1993
Resources
1989-1993 Vice President, Human
Resources - Ferro
Corporation
<PAGE>
A25
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON SHARE AND RELATED STOCKHOLDER MATTERS
At March 16, 1994, there were approximately 10,072 common stockholders of
record. The principal market for Asarco's Common Stock is the New York Stock
Exchange. The Stock Exchange symbol for Asarco's common stock is AR. High and
low stock prices and dividends for last two years were:
<TABLE>
<CAPTION>
QUARTERS 1ST 2ND 3RD 4TH TOTAL
------------------ ------------------ ------------------ ------------------ -------------------
1993 1992 1993 1992 1993 1992 1993 1992 1993 1992
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DIVIDENDS PAID PER .20 .20 .10 .20 .10 .20 .10 .20 .50 .80
COMMON SHARE
STOCK MARKET PRICE:
HIGH 28-5/8 28-3/4 23-1/4 31-3/8 20-1/4 30-1/2 22-7/8 25-1/4 28-5/8 31-3/8
LOW 23-1/2 19-7/8 17-3/4 24-3/4 16-7/8 23-3/4 16-5/8 22-1/4 16-5/8 19-7/8
</TABLE>
<PAGE>
A26
ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR SELECTED FINANCIAL AND STATISTICAL DATA
(in millions, except per share data)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
EARNINGS DATA
Net sales $1,736 $1,908 $1,912 $2,210 $2,214
Operating income (loss) (111) (a) (42) (c) 61 (d) 127 (e) 238 (f)
Earnings (loss) before equity
earnings and cumulative effect of
changes in accounting
principles (98) (32) 36 99 184
Equity earnings 27 3 10 (d) 36 41
Net earnings (loss) 16 (b) (83) 46 136 224
Net earnings (loss) per share $0.38 $(2.01) $1.12 $3.28 $5.34
Cash dividends per common share $0.50 $0.80 $1.60 $1.60 $1.50
CONSOLIDATED STATEMENT OF
CASH FLOWS DATA
Cash provided from operating
activities $ 39 $ 106 $ 67 $ 150 $ 270
Cash dividends paid on common
stock 21 33 66 66 63
Property additions 112 135 283 237 157
Business acquisitions, net of
cash acquired - - 17 6 116
Depreciation and depletion 81 87 75 75 64
CONSOLIDATED BALANCE SHEET DATA
(end of period)
Total assets $3,153 $2,946 $2,954 $2,790 $2,456
Inventories - replacement cost
in excess of LIFO inventory
costs 114 125 130 157 165
Total debt 901 869 802 543 348
Common stockholders' equity 1,472 1,357 1,475 1,490 1,431
COMMON STOCK DATA
Common shares outstanding 41,718,000 41,467,000 41,249,000 41,058,000 41,604,000
Price-high $28-5/8 $31-3/8 $30-1/2 $34-1/8 $35-7/8
-low $16-5/8 $19-7/8 $18-1/4 $22-1/4 $26-1/8
Book value per common share $35.27 $32.74 $35.75 $36.29 $34.40
Price/Earnings ratio 60.92 - 19.13 8.27 5.60
Dividend payout ratio 133.2% - 143.2% 48.8% 28.1%
Financial Ratios
Current assets to current
liabilities 1.5 1.6 1.8 2.0 1.8
Debt as % of capitalization 38.0% 39.0% 35.2% 26.7% 19.6%
Employees (at year-end) 8,500 8,900 9,100 9,300 9,000
</TABLE>
<PAGE>
A27
<TABLE>
NOTES TO SELECTED FINANCIAL DATA
<C> <S>
(a) Includes a $25.6 pre-tax provision for the valuation of inventories and
additions to reserves for closed plants, $9.2 million of LIFO profits and
$8.2 million of previously unrecognized losses of Nor Peru.
(b) Includes $26.4 (net of taxes of $.4) of previously unrecognized equity
earnings of Southern Peru Copper Corp. and $86.3 as the result of the
cumulative effect of a change in accounting principle.
(c) Includes a $66.7 pre-tax provision for closed plant and environmental
matters and a $31.9 provision to reduce the carrying value of certain
facilities.
(d) Includes a $10.6 pre-tax provision for doubtful accounts for a copper
customer receivable. Effective the second quarter of 1991, MEDIMSA is
accounted for on the cost basis.
(e) Includes a $75.5 pre-tax provision for closed plants and environmental
matters and $7.0 for increased State of Arizona royalties.
(f) Includes a $34.3 pre-tax loss on sale of businesses.
</TABLE>
<PAGE>
A28
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
EARNINGS: The Company reported net earnings for the year ended December 31, 1993
of $15.6 million, or $.38 per share, compared with a net loss of $83.1 million,
or $2.01 per share in 1992 and net earnings of $46.0 million, or $1.12 per
share, in 1991. Net earnings in 1993 include $104.5 million of previously
unrecognized results of the Company's investments in Peru. In the fourth
quarter of 1993, the Company resumed equity accounting for its 52.3% interest in
Southern Peru Copper Corporation (SPCC) and recorded the results of its 80%
owned subsidiary Corporacion Minera Nor Peru, S.A. (Nor Peru). The change in
accounting for Asarco's investments in Peru resulted from the improvements in
the political, economic and operating conditions in Peru, which included the
ratification of a new constitution and the successful completion of SPCC's
capital program financing, which restored management's influence over its
Peruvian operations. To reflect this change, the Company recorded $18.2 million
of previously unrecognized earnings relating to the period 1988 through 1993
from its investments in Peru and $86.3 million, or $2.08 per share, for the
cumulative effect of a change in accounting principle resulting from SPCC's
adoption of SFAS 109, "Accounting for Income Taxes". The Company also recorded
an after-tax charge of $16.7 million ($25.6 million pre-tax) related to the
valuation of certain inventories and additions to reserves, principally for
assets planned for disposition. Also included in 1993 earnings are LIFO profits
of $5.9 million after-tax ($9.2 million pre-tax) resulting from the reduction of
inventories accounted for on a LIFO basis due principally to the completion of
the integration of the Company's copper business.
Results were adversely impacted beginning in late 1992 and into early 1993 by
unusually heavy rains in Arizona which affected operations at two of the
Company's principal copper properties. While the most severe effect of the
rains was overcome by the second quarter of 1993, the limitations imposed on
mining operations at the Ray mine by the substantial amount of water retained in
the pit continued to affect operations through the balance of the year. As a
result, copper production was reduced from expected levels, costs were higher
and net earnings were reduced by $22 million. Completion of the major
expansions at the Company's Mission and Ray mines in Arizona resulted in
increased copper mine production in 1993 and 1992 compared with 1991, but
principally because of the heavy rains in Arizona, copper mine production did
not meet expectations.
Asarco earnings are heavily influenced by the metals markets. The economic
recovery in the United States created increasingly strong demand for the
Company's products domestically but economic weakness in continental Europe and
in Japan offset most of the growth in the U.S., Southeast Asia and Latin
America. As a result of the imbalance in supply and demand, prices for all of
the Company's principal base metal products, copper, lead and zinc, reached new
lows for this economic cycle in 1993. Silver prices however, increased in 1993
compared to 1992 and 1991 as speculative buying and concern over inflation
renewed investor demand for precious metals. Compared with 1992, the Company's
1993 earnings were lowered by $96 million due to these price declines.
The net loss of $83.1 million in 1992 includes an after-tax charge of $122.1
million consisting of $56 million for the adoption of SFAS 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions", $44 million for
environmental costs, and $21.1 million for the reduction in carrying value of
certain facilities.
Net earnings of $46 million in 1991 were reduced by a charge of $6.6 million
after-tax, to establish a reserve for a receivable from a copper customer which
filed for bankruptcy protection and were benefited by an after-tax profit of
$5.4 million from the sale of the Company's direct interest in Highlands Gold
Limited.
In August 1993, the Company sold a 9.9% interest in Asarco Australia Limited
(Asarco Australia), its gold mining subsidiary for $13.8 million. The sale
resulted in a pre-tax gain of approximately $10.3 million ($5.4 million after-
tax). Owning less than 50% of Asarco Australia following the sale, the Company
began to account for this investment by the equity method. In September 1993,
Asarco Australia offered 13.3 million shares of previously unissued common stock
to the public, resulting in net cash proceeds of A$16.4 million. As a result of
this share issuance, the Company's ownership was reduced to 45.3% and a $3.3
million pre-tax gain ($2.1 million after-tax) was recognized as the shares were
sold at a price exceeding the book value per share of the Company's investment.
In January 1994, the Company sold its remaining 45.3% interest (66.5 million
shares) for $79.5 million. The sale resulted in a pre-tax gain of $58.5 million
which will be reported in the first quarter of 1994.
<PAGE>
A29
PRICES: Prices for the Company's metals are established principally on the New
York Commodity Exchange (COMEX) or the London Metal Exchange (LME). Thus, it is
not possible to predict prices for future metal sales.
Price volume analysis:
The following prices and volumes were realized.
<TABLE>
<CAPTION>
PRICE 1993 1992 1991
----------- ------------ ------------
<S> <C> <C> <C>
Copper (per pound) $ .87 $ 1.04 $ 1.07
Lead (per pound) .20 .26 .26
Silver (per ounce) 4.22 3.97 4.12
Zinc (per pound)(1) .44 .56 .51
Gold (per ounce) 358.59 360.53 397.85
VOLUME (IN THOUSANDS)
Copper (pounds) 1,056,200 1,005,200 973,100
Lead (pounds) 423,000 403,200 424,600
Silver (ounces) 32,754 34,775 37,325
Zinc (pounds)(1) 192,500 212,000 205,100
Gold (ounces) 162 191 189
<FN>
(1) Zinc prices are per pound for refined zinc, which is sold in concentrate
form. Volume is pounds of refined zinc contained in concentrate. The
Company fully hedged its zinc mine production for 1993 at an average price
of 55 cents per pound.
</TABLE>
SALES: Sales in 1993 were $1,736.4 million, compared with $1,908.5 million in
1992 and $1,911.8 million for 1991. The decline in sales dollars caused by
lower prices for copper and lead in 1993 was partially offset by increased
volumes for both metals. Accounting for the Company's investment in Asarco
Australia as an equity investment rather than as a consolidated subsidiary
reduced 1993 sales by approximately $25 million.
COST OF PRODUCTS AND SERVICES: Cost of products and services in 1993 were
$1,638.0 million, compared with $1,647.3 million in 1992 and $1,634.2 million in
1991. The decrease in 1993 was caused principally by the elimination of
operating costs at operations on standby status. In April 1993, the Company put
its Troy, Montana, copper-silver mine on standby due to low silver prices. The
Troy shutdown followed the suspension of production at the Galena mine in 1992
and the Coeur mine in 1991. LIFO profits of $9.2 million, the deconsolidation
of Asarco Australia and other operating cost reductions, $8.2 million of
previously unrecognized losses of Nor Peru and higher purchases of refined
copper also affected cost of products and services. The Company's cost for
purchased refined copper approximates the market price at which it is sold.
Cost of products and services were negatively impacted by the heavy rains in
Arizona in late 1992 and early 1993. The increase in 1992 was from increases in
copper sales volumes, net of the impact of lower lead and silver sales volumes
and lower purchases of refined copper. In 1991, equipment availability
problems, higher reagent usage, pump repairs and train derailments at the Ray
mine, resulted in reduced production and higher operating costs.
OTHER EXPENSES: Selling and administrative costs decreased by $1.8 million in
1993 and $7.1 million in 1992, principally as a result of cost reduction
programs. The 1991 provision for doubtful accounts includes a $10.6 million bad
debt reserve for receivables from Laribee Wire Manufacturing Company, Inc. and
its affiliated companies. Depreciation and depletion expense decreased by $6
million in 1993 as a result of the temporary closure of the Troy mine, the
deconsolidation of Asarco Australia and lower production at the Ray mine due to
heavy rains. Depreciation and depletion expense increased by $11.8 million in
1992 primarily as a result of higher production following the completion of the
expansion programs at Mission in October 1991 and Ray in February 1992.
Increases in ore reserves at Ray extended the economic life of the mine,
reducing depreciation and depletion expense. Research and exploration expense
declined by $5.0 million in 1992 as a result of reduced levels of exploration
activity, and that level was maintained in 1993.
<PAGE>
A30
NONOPERATING ITEMS: Interest expense increased a further $6.1 million in 1993
after increasing by $5.0 million in 1992 as compared to 1991 as a result of
higher borrowings. The amount of interest capitalized has been declining as a
result of the completion of portions of the copper expansion program. Interest
expense has been reduced by lower interest rates paid on floating rate debt.
The weighted average interest rate on this debt was 3.7% in 1993 compared to
4.2% in 1992 and 6.5% in 1991. Other income was $30.2 million in 1993, $23.9
million in 1992 and $22.9 million in 1991. Other income in 1993 includes a
$10.3 million gain on the sale of a 9.9% interest in Asarco Australia and $9.4
million of dividends from SPCC, recorded prior to resuming equity accounting.
Other income in 1992 includes $7.8 million of dividends from SPCC and in 1991 an
$8.7 million gain on the sale of Highlands Gold Limited shares. Dividends from
M.I.M. Holdings Limited included in other income were $8.3 million in 1993, $8.8
million in 1992 and $9.5 million in 1991.
TAXES ON INCOME: The tax benefits in 1993 and 1992 result principally from
operating losses and, in 1992, from the settlement of a Canadian tax assessment.
Taxes in 1993 include $2.8 million for additional deferred Federal Income taxes
as a result of the increase in the statutory tax rate to 35% and higher taxes on
the gain realized on the sale of 9.9% of the shares of Asarco Australia, as a
result of providing taxes on earnings previously treated as permanently
reinvested while Asarco Australia was a consolidated subsidiary. Taxes on
income were reduced for 1991 as a result of percentage depletion, partially
offset by the tax effect of the pro rata repurchase of outstanding shares by
SPCC. Net operating loss carryforwards have reduced the Company's deferred tax
liability by $127.6 million at December 31, 1993. The Company believes that
these carryforwards, which expire in 2006, 2007 and 2008, will reduce future
federal income taxes otherwise payable and, if necessary, the Company could
implement available tax planning strategies, including the sale of certain
assets, to realize the tax benefit of the carryforwards.
EQUITY IN EARNINGS OF NONCONSOLIDATED ASSOCIATED COMPANIES: Equity earnings in
1993 are principally from the previously unrecognized results of SPCC. In the
second quarter of 1991, the Company discontinued equity accounting for its
investment in Mexico Desarrollo Industrial Minero, S.A. de C.V. (MEDIMSA), after
announcing that it was considering the sale or other form of disposition of some
or all of its investment. In light of this and other factors, the Company's
equity earnings from MEDIMSA include earnings for the first quarter of 1991
only. In January 1994, the Company signed an agreement with Grupo Industrial
Minera Mexico, S.A. de C.V. (Grupo Mexico) for combining MEDIMSA with Grupo
Mexico, its publicly traded parent. The agreement is subject to a number of
approvals. Under the terms of the agreement with Grupo Mexico, the Company will
hold a 23.6% stake in the new Grupo Mexico upon completion of the transaction.
This transaction will ultimately provide greater liquidity for the Company as
its holdings will be in a publicly traded entity.
CASH FLOWS - OPERATING ACTIVITIES: Net cash provided from operating activities
was $38.9 million in 1993, compared with $105.7 million in 1992 and $67.5
million in 1991. The $66.8 million decrease in 1993 from 1992, was from lower
earnings due to a decline in metals prices and other items noted above, net of
$101.5 million of operating cash provided from inventory and receivable
reductions and higher accounts payable. Setting aside the effect of the $122.1
million provision, which is a noncash charge, and other noncash items, the $38.2
million increase in 1992 from 1991 results from $13.9 million from operating
activities and $24.3 million from a reduction in operating assets net of
liabilities.
CASH FLOWS - INVESTING ACTIVITIES: Capital expenditures were $112.3 million in
1993, of which $23.8 million was spent on the completion of the El Paso copper
smelter modernization. Capital expenditures in 1992 were $134.6 million,
including $70.3 million for the copper expansion and modernization program at
the Ray mine and El Paso smelter and $9.5 million for participation payments on
previously acquired properties. Capital expenditures in 1991 were $282.9
million, of which $207.5 million was spent on the expansion and modernization
program at the Mission and Ray mines and the El Paso smelter. The expansion and
modernization at Mission was completed in the fourth quarter of 1991 and at Ray
in the first quarter of 1992. The Company's planned capital expenditures in
1994 are estimated to be about $90 million.
The proceeds from sale of securities and property represents, principally, the
investment portfolio of Geominerals Insurance Company, Ltd. which for the most
part is reinvested by purchasing additional securities. Proceeds of $13.8
million from the sale of a 9.9% interest in Asarco Australia are included in
proceeds from sale of securities in 1993. In 1992, the Company did not exercise
a $40 million option to purchase 16,705,527 shares of MEDIMSA which it held
under a 1989 agreement, effectively lowering its ownership interest to 28.3%.
Included in purchases of investments in 1991 is $24.9 million for a stock
subscription of MEDIMSA by a wholly owned subsidiary of the Company. The
Company received
<PAGE>
A31
proceeds of $25.8 million in 1991 from the sale of shares of Highlands Gold
Limited and received $31.4 million from a SPCC pro rata repurchase of
outstanding shares which is included in proceeds from sale of securities. The
Company reduced its carrying value in SPCC by the amount of these proceeds. In
1991, Asarco Australia, previously a 60% owned subsidiary of the Company,
acquired the remaining 50% interest in the Wiluna gold mine owned by its former
partner for $17.4 million.
LIQUIDITY AND CAPITAL RESOURCES: Debt securities in the amount of $250 million
were issued in 1993 including $100 million of 7 3/8% Notes due in 2003, $100
million of 7 7/8% Debentures due in 2013 and $50 million of 7% Notes due in
2001. Proceeds of these debt issues were used to reduce borrowings under
revolving credit loan agreements. In addition, after year-end, the Company
prepaid its 9 3/4% Sinking Fund Debentures at par value plus a premium of .9%.
In 1993, the Company also entered into a new five-year $320 million revolving
credit agreement to replace a $260 million revolving credit agreement which
expired. At December 31, 1993, the Company's debt as a percentage of total
capitalization was 38.0%, compared with 39.0% at the end of 1992 and 35.2% at
the end of 1991. Debt at the end of 1993 was $900.5 million, compared with
$868.8 million in 1992 and $801.6 million at the end of 1991. Additional
available credit under existing loan agreements totaled $339 million at the end
of 1993. The Company adopted SFAS 115, "Accounting for Certain Investments in
Debt and Equity Securities" in the fourth quarter of 1993, which increased
stockholders equity by an after-tax credit of $112.7 million ($173.4 million
pre-tax) to reflect the increased net value of its cost investments, principally
M.I.M. Holdings Limited. Earnings were not affected by this accounting change.
The Company expects that it will meet its cash requirements in 1994 and beyond
from internally generated funds, from proceeds of the sale of its remaining
interest in Asarco Australia in January 1994 and from borrowings, if necessary,
under its revolving credit agreements, or from additional debt financing.
DIVIDENDS AND CAPITAL STOCK: The Company paid dividends of $20.8 million, or 50
cents per share, in 1993 and $33.0 million, or 80 cents per share, in 1992. In
1991, the Company purchased 67,314 shares of common stock at a cost of $1.8
million and paid dividends of $65.8 million, or $1.60 per share. At the end of
1993, the Company had 41,718,000 common shares issued and outstanding, compared
with 41,467,000 at the end of 1992 and 41,249,000 at the end of 1991.
CLOSED FACILITIES AND ENVIRONMENTAL MATTERS: During 1993, the reserve for
environmental matters was increased by $6.2 million for ongoing evaluations of
environmental costs. As a result of developments during 1992, at a number of
the Company's properties where it was probable that an environmental liability
had been incurred, the Company was able to further refine previous estimates
with requisite certainty for a substantial portion of the anticipated costs at
those sites. Accordingly, in 1992, the Company recorded a pre-tax charge of
$72.4 million to provide additional reserves for these environmental costs. At
the end of 1993, reserves for closed plant and environmental matters totaled
$116.1 million. Cash expenditures charged to these reserves were $44 million in
1993, $36 million in 1992 and $32 million in 1991. The increased level of
expenditures in 1993 are due to settlement of litigation concerning past
operations at the Company's Globe plant in Denver. Future environmentally
related expenditures cannot be reliably determined in many circumstances due
to the early stages of investigation, the uncertainties relating to specific
remediation and clean-up methods and therefore the related costs, the possible
participation of other potentially responsible parties, insurance coverage
issues and changing environmental laws and interpretations. It is the opinion
of Management that the outcome of these environmental matters will not
materially adversely affect the financial position of Asarco and its
consolidated subsidiaries. However, it is possible that future environmental
contingencies could have a material effect on quarterly or annual operating
results, when they are resolved in future periods. This opinion is based on
considerations including experience related to previous court judgments and
settlements and remediation costs and terms. The financial viability of other
potentially responsible parties has been considered when relevant and no credit
has been assumed for any potential insurance recoveries when the availability of
insurance has not been determined.
In 1992, the Company concluded that certain facilities, primarily at the El
Paso, Texas, smelter, were unlikely to be used following completion of its
modernization and expansion program in 1993. Accordingly, the Company recorded
a pre-tax charge of $31.9 million to reduce the carrying value of these
facilities.
ACCOUNTING MATTERS: In 1993, the Company adopted SFAS 112, "Employers'
Accounting for Post Employment Benefits", which had no net effect on earnings.
<PAGE>
A32
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
ASARCO Incorporated
and Consolidated Subsidiaries
CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
For the years ended December 31, 1993 1992 1991
(in thousands, except per share amounts) -------------- -------------- --------------
<S> <C> <C> <C>
Sales of products and services $1,736,358 $1,908,492 $1,911,806
Operating costs and expenses:
Cost of products and services 1,637,959 1,647,263 1,634,198
Selling, administrative and other 85,347 87,195 94,258
Provision for doubtful accounts 2,902 3,436 13,625
Depreciation and depletion 80,641 86,642 74,869
Research and exploration 20,871 21,410 26,431
Provision for plant closures and
disposals(7) 13,156 31,900 -
Provision for environmental matters (8) 6,241 72,400 7,305
----------------------------------------------
Total operating costs and expenses 1,847,117 1,950,246 1,850,686
----------------------------------------------
Operating income (loss) (110,759) (41,754) 61,120
Interest expense (9) (57,321) (51,230) (46,227)
Other income (2) 30,247 23,911 22,870
Gain on issuance of capital stock by
Asarco Australia Limited (6) 3,270 - -
----------------------------------------------
Earnings (loss) before taxes and equity
earnings and cumulative effect of
changes in accounting principles (134,563) (69,073) 37,763
Taxes on income (benefit) (3) (36,503) (37,371) 2,199
----------------------------------------------
Earnings (loss) before equity earnings
and cumulative effect of changes in
accounting principles (98,060) (31,702) 35,564
Equity in earnings of nonconsolidated
associated companies, net of taxes
of $406 in 1993 and $3,473 in 1991 (6) 27,384 2,575 10,393
----------------------------------------------
Earnings (loss) before cumulative
effect of changes in accounting
principles (70,676) (29,127) 45,957
Cumulative effect of changes in
accounting principles, net of taxes of
$27,800 in 1992 (6) (11) 86,295 (53,964) -
----------------------------------------------
Net earnings (loss) $ 15,619 $ (83,091) $ 45,957
----------------------------------------------
----------------------------------------------
Per common share amounts:
Earnings (loss) before cumulative
effect of changes in accounting
principles $ (1.70) $ (0.70) $ 1.12
Cumulative effect of changes in
accounting principles 2.08 (1.31) -
----------------------------------------------
Net earnings (loss) $ 0.38 $ (2.01) $ 1.12
----------------------------------------------
----------------------------------------------
Cash dividends $ 0.50 $ 0.80 $ 1.60
Weighted average number of shares
outstanding 41,594 41,364 41,128
<FN>
( ) See notes to financial statements
</TABLE>
<PAGE>
A33
ASARCO Incorporated
and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
At December 31, 1993 1992
(dollars in thousands) ------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,500 $ 33,248
Accounts receivable, net of allowance for
doubtful accounts of $4,579 and $4,232 312,178 341,878
Inventories (4) 245,034 283,026
Other assets 31,537 29,100
Investment in Asarco Australia Limited(6) 18,573 -
------------------------------
Total current assets 619,822 687,252
------------------------------
Investments (6)
Cost method 783,417 803,550
Equity method 346,927 46,101
------------------------------
Total investments 1,130,344 849,651
------------------------------
Property (7) 2,497,605 2,423,720
Less: Accumulated depreciation and
depletion (1,192,153) (1,112,755)
------------------------------
Net property 1,305,452 1,310,965
------------------------------
Intangible and other assets 96,880 98,048
------------------------------
Total assets $3,152,498 $2,945,916
------------------------------
------------------------------
LIABILITIES
Current liabilities:
Bank loans $ 16,875 $ 20,574
Current portion of long-term debt (9) 14,801 63,868
Accounts payable 264,738 208,688
Salaries and wages 15,759 15,985
Taxes on income (3) 29,516 42,879
Reserve for closed plant and environmental
matters (8) 46,409 39,997
Other current liabilities 30,582 28,720
------------------------------
Total current liabilities 418,680 420,711
Long-term debt (9) 868,871 784,327
Deferred income taxes (3) 147,864 104,240
Reserve for closed plant and environmental
matters (8) 69,694 100,962
Accrued postretirement benefit obligation(11) 92,943 90,214
Other liabilities and reserves 82,848 87,969
------------------------------
Total liabilities 1,680,900 1,588,423
------------------------------
Contingencies (8)
PREFERRED STOCKHOLDERS' EQUITY (10)
Authorized-10,000,000 shares without par
value; none issued
COMMON STOCKHOLDERS' EQUITY (10)
Authorized-80,000,000 common shares
without par value: Issued shares: 1993 and 1992-
45,039,878 679,991 679,991
Unrealized gain on securities reported at
fair value (6) 112,729 -
Retained earnings 808,143 821,072
Treasury stock (at cost) - common shares
1993-3,321,478; 1992-3,572,705; (129,265) (143,570)
------------------------------
Total common stockholders' equity 1,471,598 1,357,493
------------------------------
Total liabilities, preferred and
common stockholders' equity $3,152,498 $2,945,916
------------------------------
------------------------------
<FN>
( ) See notes to financial statements
</TABLE>
<PAGE>
A34
ASARCO Incorporated
and Consolidated Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended December 31, 1993 1992 1991
(in thousands) ------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings (loss) $ 15,619 $ (83,091) $ 45,957
Adjustments to reconcile net earnings (loss) to net
cash provided from operating activities:
Depreciation and depletion 80,641 86,642 74,869
Provision (benefit) for deferred income taxes (19,639) (60,200) 2,387
Treasury stock used for employee benefits 4,743 4,140 3,318
Undistributed equity earnings (26,114) (1,772) (11,788)
Net gain on sale of investments and property (18,823) (2,600) (10,125)
Cumulative effect of change in accounting
principle by SPCC (86,295) - -
Provision for plant closures and disposals 13,156 31,900 -
Increase (decrease) in reserves for closed plant
and environmental matters (38,012) 36,781 (24,944)
Provision for postretirement benefit obligation at
adoption - 81,764 -
Cash provided from (used for) operating assets and
liabilities, net of acquisitions:
Accounts receivable 21,765 (5,255) 53,759
Inventories 37,462 (19,200) (10,174)
Accounts payable and accrued liabilities 42,231 13,553 (7,762)
Other operating liabilities and reserves 12,149 6,960 (52,171)
Other operating assets (709) 15,620 3,888
Foreign currency transaction losses 687 447 262
------------------------------------------
Net cash provided from operating activities 38,861 105,689 67,476
------------------------------------------
INVESTING ACTIVITIES
Capital Expenditures (112,315) (134,574) (282,917)
Business acquisitions, net of cash acquired - - (17,392)
Proceeds from sale of securities and property 176,024 72,389 116,384
Purchase of investments, principally marketable
securities (139,592) (73,374) (77,998)
------------------------------------------
Net cash used for investing activities (75,883) (135,559) (261,923)
------------------------------------------
FINANCING ACTIVITIES
Debt incurred 387,788 84,781 267,654
Debt retired (349,371) (20,195) (9,466)
Retirement of common stock purchase warrants, net - - 766
Net treasury stock transactions 321 1,209 (955)
Dividends paid (20,792) (33,043) (65,796)
------------------------------------------
Net cash provided from financing activities 17,946 32,752 192,203
Effect of exchange rate changes on cash (1,672) (4,844) 2,861
------------------------------------------
Increase (decrease) in cash and cash equivalents (20,748) (1,962) 617
Cash and cash equivalents at beginning of year 33,248 35,210 34,593
------------------------------------------
Cash and cash equivalents at end of year $ 12,500 $ 33,248 $ 35,210
------------------------------------------
------------------------------------------
<FN>
( ) See notes to financial statements
Descriptions of material noncash transactions and supplemental disclosures are
included in Notes 3, 6, 8 and 9.
</TABLE>
<PAGE>
A35
ASARCO Incorporated
and Consolidated Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN
COMMON STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the years ended December 31, 1993 1992 1991
(dollars in thousands) ------------ ------------ -----------
<S> <C> <C> <C>
Common stock
Balance at beginning of year:
1993-45,039,878 shares;
1992-45,039,878 shares;
1991-44,992,272 shares $ 679,991 $ 679,991 $ 679,225
Issuance of 47,606 shares upon
exercise of common stock purchase
warrants - - 766
---------------------------------------------
Balance at end of year:
1993-45,039,878 shares;
1992-45,039,878 shares;
1991-45,039,878 shares 679,991 679,991 679,991
---------------------------------------------
Unrealized gain on securities reported
at fair value 112,729 - -
---------------------------------------------
Retained earnings
Balance at beginning of year 821,072 950,791 976,650
Net earnings (loss) 15,619 (83,091) 45,957
Cash dividends declared and paid on common shares (20,792) (33,043) (65,796)
Treasury stock issued at less than cost (9,243) (7,035) (7,679)
Foreign currency adjustment 1,487 (6,550) 1,659
---------------------------------------------
Balance at end of year 808,143 821,072 950,791
---------------------------------------------
Treasury stock
Balance at beginning of year (143,570) (155,954) (165,996)
Purchased (127) (166) (1,840)
Used for corporate purposes 14,432 12,550 11,882
---------------------------------------------
Balance at end of year:
1993-3,321,478 shares;
1992-3,572,705 shares;
1991-3,790,624 shares (129,265) (143,570) (155,954)
---------------------------------------------
Total common stockholders' equity $ 1,471,598 $ 1,357,493 $ 1,474,828
---------------------------------------------
---------------------------------------------
<FN>
( ) See notes to financial statements
</TABLE>
<PAGE>
A36
ASARCO Incorporated and Consolidated Subsidiaries
NOTES TO FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements include all
significant subsidiaries in which the Company has voting control. Significant
investments in the capital stock of associated companies and subsidiaries over
which the Company has significant influence but does not have voting control are
accounted for by the equity method.
Cash Equivalents: The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
Inventories: Company-owned metals processed by smelters and refineries are
valued at the lower of last-in, first-out (LIFO) cost or market. Other
inventories are valued at the lower of first-in, first-out (FIFO) or average
cost or market.
Investments: The Company adopted Statement of Financial Accounting Standards
(SFAS) 115 "Accounting for Certain Investments in Debt and Equity Securities",
in 1993. Investment in equity securities that have readily determinable fair
values and all debt securities are classified as held to maturity, trading, or
available-for-sale securities. The unrealized gains or losses for trading
securities are included in net earnings, while the unrealized gains or losses on
securities classified as available-for-sale (reported at fair value) are
included as a separate component of Stockholders' equity.
Property: Assets are valued at cost or less. Betterments, renewals, costs of
bringing new mineral properties into production, and the cost of major
development programs at existing mines are capitalized. Maintenance, repairs,
development costs to maintain production at existing mines, and gains or losses
on assets retired or sold are reflected in earnings as incurred. Plant assets
are depreciated over their estimated useful lives, generally by the units-of-
production method. Depreciation and depletion of mine assets are computed
generally by the units-of-production method using proven and probable ore
reserves.
Revenue Recognition: Revenue is recognized on metals sold at the time a sales
contract is executed and the sales price is fixed in accordance with the terms
of the contract.
Exploration: Tangible and intangible costs incurred in the search for mineral
properties are charged against earnings when incurred.
Hedge Contracts: The Company periodically uses futures and options contracts to
hedge the effect of price changes on a portion of the primary metals it sells.
Gains and losses on hedge contracts are reported as a component of the related
transaction.
Taxes on Income: Deferred income taxes reflect the future tax consequences of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year-end. No deferred income taxes have been provided
for the income tax liability which would be incurred on repatriation of the
undistributed earnings of the Company's consolidated foreign subsidiaries
because the Company intends indefinitely to reinvest these earnings outside the
United States. General business credits are accounted for by the flow-through
method. The Company adopted SFAS 109 "Accounting for Income Taxes", in 1992,
and restated prior period financial statements to reflect the change.
<PAGE>
A37
Subsidiary Stock Issuance: Gains or losses arising from the sale of previously
unissued shares to an unrelated party by a subsidiary are recognized as a
component of net earnings to the extent that the net book value of the shares
owned by the parent after the sale exceeds or is lower than the net book value
per share immediately prior to the sale of the shares by the subsidiary.
(2) Other Income
- -----------------
Other Income consists of the following:
<TABLE>
<CAPTION>
For the years ended December 31, 1993 1992 1991
------------ ------------ -------------
(in millions)
<S> <C> <C> <C>
Interest income $ 2.0 $ 3.7 $ 4.1
Dividend income 17.8 16.9 9.8
Miscellaneous 10.4 3.3 9.0
-----------------------------------------
Total $ 30.2 $ 23.9 $ 22.9
-----------------------------------------
-----------------------------------------
</TABLE>
(3) Taxes on Income
- --------------------
Earnings (loss) before taxes on income is as follows:
<TABLE>
<CAPTION>
For the years ended December 31, 1993 1992 1991
------------ ------------ ------------
(in millions)
<S> <C> <C> <C>
Domestic operations $ (129.9) $ (153.6) $ 21.6
Foreign operations 109.4 5.3 30.0
--------------------------------------
Total $ (20.5) $(148.3) $ 51.6
--------------------------------------
--------------------------------------
</TABLE>
<PAGE>
A38
Tax Expense:
The components of the provision for taxes on income are as follows:
<TABLE>
<CAPTION>
For the years ended December 31, 1993 1992 1991
---------- ---------- ---------
(in millions)
<S> <C> <C> <C>
U.S. Federal:
Current tax (benefit) $(20.7) $ (8.5) $ (1.1)
Deferred tax provision (benefit) (19.6) (60.0) 1.9
-------------------------------
U.S. Federal income tax provision (benefit) (40.3) (68.5) 0.8
-------------------------------
Foreign and State:
Current tax provision 4.2 3.5 4.4
Deferred tax provision (benefit) - (0.2) 0.5
-------------------------------
Foreign and state income tax provision 4.2 3.3 4.9
-------------------------------
Total income tax provision (benefit) $(36.1) $(65.2) $ 5.7
-------------------------------
-------------------------------
</TABLE>
Total taxes paid (refunded) were: 1993-($3.1) million; 1992-$2.6 million and
1991-($16.3) million.
Reconciliation of Statutory Income Tax Rate:
<TABLE>
<CAPTION>
For the years ended December 31, 1993 1992 1991
---------- ---------- ----------
<S> <C> C <C>
U.S. statutory income tax rate (benefit) (35.0%) (34.0%) 34.0%
Adjustment for entities for which
no U.S. tax has been provided 23.2 (0.2) 2.8
Percentage depletion (12.1) (6.8) (34.2)
Undistributed equity earnings of SPCC
permanently reinvested (183.4) - -
Dividends received deduction (21.0) - -
Foreign taxes, net of federal benefit 15.4 .5 4.1
Effect of increase in statutory tax rate
on deferred tax liability 15.6 - -
Effect of net operating loss on foreign
tax credits previously recognized 13.6 - -
Excess of tax over book gain on sale of
shares 6.1 - 4.1
Reversal of taxes previously accrued - (4.7) -
Other 1.3 1.2 0.2
---------------------------------
Taxes on income (benefit)-effective rate (176.3%) (44.0%) 11.0%
---------------------------------
---------------------------------
</TABLE>
<PAGE>
A39
Temporary differences and carryforwards which give rise to deferred tax assets
and liabilities are as follows:
<TABLE>
<CAPTION>
Deferred Tax Assets (Liabilities)
At December 31, 1993 1992
---------- ----------
(in millions)
<S> <C> <C>
Current:
Reserve for closed plant and environmental matters $ 11.4 $ 11.1
Inventories 7.6 6.6
Miscellaneous accrued expenses (2.8) (1.9)
Other 7.0 4.9
---------------------
Net deferred tax asset 23.2 20.7
---------------------
Noncurrent:
Tax effect of regular net operating losses 127.6 49.9
Reserve for closed plant and environmental
matters 24.4 36.8
Postretirement benefit obligation 32.5 32.8
Alternative minimum tax credits 7.4 25.9
Previously taxed income 8.2 6.2
Property, plant and equipment (151.1) (115.8)
Investments - MEDIMSA (92.8) (90.1)
Investments - MIM (121.0) (58.9)
Other 16.9 9.0
---------------------
Net deferred tax liability (147.9) (104.2)
---------------------
Total net deferred tax liability $(124.7) $(83.5)
---------------------
---------------------
</TABLE>
At December 31, 1993, the Company had $364.6 million of net operating loss
carryforwards which expire, if unused, in 2006, 2007 and 2008 and $7.4 million
of alternative minimum tax credits which are not subject to expiration. The
Company believes that these carryforwards will be available to reduce future
federal income tax liabilities and has recorded the tax benefit of these
carryforwards as deferred tax assets. Because of shorter carryforward periods
and other statutory differences, the Company's net operating loss carryforwards
for state purposes are not significant and, therefore, have not been recorded as
deferred tax assets.
U.S. deferred income taxes have not been recognized on approximately $267.0
million in 1993 ($167.0 million in 1992 and $174.6 million in 1991) of
undistributed earnings of foreign subsidiaries and nonconsolidated associated
companies more than 50% owned, because assets representing those earnings are
permanently invested. It is not practicable to determine the amount of income
taxes that would be payable upon remittance of assets that represent those
earnings. The amount of foreign withholding taxes that would be payable upon
remittance of assets that represent those earnings would be approximately $2.8
million in 1993 ($3.4 million in 1992 and $3.9 million in 1991).
<PAGE>
A40
(4) Inventories
- ----------------
<TABLE>
<CAPTION>
At December 31, 1993 1992
---------- ----------
(in millions)
<S> <C> <C>
Inventories of smelters and refineries at LIFO
cost or market $ 12.7 $ 30.0
Provisional cost of metals received for
which prices have not yet been fixed 44.2 61.6
Mine inventories at FIFO cost or market 98.6 96.7
Materials and supplies (average cost or less) 62.4 58.4
Other 27.1 36.3
---------------------
Total $ 245.0 $ 283.0
---------------------
---------------------
</TABLE>
Replacement cost exceeds inventories valued at LIFO cost by approximately $114.1
million in 1993 (1992-$125.2 million). Liquidation of LIFO inventories resulted
in recognition of pre-tax earnings of $9.2 million in 1993.
(5) Acquisitions
- -----------------
Asarco Australia Limited, previously a 60% owned subsidiary of the Company,
invested $17.4 million in 1991 to acquire the remaining 50% interest in the
Wiluna gold mine owned by its former partner.
Acquisitions are accounted for as purchases and, accordingly, acquired assets
and liabilities have been recorded at their estimated fair market values at the
date of acquisition. Operating results are included in the Consolidated
Statement of Earnings from the acquisition dates. The excess of the purchase
price over the valuation of the net assets acquired of $59.0 million at December
31, 1993 is recorded as goodwill in Intangible and other assets. Goodwill is
generally amortized over either the mine life up to a maximum of 40 years on a
units-of-production basis or over 40 years on a straight-line basis.
Accumulated amortization was $9.3 million and $7.7 million at December 31, 1993
and 1992, respectively.
(6) Investments
- ----------------
The Company has substantial interests in associated companies in Mexico, Peru
and Australia, which are engaged principally in mining, smelting and refining
nonferrous metals. These companies are Mexico Desarrollo Industrial Minero,
S.A. de C.V. (MEDIMSA), Southern Peru Copper Corporation (SPCC), M.I.M. Holdings
Limited (MIM) and Asarco Australia Limited (Asarco Australia). The fiscal year
for MIM ends June 30. MEDIMSA, Asarco Australia and SPCC report on a calendar-
year basis.
MEDIMSA: In 1991, the Company announced that it was considering the sale or
other form of disposition of some or all of its investment in MEDIMSA. In light
of this action and other factors, the Company changed from the equity method of
accounting for its interest in MEDIMSA to the cost method, effective with the
second quarter of 1991. At December 31, 1993, cumulative losses that would have
been recognized had equity accounting been continued totaled $7 million. In the
second quarter of 1991, a wholly owned subsidiary of Asarco invested an
additional $24.9 million in MEDIMSA under a rights offering. As a result of not
subscribing to its full share of the offering, the Company's interest in MEDIMSA
declined to 31.2% from 34.0%. Pursuant to a financing and option agreement
entered into in 1989 with a subsidiary of the Chase Manhattan Bank, N.A., the
Company exchanged 16,705,527 shares of MEDIMSA for $38.4 million of previously
issued exchangeable preferred stock of a wholly owned subsidiary of the Company
in December 1992, decreasing ownership to 28.3%. In January 1994, the Company
signed an agreement with Grupo Industrial Minera Mexico S.A. de C.V. (Grupo
Mexico) on terms for combining Medimsa with Grupo Mexico, its publicly traded
parent. Under the terms of the agreement, which is subject to regulatory and
other approvals, the Company will hold a 23.6% stake in the new Grupo Mexico,
upon completion of the transaction.
<PAGE>
A41
SPCC: In 1988, the Company changed from the equity method of accounting for
SPCC to the cost method. This change followed the deterioration in the economy
of Peru, inflation and level of foreign exchange reserves, the economic
uncertainty for the near term outlook and the foreign exchange restrictions on
the remittance of profits then in place. In addition, the Company discontinued
consolidating its interest in Corporacion Minera Nor Peru, S.A. (Nor Peru) for
similar reasons. Conditions have improved and stabilized to the point where the
Company has the ability to reassert influence and act without the governmental
oversight that previously existed. Economic and political conditions have
improved significantly as indicated by the ratification of a new constitution by
voters in Peru in October 1993 and the successful completion of SPCC's financing
of its $300 million capital program in December. Therefore, in the fourth
quarter of 1993, the Company resumed equity accounting and recorded $26.4
million of previously unrecognized equity earnings for SPCC and resumed
consolidation of Nor Peru by recording $8.2 million of previously unrecognized
losses. Effective January 1, 1993, SPCC adopted SFAS 109, "Accounting for
Income Taxes". The impact of adopting this statement on SPCC was to increase
retained earnings as of January 1, 1993 and decrease deferred taxes by $165
million, ASARCO's share of which is $86.3 million, which is reported as the
cumulative effect of a change in accounting principle.
In December 1991, SPCC repurchased approximately 13.8% of its outstanding common
shares pro rata from its shareholders, from which Asarco received proceeds of
$31.4 million. The Company reduced its carrying value in SPCC by the amount of
these proceeds. Dividends received (prior to the resumption of equity
accounting) of $9.4 million in 1993 and $7.8 million in 1992 were recorded as
dividend income.
Asarco Australia: In August 1993, the Company sold a 9.9% interest in Asarco
Australia, its gold mining subsidiary for $13.8 million. The sale resulted in a
pre-tax gain of approximately $10.3 million ($5.4 million after-tax) and reduced
the Company's interest in Asarco Australia to 49.8%. As a result of this sale,
the Company began to account for its investment in Asarco Australia using the
equity method. In September 1993, Asarco Australia offered 13.3 million shares
of previously unissued common stock to th e public, resulting in net cash
proceeds of A$16.4 million. As a result of this share issuance, the Company's
ownership interest was reduced to 45.3% and a $3.3 million pre-tax gain ($2.1
million after-tax) was recognized as the shares were sold at a price exceeding
the book value per share of the Company's investment. In January 1994, the
Company sold its remaining 45.3% interest (66.5 million shares) in Asarco
Australia for $79.5 million. The sale resulted in a pretax gain of $58.5
million which will be reported in the first quarter of 1994.
SFAS 115: In the fourth quarter of 1993, the Company adopted SFAS 115.
Accordingly, certain of the Company's investments, principally M.I.M., have been
classified as available-for-sale securities and are reported at their fair value
of $482.6 million compared to a historical cost of $309.1 million. The
unrealized gains of $173.4 million are reported as a separate component of
stockholders' equity, before deferred taxes of $60.7 million. Investments
accounted for using the equity method of accounting (SPCC) and investments which
do not have readily determinable fair market values (MEDIMSA), are not affected
by this accounting principle.
<PAGE>
A42
Investments in Associated Companies
- -----------------------------------
(in millions - U.S. dollars)
<TABLE>
<CAPTION>
Financial Position
At December 31, 1993 MEDIMSA(a) SPCC(a) MIM
- -------------------- ------- ---- ---
<S> <C> <C> <C>
Cost Equity Cost
Method Method Method
Asarco's Interest 28.3% 52.3% 17.2%
Asarco's Investment
(U.S. GAAP) $298.4 $295.0 $439.1(e)
</TABLE>
<TABLE>
<CAPTION>
December 31, December 31, June 30,
---------------------- ---------------------- ----------------------
1992 1991 1993 1992 1993 1992
---------- ---------- ---------- ---------- ---------- ----------
Mexican GAAP (b) U.S. GAAP Australian GAAP
<S> <C> <C> <C> <C> <C> <C>
Current assets $ 666.3 $ 643.7 $ 304.4 $ 299.6 $ 716.9 $ 645.8
Property-net 2,510.2 2,802.5 391.3 390.2 1,749.6 1,933.7
Other assets 54.6 72.5 35.7 33.5 1,447.3 1,588.9
-----------------------------------------------------------------------
Total assets $ 3,231.1 $ 3,518.7 $ 731.4 $ 723.3 $ 3,913.8 $4,168.4
-----------------------------------------------------------------------
Current liabilities $ 580.9 $ 675.3 $ 61.3 $ 78.2 $ 724.6 $ 408.3
Long-term debt 311.5 191.0 17.3 6.0 1,034.2 1,253.1
Other liabilities - 236.5 20.8 26.6 114.5 131.5
Deferred income
taxes 3.7 3.3 5.6 167.0 234.9 352.1
Minority interests 231.5 254.6 61.4 56.7 123.6 137.4
-----------------------------------------------------------------------
Total liabilities 1,127.6 1,360.7 166.4 334.5 2,231.8 2,282.4
-----------------------------------------------------------------------
Stockholders' equity 2,103.5 2,158.0 565.0 388.8 1,682.0 1,886.0
-----------------------------------------------------------------------
Total liabilities
and stockholders'
equity $ 3,231.1 $ 3,518.7 $ 731.4 $ 723.3 $ 3,913.8 $ 4,168.4
-----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended September 30, December 31, December 31,
- --------------------- ----------------- ---------------- -----------------
<S> <C> <C> <C>
Net Sales 100% Mexican GAAP(c) U.S. GAAP Australian GAAP
1993 $ 885.3 $ 474.0 $ 1,377.6
1992 876.6 550.5 1,435.5
1991 830.0 527.1 1,457.2
Net Earnings (Loss)
100%
1993 $ 51.6 $ 194.2(g) $ (12.6)
1992 87.3 45.6 93.7
1991 66.5 (0.4) 14.8
Equity Earnings
Reported by Asarco
1993 $ - $ 112.7(f) -
1992 - - -
1991 10.2(d) - -
Dividends to Asarco
1993 - $ 9.4 $ 8.3
1992 - 7.8 8.8
1991 - 31.4(h) 9.5
</TABLE>
<PAGE>
A43
GAAP-Generally Accepted Accounting Principles
(a) Quoted market prices on Asarco's investments in MEDIMSA and SPCC are not
available since the shares are not publicly traded. It is not cost
effective to estimate fair value; however, in management's opinion, the
fair value is equal to or exceeds the carrying amount.
(b) Translated into U.S. dollars at the rate in effect at December 31, 1992 ($1
U.S. = MN$3.123). December 31, 1993 financial statements are not
available.
(c) Translated at the average exchange rates of $1 U.S. = MN$3.114 in 1993
(MN$3.089 - 1992; MN$2.949 - 1991).
(d) Includes an adjustment of $(4.6) million in 1991 to reflect the differences
between U.S. and Mexican accounting standards. Effective with the second
quarter of 1991, MEDIMSA is accounted for using the cost method.
(e) Investment classified as available-for-sale security, and is reported at
fair value, including unrealized gain of $172.3 million. Fair value is
based on the December 31, 1993 closing market price of MIM's shares on the
Sydney (Australia) Stock Exchange. Fair value is not necessarily
indicative of an amount realizable in the event of a sale.
(f) Includes $26.4 million of previously unrecognized equity earnings and $86.3
million (Asarco share) relating to the adoption of SFAS 109 by SPCC.
(g) Includes $165 million relating to the adoption of SFAS 109 by SPCC.
(h) $31.4 million from pro-rata repurchase of shares by SPCC in 1991. Asarco
reduced its carrying value in SPCC by the amount of these proceeds.
(7) Property
- -------------
Property is stated at cost and consists of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
At December 31, 1993 1992
----------- -----------
(in millions)
Buildings and equipment $ 2,006.7 $ 1,940.3
Equipment capital leases 122.7 123.2
Mineral land 293.9 289.2
Land, other than mineral 68.2 66.5
Other 6.1 4.5
-----------------------
Total property $ 2,497.6 $ 2,423.7
-----------------------
-----------------------
</TABLE>
Accumulated depreciation applicable to capitalized leases amounted to $39.9
million in 1993, $27.0 million in 1992 and $16.5 million in 1991, including
depreciation charged to earnings of $13.4 million in 1993, $11.1 million in 1992
and $6.5 million in 1991. An increase in the proven and probable ore reserves
at the Ray mine resulting from normal reassessments had the effect of lowering
depreciation by $3.7 million in 1992.
In the fourth quarter of 1993, the Company recorded a pre-tax charge of $13.2
million to provide for the closure and sale of a secondary metal processing
plant, a zinc plant, and its pipe business. In 1992, the Company recorded a
pre-tax charge of $31.9 million to reduce the carrying value of certain
facilities, primarily at the El Paso, Texas smelter, which were unlikely to be
used following the completion of the modernization and expansion program at the
copper smelter in 1993.
(8) Contingencies and Litigation
- ---------------------------------
The Company is a defendant in a lawsuit brought on behalf of classes of persons
who live or have lived within a two mile radius from the site of the Company's
former smelter located in Tacoma, Washington, seeking damages and medical
monitoring due to substances allegedly emitted from the smelter.
<PAGE>
A44
The Company and two subsidiaries, as of December 31, 1993, are defendants in 726
lawsuits brought by 13,940 primary and 11,329 secondary plaintiffs seeking
substantial actual and punitive damages for personal injury or death allegedly
caused by exposure to asbestos as well as four lawsuits for removal or
containment of asbestos-containing products in structures. In addition, the
Company and certain subsidiaries are defendants in product liability lawsuits
involving various other products, including metals.
The Company is a defendant in lawsuits in Arizona brought by Indian Tribes and
some other Arizona water users contesting the right of the Company and numerous
other individuals and entities to use water and, in some cases, seeking damages
for water usage and contamination of ground water. The lawsuits could
potentially affect the Company's use of water at its Ray Complex, Mission
Complex and other Arizona operations.
The Company and certain of its subsidiaries have received notices from the
United States Environmental Protection Agency ("EPA") that they and in most
cases numerous other parties are potentially responsible to remediate alleged
hazardous substance releases at certain sites under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA" or
"Superfund"). In addition, the Company and certain of its subsidiaries are
defendants in lawsuits brought under CERCLA or state laws which seek substantial
damages and remediation. Remedial action is being undertaken by the Company at
some of the sites. In connection with the sites referred to above, as well as
at other closed plants and sites where the Company is working with the EPA and
state agencies to resolve environmental issues, the Company has made reasonable
estimates, where possible, of the extent and cost of necessary remedial action
and damages. As a result of feasibility studies, public hearings, engineering
studies and discussions with the EPA and similar state agencies, for sites where
it is probable that a liability has been incurred and the amount of cost could
be reasonably estimated, the Company recorded pre-tax charges to earnings in
1990 of $75.5 million and in 1992 of $72.4 million. Recorded reserves for these
matters total $116.1 million at December 31, 1993. The Company anticipates that
expenditures relating to these reserves will be made over the next several
years. Net cash expenditures charged to these reserves were $44.3 million in
1993, $35.6 million in 1992 and $32.2 million in 1991.
Future environmental related expenditures cannot be reliably determined in many
circumstances due to the early stages of investigation, the uncertainties
relating to specific remediation and clean-up methods and therefore the related
costs, the possible participation of other potentially responsible parties,
insurance coverage issues and changing environmental laws and interpretations.
It is the opinion of management that the outcome of the legal proceedings and
environmental contingencies mentioned, and other miscellaneous litigation and
proceedings now pending, will not materially adversely affect the financial
position of Asarco and its consolidated subsidiaries. However, it is possible
that future environmental contingencies could have a material effect on
quarterly or annual operating results, when they are resolved in future periods.
This opinion is based on considerations including experience related to previous
court judgments and settlements and remediation costs and terms. The financial
viability of other potentially responsible parties has been considered when
relevant and no credit has been assumed for any potential insurance recoveries
when the availability of insurance has not been determined.
<PAGE>
A45
(9) Debt and Available Credit Facilities
- -----------------------------------------
<TABLE>
<CAPTION>
Long-Term Debt
At December 31, 1993 1992
---------------------- ----------------------
(in millions) Book Value Fair Value Book Value Fair Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revolving credits $ 315.0 $ 315.0 $ 520.0 $ 520.0
Pollution control bonds,
1994/2006 - rates from
6 3/4% to 8.9% 171.1 185.1 171.1 185.9
Capital lease obligations,
1994/2006-rates from 7.3%
to 12.0% 102.2 102.2 109.5 109.5
9 3/4% Sinking Fund
Debentures, 1996/2000 40.0 40.4 40.0 40.8
7% Notes due 2001 50.0 50.2 - -
7 3/8% Notes due 2003 99.4 101.9 - -
7 7/8% Debentures due 2013 99.7 99.7 - -
Other 6.3 6.3 7.6 7.6
-----------------------------------------------
Total long-term debt 883.7 900.8 848.2 863.8
Less, current portion 14.8 14.8 63.9 63.9
-----------------------------------------------
Long-term debt $ 868.9 $ 886.0 $ 784.3 $ 799.9
-----------------------------------------------
-----------------------------------------------
</TABLE>
The fair value of the debt instruments was determined using quoted market prices
of publicly traded securities, or securities of similar maturities and credit
ratings.
Maturities of debt instruments and future minimum payments under capital leases
as of December 31, 1993 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
(in millions) Debt Instruments Capital Leases
------------------ ----------------
1994 $ 6.4 $ 16.6
1995 .8 16.5
1996 35.8 16.8
1997 .8 18.5
1998 343.0 18.3
Thereafter 394.7 55.6
Less interest - (40.1)
----------------------------------
$ 781.5 $ 102.2
----------------------------------
----------------------------------
</TABLE>
Total interest paid (excluding amounts capitalized of $4.0 million in 1993, $7.4
million in 1992 and $12.3 million in 1991) was $51.1 million in 1993, $52.6
million in 1992 and $41.7 million in 1991.
Debt securities in the amount of $250 million were issued in 1993 including $100
million of 7 3/8% Notes due in 2003, $100 million of 7 7/8% Debentures due in
2013 and $50 million of 7% Notes due in 2001. The Company has two revolving
credit agreements that permit borrowings of up to $686.7 million, of which
approximately $339 million was available at December 31, 1993. One facility
allows the Company to borrow up to $366.7 million as of December 31, 1993, after
which the facility will decline by $36.7 million quarterly until 1996. The
second facility expires in March 1998. Borrowings under these agreements bear
interest based on LIBOR, the CD or the prime rate, and averaged 3.8% at December
31, 1993. Rates may vary based upon the Company's debt rating. A commitment
fee of 1/8% per annum is payable on the unused portion of the $366.7 facility in
addition to a 1/8% per annum fee on the full amount of the facility. A
commitment fee of 1/4% per annum is payable on the unused portion of the other
facility.
<PAGE>
A46
The highest level of revolving credit borrowings during 1993 was $535.0 million
(1992-$535.0 million; 1991-$450.0 million). Borrowings under these agreements
averaged $397.7 million for 1993 (1992-$465.4 million; 1991-$390.3 million),
with a weighted average interest rate of 3.7% in 1993 (1992-4.2%; 1991-6.5%).
Under the most restrictive terms of the agreements, the Company must maintain a
tangible net worth, as defined, of at least $1 billion. Tangible net worth was
$1.4 billion at December 31, 1993. The ratio of current assets to current
liabilities cannot be less than 125% and at December 31, 1993 this ratio was
153%.
During 1991 the Company entered into two sale and leaseback transactions for
mobile mining equipment and railroad rolling stock. Proceeds from these
transactions were used principally to replace interim financing which was used
to fund property additions.
In January 1994, the Company prepaid its 9 3/4% Sinking Fund Debentures at par
value plus a premium of .9%, using a portion of the proceeds of the 7% Notes
issued in December 1993.
The Company has two agreements expiring in 1994 which fix the rate on a notional
$7.0 million of its variable-rate debt. During 1993, agreements covering $105.4
million of notional debt expired. The effect of the remaining agreements is to
limit the interest rate exposure to 12.7% and is recorded as an adjustment to
interest expense which resulted in 1993 in a $2.4 million charge (1992-$5.3
million; 1991-$2.5 million). The Company has exposure to credit risk but does
not anticipate nonperformance by the counterparties to these agreements.
(10) Stockholders' Equity
- --------------------------
The Company purchased 5,393 of its common shares in 1993 (1992-5,649 shares;
1991-67,314 shares). In 1993, 256,620 common shares (1992-223,568 shares; 1991-
211,163 shares) were used for savings, stock option and incentive plans. The
effect on the calculations of net earnings per common share of the Company's
common stock equivalents (shares under option) was insignificant.
Retained earnings at December 31, 1993, included undistributed earnings of
$260.2 million for nonconsolidated subsidiaries and $263.0 million for all other
investments. Retained earnings has been increased by cumulative foreign
currency adjustments of $1.6 million at December 31, 1993 ($0.1 million in 1992;
$6.6 million in 1991). In 1993, a charge of $0.6 million was transferred from
cumulative foreign currency adjustments and used to determine the gain on the
sale and dilution of ownership interest in Asarco Australia. Stockholders'
equity at December 31, 1993 has been increased by $112.7 million for the
unrealized gains on securities classified as available-for-sale (net of deferred
taxes of $60.7 million).
Stock Options: The Company has a stockholder-approved Stock Incentive Plan and
a Stock Option Plan. The Stock Incentive Plan replaces the Stock Option Plan.
No additional options will be granted under the Stock Option Plan and unexpired
options continue to be governed by, and exercised under, the Stock Option Plan.
The Stock Incentive Plan provides for the granting of nonqualified or incentive
stock options, as defined under current provisions of the Internal Revenue Code,
as well as for the award of restricted stock and bonuses payable in stock. The
option price for options granted under the Stock Incentive Plan shall not be
less than 100% of the fair market value of the Common Stock on the date of grant
in the case of incentive stock options, or 50% in the case of other options. In
general, options expire after 10 years and are not exercisable for six months
from the date of grant.
<PAGE>
A47
Options granted may provide for "Stock Appreciation Rights" (SARs). An SAR
permits an optionee, in lieu of exercising the option, to receive from the
Company payment in an amount equal to the difference between the market value of
the stock on the date of exercise of the SAR and the purchase price of the stock
under the terms of the option. At December 31, 1993, twenty individuals held
SARs covering options for 550,882 shares, ranging in price from $18.00 to $29.69
per share, exercisable as either regular stock options or SARs.
The authorized number of shares under the Stock Incentive Plan is 2,000,000 of
which 300,000 shares may be awarded as restricted stock. As of December 31,
1993, 1,029,050 shares are available for future grants under the Stock Incentive
Plan. Stock option activity over the past three years under the Stock Incentive
Plan and Stock Option Plan is summarized as follows:
<TABLE>
<CAPTION>
Option Price
Number of shares (range per share)
---------------- -------------------
<S> <C> <C>
Outstanding at
January 1, 1991 765,777 $20.57 to $41.63
Granted 182,100 $24.82 to $27.88
Exercised (6,200) $20.57 to $24.31
Canceled or expired (80,000) $20.57 to $41.63
----------
Outstanding at
January 1, 1992 861,677 $20.57 to $38.13
Granted 163,000 $22.31 to $22.31
Exercised (26,534) $20.57 to $27.88
Canceled or expired (64,557) $20.57 to $38.13
----------
Outstanding at
January 1, 1993 933,586 $20.57 to $38.13
Granted 186,500 $18.00 to $26.13
Exercised (900) $22.31 to $22.31
Canceled or expired (98,200) $20.57 to $38.13
----------
Outstanding at
December 31, 1993 1,020,986 $18.00 to $33.19
---------
---------
</TABLE>
In 1989, the Company adopted a Shareholder Rights plan and declared a dividend
of one Right for each of its Common Shares. In certain circumstances, if a
person or group becomes the beneficial owner of 15% or more of the outstanding
common shares (or in the case of MIM, more than 33 1/3%), with certain
exceptions, these rights vest and entitle the holder to certain share purchase
rights. In connection with the Rights dividend, 800,000 shares of Junior
Participating Preferred Stock were authorized for issuance upon exercise of the
Rights.
(11) BENEFIT PLANS
- -------------------
The Company maintains several noncontributory, defined benefit pension plans
covering substantially all employees. Benefits for salaried plans are based on
salary and years of service. Hourly plans are based on negotiated benefits and
years of service.
The Company's funding policy is to contribute amounts to the plans sufficient to
meet the minimum funding requirements set forth in the Employee Retirement
Income Security Act of 1974, plus such additional amounts as the Company may
determine to be appropriate from time to time. Plan assets are invested
principally in commingled stock funds and United States government securities.
<PAGE>
A48
Net pension costs consist of:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the years ended 1993 1992 1991
-------- -------- --------
December 31,
(in millions)
Service cost $ 7.2 $ 7.0 $ 6.4
Interest cost on projected benefit
obligations 7.9 7.1 6.1
Return on plan assets (8.1) (6.2) (4.9)
Other items 1.6 1.8 1.3
-------- -------- --------
Total net pension costs $ 8.6 $ 9.7 $ 8.9
-------- -------- --------
-------- -------- --------
</TABLE>
The funded status of the plans using the projected unit credit method is
presented below:
<TABLE>
<CAPTION>
<S> <C> <C>
At December 31, 1993 1992
-------- --------
(in millions)
Assets and obligations:
Vested benefit obligation $ 89.3 $ 66.7
Nonvested benefits 6.1 4.9
-------- --------
Accumulated benefit obligation 95.4 71.6
-------- --------
Projected benefit obligation 127.8 104.0
Less, Plan assets at fair value 93.3 76.3
-------- --------
Excess of projected benefit obligation
over plan assets (34.5) (27.7)
Items not yet recognized in earnings:
Unrecognized prior service cost 9.6 10.4
Unrecognized initial net plan obligation 1.9 2.2
Effect of changes in assumptions and
actuarial losses 27.2 14.7
Minimum liability (6.3) -
-------- --------
Net accrued cost $ (2.1) $ (0.4)
-------- --------
-------- --------
</TABLE>
The actuarial computations presented above are based upon a discount rate on
benefit obligations of 7% in 1993 and 8% in 1992 and 1991; an expected long-term
rate of return on plan assets of 10%; and annual salary increases of 4% in 1993
and 5% in 1992 and 1991.
Noncontributory postretirement health care coverage under the Asarco Health Plan
is provided to substantially all retirees not eligible for Medicare. A cost
sharing Medicare supplement plan is available for retired salaried employees and
life insurance coverage is provided to substantially all retirees. In 1992 the
Company adopted SFAS 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions". The effect of adopting the new standard increased 1992
net periodic postretirement benefit cost by $3.2 million and decreased 1992 net
income by $2.1 million. Postretirement benefit costs for 1991 of $5.1 million
which were recorded on a cash basis, have not been restated. In addition, the
projected benefit obligation of $54.0 million (net of tax benefit of $27.8
million) related to prior service cost was recognized as the cumulative effect
of a change in accounting principle as of January 1, 1992.
<PAGE>
A49
The following sets forth the plan's status reconciled with amounts reported in
the Company's Consolidated Balance Sheet:
<TABLE>
<CAPTION>
<S> <C> <C>
At December 31,
(in millions) 1993 1992
---------- ----------
Accumulated postretirement benefit
obligation (APBO):
Retirees $ 59.9 $ 50.0
Fully eligible active plan participants 17.4 14.4
Other plan participants 36.2 27.7
---------- ----------
Total APBO 113.5 92.1
Items not yet recognized in earnings:
Effect of changes in assumptions and actuarial
losses (20.6) (1.9)
---------- ----------
Accrued postretirement benefit obligation $ 92.9 $ 90.2
---------- ----------
---------- ----------
</TABLE>
Net periodic postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
<S> <C> <C>
For the year ended December 31,
(in millions) 1993 1992
---------- ----------
Service cost $ 2.2 $ 2.5
Interest cost 7.9 6.9
---------- ----------
Net periodic postretirement benefit cost $ 10.1 $ 9.4
---------- ----------
---------- ----------
</TABLE>
The weighted-average annual assumed rate increase in the per capita cost of
covered benefits (i.e., health cost trend rate) is 10% for 1993 (11% for 1992)
and is assumed to decrease gradually to 5% for 1999 and remain at that level
thereafter. The health care cost trend rate assumption has a significant effect
on the amounts reported. For example, increasing the assumed health care cost
trend rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1993 by $7.0 million, and
the aggregate of the service and interest cost components of net periodic
postretirement benefit cost for 1993 by $.8 million. The weighted-average
discount rate used in determining the accumulated postretirement benefit
obligation was 7% at December 31, 1993 (8 1/2%-1992). The plans are currently
unfunded.
(12) BUSINESS SEGMENTS
- -----------------------
The Company operates principally in the nonferrous metals industry, involving
mining, smelting, refining and selling of copper, silver, lead, and gold and
mining and selling zinc and molybdenum in the form of concentrates. The Company
is also engaged in specialty chemicals for metals plating and electronics
industries and in minerals comprising limestone, sand and gravel operations.
Included in the caption Other are the Company's polyvinyl chloride pipe and
cement pipe businesses and its environmental services operations. Foreign
operations are conducted by affiliates in Australia, Asia, Europe and North and
South America.
<PAGE>
A50
General corporate administrative expenses are allocated among the segments
generally in proportion to their operating expenses. Exploration expenses are
attributable to the metals segment, while research expenses are attributable to
metals and specialty chemicals. Identifiable assets are those directly used in
the operations of each segment. Corporate assets are principally cash and
investments. Export sales from the United States to unaffiliated customers were
$278.3 million in 1993, $297.7 million in 1992 and $246.3 million in 1991.
There can be no assurance that operations and assets of the Company and
nonconsolidated associated companies that are subject to the jurisdiction of
foreign governments may not be affected adversely by future actions by such
governments.
METAL SALES, EXCLUDING INTERSEGMENT SALES
- -----------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the years ended December 31, 1993 1992 1991
---------- ---------- ----------
(in millions)
Refined Copper $ 917 $ 1,045 $ 1,037
Refined Silver 138 138 154
Refined Lead 87 106 109
Refined Gold 58 69 75
Services 7 10 9
Other 131 145 144
---------- ---------- ----------
$ 1,338 $ 1,513 $ 1,528
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
BUSINESS SEGMENTS AND LINES OF BUSINESS
- ---------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1993 1992 1991
---------- ---------- ----------
For the years ended December 31,
(in millions)
Sales
Metals $ 1,338 $ 1,513 $ 1,528
Specialty Chemicals 251 256 253
Minerals 37 36 33
Other 110 103 98
---------- ---------- ----------
Total $ 1,736 $ 1,908 $ 1,912
---------- ---------- ----------
---------- ---------- ----------
Domestic 1,586 1,722 1,717
Foreign 150 186 195
Operating Income (Loss) (a)
Metals $ (97) $ (28) $ 69
Specialty Chemicals 3 (1) -
Minerals 7 7 6
Other (24) (20) (14)
---------- ---------- ----------
Total $ (111) $ (42) $ 61
---------- ---------- ----------
---------- ---------- ----------
Domestic (101) (37) 66
Foreign (10) (5) (5)
Equity in results of nonconsolidated
associated companies
Specialty Chemicals $ 3 $ 4 $ 5
Corporate 24 (1) 5
Interest, taxes and other 13 10 (25)
---------- ---------- ----------
Net Earnings (loss) before cumulative
effect of changes in accounting
principles $ (71) $ (29) $ 46
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<PAGE>
A51
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the years ended December 31, 1993 1992 1991
---------- ---------- ----------
(in millions)
Identifiable Assets
Metals $ 1,679 $ 1,749 $ 1,694
Specialty Chemicals 231 236 245
Minerals 30 29 30
Other 112 123 140
Corporate 1,100 809 845
---------- ---------- ----------
Total $ 3,152 $ 2,946 $ 2,954
---------- ---------- ----------
---------- ---------- ----------
Domestic 2,981 2,728 2,723
Foreign 171 218 231
Depreciation and Depletion
Metals $ 71 $ 77 $ 65
Specialty Chemicals 5 5 5
Minerals 2 2 2
Other 3 3 3
---------- ---------- ----------
Total $ 81 $ 87 $ 75
---------- ---------- ----------
---------- ---------- ----------
Capital Expenditures (b)
Metals $ 103 $ 126 $ 275
Specialty Chemicals 2 3 5
Minerals 3 2 2
Other 2 3 4
Corporate 2 1 8
---------- ---------- ----------
Total $ 112 $ 135 $ 294
---------- ---------- ----------
---------- ---------- ----------
<FN>
(a) Includes in 1993 $8.2 in previously unconsolidated losses for Nor Peru,
(Metals) $25.6 related to the valuation of certain inventories and
additions to reserves principally for assets planned for disposition ($8.3
Metals, $17.3 Other) and LIFO profits of $9.2 (Metals). Includes
provisions in 1992 ($58.0 Metals, $9.0 Other, $67.0 Total) for closed
plant and environmental matters and provision to reduce the carrying value
of certain facilities in 1992 ($31.9 Metals).
(b) Includes the portion of business acquisitions attributable to property
($11-1991).
</TABLE>
<PAGE>
A52
Unaudited Quarterly Data
- ------------------------
<TABLE>
<CAPTION>
QUARTERS 1st 2nd 3rd 4th Total
------------------- ------------------- ------------------- ------------------ -------------------
1993 1992(a) 1993 1992 1993 1992 1993(b) 1992(c) 1993 1992
--------- --------- --------- --------- --------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $457.1 $458.9 $418.6 $487.7 $425.2 $490.0 $435.5 $471.9 $1,736.4 $1,908.5
Operating income
(loss): (30.5) 13.5 (22.5) 10.4 (9.2) 30.4 (48.6) (96.1) (110.8) (41.8)
Earnings (loss) before
cumulative effect of
changes in accounting
principles (30.9) 6.4 (24.2) 4.4 (3.0) 18.1 (12.6) (58.0) (70.7) (29.1)
Net earnings (loss): (30.9) (47.6) (24.2) 4.4 (3.0) 18.1 73.7 (58.0) 15.6 (83.1)
Per common share data:
Earnings(loss) before
cumulative effect of
changes in accounting
principles (.74) .16 (.58) .10 (.08) .44 (.30) (1.40) (1.70) (.70)
Net earnings(loss) (.74) (1.15) (.58) .10 (.08) .44 1.78 (1.40) .38 (2.01)
<FN>
(a) In 1992 the Company adopted SFAS 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions". The projected benefit
obligation of $54.0 million (net of tax benefit of $27.8 million) related
to prior service cost was recognized as the cumulative effect of the
change in accounting principle as of January 1, 1992.
(b) Includes $104.5 million related to previously unrecognized results of the
Company's investments in Peru and pre-tax $25.6 million ($16.7 after-tax)
related to the valuation of certain inventories and additions to reserves
principally for assets planned for disposition.
(c) Includes the effect of a pre-tax $66.7 ($44.0 after-tax) provision for
closed plant and environmental matters as well as the effect of a pre-tax
$31.9 ($21.1 after-tax) provision to reduce the carrying value of certain
facilities.
</TABLE>
Accounting For Investments In Peru
----------------------------------
The following presents the 1993 and 1992 quarterly earnings (losses) of SPCC
and Nor Peru including the cumulative effect of the change in accounting
principle by SPCC, which were recognized by ASARCO as part of the $104.5
million recorded in the fourth quarter of 1993. The balance of $0.9 million
relates to the period 1988 to 1991. Dividends received prior to the resumption
of equity accounting were recorded as dividend income.
<TABLE>
<CAPTION>
QUARTERS 1st 2nd 3rd 4th Total
------------- ------------- ------------- ------------- -------------
(in millions) 1993 1992 1993 1992 1993 1992 1993 1992 1993 1992
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SPCC-equity earnings $ 4.0 $2.6 $ 0.5 $8.0 $1.9 $3.5 $(0.7) $1.8 $ 5.7 $15.9
SPCC-SFAS 109 86.3 - - - - - - - 86.3 -
Nor Peru (0.6) (1.0) (0.7) (0.4) 0.6 (0.1) (1.1) (1.0) (1.8) (2.5)
- ---------------------------------------------------------------------------------------------
Total $89.7 $1.6 $(0.2) $7.6 $2.5 $3.4 $(1.8) $0.8 $90.2 $13.4
-----------------------------------------------------------------------
-----------------------------------------------------------------------
</TABLE>
<PAGE>
A53
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of ASARCO Incorporated
We have audited the accompanying consolidated balance sheets of ASARCO
Incorporated and Consolidated Subsidiaries as of December 31, 1993 and 1992, and
the related consolidated statements of earnings, cash flows, and changes in
common stockholders' equity for each of the three years in the period ended
December 31, 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of ASARCO
Incorporated and Consolidated Subsidiaries as of December 31, 1993 and 1992, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles.
As discussed in Note 6 to the financial statements, the Company changed its
method of accounting for investments classified as available-for-sale, as of
December 31, 1993 and its equity investee Southern Peru Copper Corporation
changed its method of accounting for income taxes as of January 1, 1993. In
addition, in 1992, as discussed in Note 11 to the financial statements, the
Company changed its method of accounting for postretirement benefits other than
pensions.
COOPERS & LYBRAND
1301 Avenue of The Americas
New York, New York
January 25, 1994
<PAGE>
A54
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None
PART III
ITEMS 10, 11, 12 and 13
- -----------------------
Reference is made to Executive Officers of Asarco and Business Experience During
the Past Five Years on page A24. Information in response to the disclosure
requirements specified by these items appears under the captions and pages of
the 1993 Proxy Statement indicated below:
<TABLE>
<CAPTION>
Proxy
Statement
Item Required Information Proxy Statement Section Pages
- ---- -------------------- ----------------------- ---------
<S> <C> <C> <C>
10. Directors and Executive Election of Directors
Officers 2-5
11. Executive Compensation Executive Compensation
through Option Exercise
and Fiscal Year End
Value 11-13
Retirement Plans Through
Employment Agreements 15-17
12. Security Ownership Security Ownership of Certain
Beneficial Owners through
Beneficial Ownership of
Management 6-7
13. Certain Relationships Certain Transactions 17
and Related Compensation Committee
Transactions Interlocks and Insider
Participation 10
</TABLE>
The information referred to above is incorporated herein by reference.
<PAGE>
A55
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
- --------------------------------------------------------------------------
(a) The following documents are filed as part of this report:
1. Financial Statements
The following financial statements of ASARCO Incorporated and its
subsidiaries are included at the indicated pages of the document as stated
below:
<TABLE>
<CAPTION>
Form 10-K
Pages
---------
<S> <C>
Consolidated Statement of Earnings for the years
ended December 31, 1993, 1992 and 1991 A32
Consolidated Balance Sheet at December 31,
1993 and 1992 A33
Consolidated Statement of Cash Flows for the
years ended December 31, 1993, 1992 and 1991 A34
Consolidated Statement of Changes in Common
Stockholders' Equity for the years December 31,
1993, 1992 and 1991 A35
Notes to Financial Statements A36-A52
Report of Independent Accountants A53
</TABLE>
2. Financial Statement Schedules
The following schedules are included at indicated pages
in this Annual Report on Form 10K:
<TABLE>
<CAPTION>
Form 10-K
Pages
---------
<S> <C>
Schedule I - Marketable securities - other
investments B1
Schedule V - Property, plant and equipment B2
Schedule VI - Accumulated depreciation,
depletion and amortization of property,
plant and equipment B3
Schedule VIII - Valuation and qualifying
accounts B4-B6
Schedule IX - Short term borrowings B7
Schedule X - Supplementary income statement
information B8
</TABLE>
Schedules other than those listed above are omitted, as they are not required or
are not applicable, or the required information is shown in the financial
statements or notes thereto. Columns omitted from schedules filed have been
omitted because the information is not applicable. Any other information
omitted from schedules filed has been omitted due to immateriality.
<PAGE>
A56
3. Exhibits
<TABLE>
<CAPTION>
Exhibit
No.
- --------
<C> <S>
3. Certificate of Incorporation and By-Laws
(a) Certificate of Incorporation - restated, filed May 4, 1970
(b) Certificate of Amendment to the Certificate of Incorporation
effective April 23, 1975
(c) Certificate of Amendment of Certificate of Incorporation executed
April 14, 1981
(d) Certificate of Amendment of Restated Certificate of Incorporation
filed on May 6, 1985
(e) Certificate of Amendment of Certificate of Incorporation filed July
21, 1986
(f) Certificate of Amendment of Restated Certificate of Incorporation,
as amended filed April 22, 1987
(g) Statement of Cancellation filed July 31, 1987 whereby 155,000
shares of Series A Cumulative Preferred Stock and 862,500 shares of
$9.00 Convertible Exchangeable Preferred Stock were cancelled
(h) Statement of Cancellation filed November 20, 1987 whereby 1,026,900
shares of Series A Cumulative Preferred Stock were cancelled
(i) Statement of Cancellation filed December 18, 1987 whereby 1,250,000
shares of Series B Cumulative Convertible Preferred Stock were
cancelled
(j) Statement of Cancellation filed March 3, 1988 whereby 27,000 shares
of Series A Cumulative Preferred Stock were cancelled
(k) Certificate of Amendment of Restated Certificate of Incorporation,
as amended, filed August 7, 1989.
(l) By-Laws as last amended on June 26, 1991
4. Instruments defining the rights of security holders, including
indentures
(a) There are currently various separate indentures, agreements or
similar instruments under which long-term debt of Asarco is
currently outstanding. The Registrant hereby agrees to furnish to
the Commission, upon request, a copy of any of the instruments
which define the rights of holders of long-term debt securities.
None of the outstanding instruments represents long-term debt
securities in excess of 10% of the total assets of Asarco as of
December 31, 1993
(b) Form of Rights Agreement dated as of July 26, 1989, between the
Company and First Chicago Trust Company of New York, as Rights
Agent, defining the rights of shareholders under a July 1989
Shareholders' Rights plan and dividend declaration
(c) Rights Agreement Amendment dated as of September 24, 1992, between
the Company and The Bank of New York, as Successor Rights Agent
under the Rights Agreement listed above
</TABLE>
<PAGE>
A57
<TABLE>
<C> <S>
(d) Indenture Agreement dated as of February 1, 1993 between the
Company and Bankers Trust Company, as Trustee, covering the
issuance of debt securities registered by the Company in April
1992 not to exceed $250 million.
10.
(a) Stock Option Plan as amended through November 24, 1987
(b) Form of Employment Agreement entered into in 1985, as amended in
March and April 1989, among the Company and currently 12 of its
executive officers, including Messrs. R. de J. Osborne, F.R.
McAllister, A.B. Kinsolving, R.J. Muth and R.M. Novotny
(c) Deferred Fee Plan for Directors, as amended through January 26,
1994
(d) Supplemental Pension Plan for Designated Mid-Career Officers, as
amended through January 31, 1990
(e) Retirement Plan for Non-Employee Directors, as amended through
January 25, 1989
(f) Directors' Stock Award Plan, as amended through January 27, 1993
(g) Stock Incentive Plan adopted by the Company's Shareholders on
April 25, 1990
11. Statement re Computation of Earnings Per Share
21. Subsidiaries of the registrant
23. Report of Independent Accountants on Financial Statement Schedules
and Consent of Independent Accountants
The exhibits listed as 10(a) through (g) above are the management
contracts or compensatory plans or arrangements required to be
filed pursuant to Item 14(c) of Form 10-K.
(b) Reports of Form 8-K filed in the fourth quarter of 1993: None
(c) Exhibits - The exhibits to this Form 10-K are listed on the Exhibit
Index on pages D1 through D3. Copies of the following exhibits
are filed with this Form 10-K:
10(c) Deferred Fee Plan for Directors
11. Statement re Computation of Earnings Per Share
21. Subsidiaries of the registrant
23. Report of Independent Accountants on Financial
Statement Schedules and Consent of Independent
Accountants are included in page A58 of this Annual
Report on Form 10-K.
Copies of exhibits may be acquired upon written request to the
Treasurer and the payment of processing and mailing costs.
(d) Statements of nonconsolidated subsidiaries, and 50% or less owned
persons accounted for by the equity method:
Southern Peru Copper Corporation and Consolidated Subsidiaries C1
Individual financial statements of subsidiaries and 50%-or-less owned
persons accounted for by the equity method, other than those for Southern
Peru Copper Corporation have been omitted because such subsidiaries and
50%-or-less owned persons considered in the aggregate as a single
subsidiary would not constitute a significant subsidiary. Where separate
financial statements are presented, intercompany profits or losses
resulting from transactions with related parties are insignificant.
</TABLE>
<PAGE>
A58
Item 14
Exhibit 23
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and
Stockholders of ASARCO Incorporated
Our report on the consolidated financial statements of ASARCO Incorporated and
consolidated subsidiaries has been included in this Form 10-K on page A53. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedules which appear on pages B1 through B8 of
this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
New York, New York
January 25, 1994
COOPERS & LYBRAND
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectuses constituting
part of the Registration Statements on Form S-3 (File No. 33-45631) and Form S-8
(File Nos. 2-83782, 2-67732 and 33-34606) of ASARCO Incorporated of our report
dated January 25, 1994, appearing on page A53 of this Annual Report on Form 10-
K. Our report includes an explanatory paragraph that describes the change in
the method of accounting for investments classified as available-for-sale and
its equity investee Southern Peru Copper Corporation's change in method of
accounting for income taxes. In addition, in 1992, the Company changed its
method of accounting for postretirement benefits other than pensions. We also
consent to the incorporation by reference of our report on the financial
statement schedules, which appears above.
New York, New York
January 25, 1994
COOPERS & LYBRAND
<PAGE>
A59
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: February 23, 1994 ASARCO Incorporated
(Registrant)
By /s/ Richard de J. Osborne
-----------------------------
(Richard de J. Osborne, Chairman
of the Board, Chief Executive
Officer and President)
Pursuant to requirements of the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
<TABLE>
<C> <S> <C>
(a) Principal Executive Officer:
/s/ Richard de J. Osborne Chairman of the Board
-------------------------------
(Richard de J. Osborne)
(b) Principal Financial Officer:
/s/ Kevin R. Morano Vice President and
------------------------------- Chief Financial Officer
(Kevin R. Morano)
(c) Principal Accounting Officer:
/s/ Ronald J. O'Keefe Controller
-------------------------------
(Ronald J. O'Keefe)
(d) Directors:
/s/ Richard de J. Osborne /s/ Willard C. Butcher
------------------------------- -----------------------------
(Richard de J. Osborne) (Willard C. Butcher)
/s/ James C. Cotting /s/ Norman C. Fussell
------------------------------- -----------------------------
(James C. Cotting) (Norman C.Fussell)
/s/ David C. Garfield /s/ Dr. E. Gordon Gee
------------------------------- -----------------------------
(David C. Garfield) (Dr. E. Gordon Gee)
/s/ James R. Greene /s/ Harry Holiday, Jr.
------------------------------- -----------------------------
(James R. Greene) (Harry Holiday, Jr.)
/s/ James W. Kinnear, III /s/ Francis R. McAllister
------------------------------- -----------------------------
(James W. Kinnear, III) (Francis R. McAllister)
/s/ Michael T. Nelligan /s/ John D. Ong
------------------------------- -----------------------------
(Michael T. Nelligan) (John D. Ong)
/s/ Peter R. Rowland /s/ James Wood
------------------------------- -----------------------------
(Peter R. Rowland) (James Wood)
</TABLE>
Date: February 23, 1994
<PAGE>
B1
<TABLE>
<CAPTION>
ASARCO Incorporated
AND CONSOLIDATED SUBSIDIARIES
-------------------------------
Schedule I - Marketable Securities - Other Investments
------------------------------------------------------
at December 31, 1993
(in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Amount at which each
portfolio of equity
Number of shares or Market Value of security issues and
units - principal Cost of each issue at each other security
Name of issuer and title amount of bonds and Each balance sheet issue carried in the
of each issue notes Issue date balance sheet
- ------------------------------------------- -------------------- --------- --------------- --------------------
<S> <C> <C> <C> <C>
Asarco Australia Limited 66,500 $ 19,356 $88,733 $ 18,573(B)
------- ---------
Total Investments Current $ 19,356 $ 18,573
------- ---------
------- ---------
Meltex Inc. 1,215 $ 168 9,832 $ 3,247
Southern Peru Copper Corporation 344 41,449 (A) 295,031
Other Equity Investments 805 14,786 (A) 48,649
------ ----------
Total Investments Equity Method $ 56,403 $346,927
------- ----------
------- ----------
M.I.M. Holdings Limited 243,019 93,432 439,120 439,120(B)
Mexico Desarrollo Industrial Minero,
S.A. de C.V. 162,707 53,837 (A) 298,426(B)
U.S. Treasury Notes and Bonds 12,500 14,452 14,348 14,384
Time Deposits and Cash 85 85 85 85
Foreign Notes and Bonds 20,700 23,751 24,004 24,349
Other Bonds 4,500 4,691 5,015 4,633
Stocks Publicly Traded 1 1 8 1
Other Stocks 2,419 (A) 2,419
------- ----------
Total Investments Cost Method $192,668 $783,417
------- ----------
------- ----------
<FN>
(A) Quoted market prices on Asarco's investments in common stock are not available since they are not publicly traded.
(B) The difference between cost and carrying value is due to undistributed equity earnings (when the investment was carried on the
equity method), as well as $173.4 million resulting from the adoption of SFAS 115.
</TABLE>
<PAGE>
B2
<TABLE>
<CAPTION>
ASARCO INCORPORATED
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
SCHEDULE V-PROPERTY,PLANT AND EQUIPMENT
-----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Column A Column B Column C Column D Column E Column F
- -------- -------- -------- -------- -------- --------
Balance at Balance
Beginning of Additions Other Changes at end of
Classification Period at Cost Retirements Add (Deduct) (a) Period
- -------------------------------- ------------ ---------- ------------ ---------------- --------
<S> <C> <C> <C> <C> <C>
Year Ended December 31,1993
- ---------------------------
Buildings and equipment $2,063,548 $ 88,670 $20,039 $ (2,831) $2,129,348
Mineral land 289,188 22,098 3,118 (14,256) 293,912
Land,other than mineral 66,469 1,547 1,414 1,595 68,197
Other 4,515 - - 1,633 6,148
--------- ------- ------ -------- ---------
$2,423,720 $112,315(b) $24,571 $(13,859) $2,497,605
--------- -------- ------ ------ ----------
--------- -------- ------ ------ ----------
Year Ended December 31,1992
- ---------------------------
Buildings and equipment $1,979,725 $103,627 $15,675 $ (4,129) $2,063,548
Mineral land 263,942 28,707 2,065 (1,396) 289,188
Land,other than mineral 64,574 2,240 264 (81) 66,469
Other 6,417 - 1,902 - 4,515
-------- ------ ------ ----- --------
$2,314,658 $134,574(b) $19,906 $ (5,606) $2,423,720
--------- -------- ------ ------ ----------
--------- -------- ------ ------ ----------
Year Ended December 31,1991
- ---------------------------
Buildings and equipment $1,749,700 $228,358 $ 3,727 $ 5,394 $1,979,725
Mineral land 208,689 52,023 137 3,367 263,942
Land,other than mineral 62,382 2,536 325 (19) 64,574
Other 7,403 - 986 - 6,417
-------- ------ ------ ------- --------
$2,028,174 $282,917(b) $ 5,175 $ 8,742 $2,314,658
--------- ---------- ------ -------- ---------
--------- ---------- ------ -------- ---------
<FN>
(a) - Other changes include foreign translation adjustments, except for 1993 which includes the effects from the deconsolidation
of Asarco Australia Limited and the reconsolidation of Corporacion Minera Nor Peru.
(b) - Includes significant expenditures for:
1993 1992 1991
---- ---- ----
El Paso Modernization Project $23,782 $29,488 $ 31,728
Mission Copper expansion 2,573 2,488 47,181
Ray Mill expansion 153 38,252 128,616
Australia Wiluna purchase - - 12,344
Australia Sulphide Project 8,379 11,494 -
------ ------ -------
$34,887 $81,722 $219,869
------ ------ -------
------ ------ -------
</TABLE>
<PAGE>
B3
<TABLE>
<CAPTION>
ASARCO INCORPORATED
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
SCHEDULE VI-ACCUMULATED DEPRECIATION
DEPLETION AND AMORTIZATION OF PROPERTY
PLANT AND EQUIPMENT
---------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Additions
Balance at Charged to Balance
beginning of Costs and Other Changes at end of
Classification Period Expenses Retirements Add(Deduct)(a) Period
- -------------------------------- ------------ ---------- ------------ --------------- ---------
<S> <C> <C> <C> <C> <C>
Year Ended December 31,1993
- ---------------------------
Depreciation:
Buildings and equipment $1,013,572 $71,024 $5,025 $ 9,830 $1,089,401
Land,other than mineral 57 - - - 57
Other 4,515 - - 1,633 6,148
Depletion 94,611 9,617 2,048 (5,633) 96,547
--------- ------ ------ ------ --------
$1,112,755 $80,641 $7,073 $ 5,830 $1,192,153
--------- ------ ----- ------ ---------
--------- ------ ----- ------ ---------
Year Ended December 31, 1992
- ----------------------------
Depreciation:
Buildings and equipment $ 920,986 $75,727 $15,051 $31,910 $1,013,572
Land,other than mineral 57 - - - 57
Other 1,396 38 1,735 4,816 4,515
Depletion 89,713 10,877 1,299 (4,680) 94,611
-------- ------- ------ ------- ------
$1,012,152 $86,642 $18,085 $32,046 $1,112,755
---------- ------- ------ ------ ---------
---------- ------- ------ ------ ---------
Year Ended December 31,1991
- ---------------------------
Depreciation:
Buildings and equipment $ 855,516 $69,007 $ 2,978 $ (559) $ 920,986
Land, other than mineral 57 - - - 57
Other 1,472 161 - (237) 1,396
Depletion 84,119 5,701 98 (9) 89,713
-------- ------ ------ ------ --------
$941,164 $74,869 $ 3,076 $ (805) $1,012,152
------- ------- ------ ------ ---------
------- ------- ------ ------ ---------
<FN>
(a) - Other Changes include foreign translation adjustments, except for 1992, which includes $31,900 to reduce the carrying value
at certain facilities, particularly at the El Paso, Texas smelter. Also included in 1993 is the deconsolidation of Asarco
Australia Limited and the reconsolidation of Corporacion Minera Nor Peru.
</TABLE>
<PAGE>
B4
<TABLE>
<CAPTION>
ASARCO Incorporated
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
Schedule VIII - Valuation and Qualifying Accounts
--------------------------------------------------
FOR THE YEAR 1993
(in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions Deductions
------------------------------------- ----------------------------------------
Charged to
Balance at costs/expenses Charged to
beginning of or (credited) to other Balance at
Description period income Description accounts Descriptions Amount end of period
- ---------------------- -------------- ----------------- ----------------- ----------- ---------------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accounts and notes
written off, net of
recoveries $2,161
-------
-------
Deducted from assets
on Balance Sheet:
- -------------------
Net amount
Allowance for doubtful transferred to
accounts: $4,232 $2,901 Other Assets $393 $4,579
------- ------- ------- -------
------- ------- ------- -------
Net amount
transferred
Current portion of from noncurrent
reserves for closed reserve for closed
plants and plants and
environmental environmental Current charges
matters $39,997 matters $50,665 to reserves $44,253 $46,409
------- ------- -------- -------
------- ------- -------- -------
Non-current portion
of reserves for Net amount
closed plants and transferred
environmental to current
matters $100,962 $19,397 liabilities $50,665 $69,694
-------- ------- ------- -------
-------- ------- ------- -------
Included in caption
"Other Liabilities
and Reserves" on
Balance Sheet
-------------
Other $34,165 $28,451
------- -------
------- -------
</TABLE>
<PAGE>
B5
<TABLE>
<CAPTION>
ASARCO Incorporated
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
Schedule VIII - Valuation and Qualifying Accounts
FOR THE YEAR 1992
(in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions Deductions
------------------------------------------------- -----------------------------
Charged to
Balance at costs/expenses Charged to
beginning of or (credited) to other Balance at
Description period income Description accounts Descriptions Amount end of period
- --------------------- ------------ ---------------- ------------------- ---------- ------------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accounts and notes
written off, net of
Deducted from assets recoveries $1,404
on Balance Sheet: -------
- -------------------- -------
Allowance for doubtful Net amount
accounts: $3,326 $3,436 transferred
------- ------- to other Assets $1,126 $4,232
------- ------- ------- --------
Net amount ------- --------
transferred
Current portion of from noncurrent
reserves for closed reserve for closed
plants and plants and
environmental environmental Current charges
matters $34,120 $3,000 matters $30,265 to reserves $27,388 $39,997
------- ------- ------- Reserve trans- ------- --------
------- ------- ------- ferred to ------- --------
Accrued Post
Retirement
Benefit
Obligation $8,231
-------
Non-current portion -------
of reserves for
closed plants and Net amount
environmental transferred to
matters $70,058 $69,400 current liabilities $30,265 $100,962
------- ------- ------- --------
------- ------- ------- --------
Included in caption
"Other Liabilities
and Reserves" on
BALANCE SHEET
Other $27,600 $34,165
------- --------
------- --------
</TABLE>
<PAGE>
B6
<TABLE>
<CAPTION>
ASARCO Incorporated
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
Schedule VIII - Valuation and Qualifying Accounts
--------------------------------------------------
FOR THE YEAR 1991
(in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- ------- --------
Additions Deductions
---------------------------------------------- ----------------------
Charged to
Balance at costs/expenses Charged to
beginning of or (credited) other Balance at
Description period to income Description accounts Descriptions Amount end of period
- ------------------------------- -------------- -------------- --------------- ---------------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accounts and
notes
written
off, net of
Deducted from assets recoveries $3,127
on Balance Sheet: -------
- -------------------- -------
Net amount
transferred
Allowance for doubtful to Other
accounts: $5,507 $13,625 Assets $12,679 $3,326
------ ------- ------- ------
------ ------- ------- ------
Net amount
transferred
from noncurrent
Current portion of reserve for
reserves for closed closed
plants and plants and Current
environmental environmental charges
matters $29,158 $3,000 matters $34,211 to reserves $32,249 $34,120
------- ------ ------- ------- -------
------- ------ ------- ------- -------
Non-current portion
of reserves for Net amount
closed plants and transferred
environmental to current
matters $99,964 $4,305 liabilities $34,211 $70,058
------- ------ ------- -------
------- ------ ------- -------
Included in caption
"Other Liabilities
and Reserves" on
Balance Sheet
-------------
Other $29,207 $27,600
------- -------
------- -------
</TABLE>
<PAGE>
B7
<TABLE>
<CAPTION>
ASARCO INCORPORATED
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
Schedule IX - Short Term Borrowings
-----------------------------------
(dollars in thousands)
Column A Column B Column C Column D Column E Column F
- -------------------------------------------------------------------------------------------------------------
Weighted Maximum Average Weighted
Category of Balance average amount amount average
short term at end interest outstanding outstanding interest rate
borrowing of year rate during year during year during year
(A) (A)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993:
Bank Loans $16,875 7.4% $33,395 $23,981 9.4%
- -------------------------------------------------------------------------------------------------------------
1992:
Bank Loans $20,574 10.4% $38,651 $26,644 12.1%
- -------------------------------------------------------------------------------------------------------------
1991:
Bank Loans $45,755 8.3% $49,744 $38,404 9.2%
- -------------------------------------------------------------------------------------------------------------
<FN>
This schedule presents borrowing and interest information related only to short
term borrowing (exclusive of Long Term Debt).
(A) Based on weighted average of month end balances.
</TABLE>
<PAGE>
B8
<TABLE>
<CAPTION>
ASARCO INCORPORATED
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
Schedule X - Supplementary Income Statement Information
For the Years Ended December 31,
--------------------------------
Column A Column B
-------- --------
Charged to costs and expenses
-----------------------------
(In thousands)
Item 1993 1992 1991
- ----------------------- -------- -------- ---------
<S> <C> <C> <C>
Maintenance and Repairs $157,855 $165,294 $140,535
Property Taxes 28,079 27,239 21,229
Royalties 1,804 3,640 5,420
</TABLE>
<PAGE>
C1
SOUTHERN PERU COPPER CORPORATION
AND CONSOLIDATED SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Report of Independent Accountants C2
Consolidated Balance Sheets as of December 31, 1993 and 1992 C3-4
Consolidated Statements of Operations for the years ended
December 31, 1993, 1992 and 1991 C5
Consolidated Statements of Cash Flows for
the years ended December 31, 1993, 1992 and 1991 C6-7
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1993, 1992 and 1991 C8
Notes to Consolidated Financial Statements C9-15
FINANCIAL STATEMENT SCHEDULES
V - Property, plant and equipment for the years
ended December 31, 1993, 1992 and 1991 C16
VI - Accumulated depreciation, depletion and
amortization of property, plant and
equipment for the years ended December 31, 1993
1992 and 1991 C17
X - Supplementary income statement information for
the years ended December 31, 1993, 1992 and 1991 C18
NOTES
Financial statement schedules other than the above are omitted because they are
either not applicable, not required or the information is included in the notes
to the financial statements.
The individual financial statements of Southern Peru Copper Corporation have
been omitted since the Company is primarily an operating company and the
subsidiaries included in the consolidation are wholly owned.
The financial statements and the related financial statement schedules referred
to above are as submitted to the Registrant by Southern Peru Copper Corporation.
<PAGE>
C2
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Stockholders of
Southern Peru Copper Corporation:
We have audited the consolidated balance sheets of SOUTHERN PERU
COPPER CORPORATION and CONSOLIDATED SUBSIDIARIES as of December 31, 1993 and
1992, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1993. We have also audited the financial statement schedules
(pages C16 to C18, inclusive). These financial statements and financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Southern Peru Copper Corporation and Consolidated Subsidiaries at December 31,
1993 and 1992, and the consolidated results of their operations, and their cash
flows for each of the three years in the period ended December 31, 1993 in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedules referred to above, when considered in
relation to the basic financial statements taken as a whole, present fairly, in
all material respects, the information required to be included therein.
As described in Note 2 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1993.
New York, New York
February 4, 1994
COOPERS & LYBRAND
<PAGE>
C3
<TABLE>
<CAPTION>
SOUTHERN PERU COPPER CORPORATION
and CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, December 31, 1993 and 1992
- --------------------------------------------------------------------------------
(Dollars in Thousands)
ASSETS: 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents, including $58,328
and $56,821 in a restricted account at
December 31, 1993 and 1992, respectively $ 90,038 $ 137,739
Marketable securities 35,838 2,155
Accounts receivable
Trade:
Stockholders and affiliates 3,526 8,432
Other trade 38,736 36,124
Other 8,516 5,217
Inventories:
Metals 34,849 37,524
Supplies 77,355 59,795
Prepaid expenses 15,505 12,594
-------- ----------
Total current assets 304,363 299,580
-------- ----------
Other assets, principally investments (at cost) 35,684 33,486
------- ----------
Property, at cost:
Buildings and equipment 1,033,929 1,012,695
Mine development 114,780 114,780
Mineral land 12,226 12,176
Land, other than mineral 863 1,243
Construction in progress 22,642 14,514
------------ ---------
Total property 1,184,440 1,155,408
Less, Accumulated depreciation, amortization
and depletion 793,121 765,221
------------ ---------
Net property 391,319 390,187
------------ ----------
Total assets $ 731,366 $ 723,253
------------ ----------
------------ ----------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
C4
<TABLE>
<CAPTION>
SOUTHERN PERU COPPER CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1993 AND 1992
- --------------------------------------------------------------------------------
(Dollars in Thousands)
LIABILITIES: 1993 1992
<S> <C> <C>
Current liabilities:
Accounts payable:
Trade $ 25,241 $ 18,115
Other 5,248 7,921
Deferred Peruvian income taxes, current
portion 3,020 2,062
Accrued liabilities:
Interest 21 -
Salaries and wages 7,108 5,693
Taxes 6,872 15,887
Other 13,764 28,494
-------- ----------
Total current liabilities 61,274 78,172
-------- ----------
Long-term debt 15,600 -
Long-term payable to former Joint Venturer 1,700 6,000
Accrued severance pay 20,778 26,552
Deferred Peruvian income taxes 5,564 167,022
Participatory interest of labor shares in the
Peruvian Branch 61,410 56,689
-------- ----------
Total liabilities 166,326 334,435
-------- ----------
Commitments and contingencies (Note 12)
- --------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
- --------------------------------------------------------------------------------
Common stock, par value $100; authorized 984,370
shares, issued 762,512 shares 76,251 76,251
Treasury stock at cost, 105,337 shares (60,000) (60,000)
Additional paid-in capital 46,989 46,989
Retained earnings 501,800 325,578
-------- ----------
Total stockholders' equity 565,040 388,818
-------- ----------
Total liabilities and stockholders'equity $731,366 $723,253
-------- --------
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
C5
<TABLE>
<CAPTION>
SOUTHERN PERU COPPER CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
- -----------------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Net sales:
Stockholders and affiliates $ 52,061 $105,965 $ 61,505
Other 421,916 444,528 465,579
-------- -------- -------
Total net sales 473,977 550,493 527,084
-------- -------- -------
Operating costs and expenses:
Cost of products sold 363,523 378,706 434,213
Administrative and other expenses 9,321 5,476 42,039
Depreciation, amortization and
depletion 34,601 32,491 42,093
Provision for workers' participation 8,774 14,104 4,027
-------- -------- -------
Total operating costs and expenses 416,219 430,777 522,372
-------- -------- -------
Operating income 57,758 119,716 4,712
Interest income (includes $245 from
associated companies in 1991) 4,469 4,200 8,668
Other income (includes exchange gains
of $9,031, $5,624, and $1,747 in
1993, 1992 and 1991, respectively) 23,850 15,386 10,714
Interest expense (568) (448) (7,248)
------- ------- -------
Earnings before taxes on income,
participations of labor shares
and Joint Venturer and
cumulative effect of the
change in accounting principle 85,509 138,854 16,846
------- --------- -------
Taxes on income:
Currently payable 40,080 71,238 20,035
Deferred 5,081 1,468 (8,117)
------- ------- ----------
45,161 72,706 11,918
------- ------- ----------
Earnings before participations of
labor shares and Joint
Venturer and cumulative effect
of the change in accounting 40,348 66,148 4,928
principle
Participation of labor shares in income
of Peruvian Branch 11,218 20,510 3,804
-------- -------- -------
Earnings before participations of
Joint Venturer and cumulative
effect of the change in
accounting principle 29,130 45,638 1,124
Participation of Joint Venturer in
Cuajone mine - - 1,565
-------- -------- --------
Earnings (loss) before cumulative
effect of the change in
accounting principle 29,130 45,638 (441)
-------- -------- --------
Cumulative effect of the change in
accounting principle 165,092 - -
-------- -------- --------
Net earnings (loss) $194,222 $ 45,638 $ (441)
-------- --------- --------
-------- --------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
C6
<TABLE>
<CAPTION>
SOUTHERN PERU COPPER CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
- -----------------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities
Operations:
Net earnings (loss) $194,222 $ 45,638 $ (441)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation, amortization and depletion 34,601 32,491 42,093
Provision for severance pay (net of cash
payments of $13,886, $18,454 and $32,232 in
1993, 1992 and 1991, respectively) (7,200) (18,849) (5,052)
Deferred income taxes (including related exchange
(gains) losses of ($489), $(377) and $1,095 in
1993, 1992 and 1991, respectively) (160,500) 1,091 (6,529)
Workers' patrimonial participation ----- ---- 2,415
Participation of labor shares in income of
Peruvian Branch 11,218 20,510 3,804
Foreign exchange gains (2,118) (1,577) (3,883)
Participation of Joint Venturer in Cuajone mine,
net of gain on purchase of Joint Venture
interest of $1,987 in 1991 ----- ---- (422)
Write-down of unconsolidated investment 1,554 ---- 3,000
Changes in operating assets and liabilities:
Accounts receivable (1,005) 51,997 22,698
Inventories (net of transfers of $3,992 and $3,884
in 1993 and 1992 to property of items purchased
in prior years) (18,880) 15,663 28,080
Prepaid expenses and other assets (net of proceeds
from the sale of Peruvian tax credits for
$18,341 in 1993) (2,911) (5,103) (4,796)
Accounts payable and accrued liabilities (8,862) (3,725) 9,931
Interest and income taxes payable (8,994) 7,095 (705)
---------- -------- ----------
Net cash from operating activities 31,125 145,231 90,193
-------- --------- --------
Cash flows used for investing activities:
Capital expenditures (31,859) (23,063) (31,355)
Installment payment on purchase of
Joint Venture interest (4,300) (4,235) (2,500)
Investments in unconsolidated companies (2,732) (489) (2,500)
Investment in marketable securities (33,683) (639) (16)
Proceeds from the sale of investment 900 ---- ----
Other, net (372) (126) 17
---------- ---------- ---------
Net cash used for investing activities (72,046) (28,552) (36,354)
---------- ---------- ----------
(continued on next page)
</TABLE>
<PAGE>
C7
<TABLE>
<CAPTION>
SOUTHERN PERU COPPER CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(CONTINUED)
- -------------------------------------------------------------------------------
(Dollars in Thousands)
1993 1992 1991
---------- ---------- ---------
<S> <C> <C> <C>
Cash flows used for financing activities:
Dividends declared and paid (18,000) (15,000) -
Treasury stock purchase - - (60,000)
Proceeds from long-term borrowings 15,600 - -
Repayment of short-term borrowings - (37,677) (20,093)
Distributions to labor shareholders (3,934) (14,622) (4,265)
Distribution to Joint Venturer -- -- (17,232)
-------- --------- ----------
Net cash used for financing activities (6,334) (67,299) (101,590)
---------- --------- ---------
Effect of exchange rate changes on cash (446) (1,022) 265
---------- --------- --------
Net increase (decrease) in cash
and cash equivalents (47,701) 48,358 (47,486)
Cash and cash equivalents,
beginning of year 137,739 89,381 136,867
--------- ------- --------
Cash and cash equivalents, end of year $ 90,038 $137,739 $ 89,381
---------- -------- --------
---------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
C8
SOUTHERN PERU COPPER CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS of CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(Dollars in Thousands)
1993 1992 1991
--------- --------- --------
<S> <C> <C> <C>
Common stock:
Balance at beginning and end of
year, 762,512 shares, par value $100 $ 76,251 $ 76,251 $ 76,251
-------- -------- --------
Additional paid in capital:
Balance at beginning and end of year 46,989 46,989 46,989
-------- -------- -------
Treasury stock:
Balance at beginning of year (60,000) (60,000) -
Purchased in 1991, 105,337 shares - - (60,000)
-------- -------- --------
Balance at end of year, 105,337
shares (60,000) (60,000) (60,000)
-------- -------- --------
Retained earnings:
Retained earnings, appropriated
Balance at beginning of year - - 15,707
Use of appropriation,
distribution to Joint Venturer - - (15,707)
-------- ------- --------
Balance at end of year - - -
-------- ------- --------
Retained earnings, unappropriated
Balance at beginning of year 325,578 294,940 295,381
Net earnings (loss) 194,222 45,638 (441)
Dividends paid (18,000) (15,000) -
-------- ------- --------
Balance at end of year 501,800 325,578 294,940
--------- -------- --------
Total retained earnings 501,800 325,578 294,940
--------- -------- -------
Total stockholders' equity $565,040 $388,818 $358,180
--------- -------- --------
--------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
C9
SOUTHERN PERU COPPER CORPORATION AND
CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation: Southern Peru Copper Corporation (the Company) is a
Delaware Corporation which prepares its financial statements in accordance with
generally accepted accounting principles in the United States. The Company
operates two copper mines and a smelter in Peru (Peruvian Branch) and
substantially all of its assets are located there. The consolidated financial
statements include the accounts of the Company and its wholly owned
subsidiaries. Certain reclassifications have been made in prior years' financial
statements to conform to the 1993 presentation.
Net Sales: Net sales represent the invoiced value of products containing copper,
silver and molybdenum after deducting Peruvian sales and export taxes,
commissions, insurance, freight, toll refining charges and hedging costs. Price
estimates used for provisionally priced shipments are based on the Company's
judgment of the current price level and its susceptibility to decline during the
settlement period.
Cash Equivalents: The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
Marketable Securities: Marketable securities include liquid investments with a
maturity of more than three months when purchased and are carried at cost, which
approximates market value.
Peruvian Tax Credits: Excess Peruvian tax credits are classified as prepaid
expenses on the balance sheet and are utilized to either pay Peruvian taxes or
are sold. The carrying value of the Peruvian tax credits approximates their
market value.
Inventories: Inventories are carried at the lower of average cost or market
value.
Property: Maintenance, repairs and gains or losses on assets retired or sold are
reflected in earnings as incurred. The cost of renewals is capitalized and the
property unit being replaced is retired. The cost of betterments is capitalized.
Buildings and equipment are depreciated on the straight-line method over
estimated lives from 5 to 34 years, or the estimated life of the mine if
shorter. Mine development cost and the cost of Toquepala and Cuajone mineral
lands are capitalized and charged to earnings on the unit-of-production method
using economic ore reserves.
Income Taxes: The Company adopted Statement of Financial Accounting Standards
No. 109 "Accounting for Income Taxes" (SFAS No. 109) effective January 1, 1993.
SFAS No. 109, issued in February 1992, requires the adoption of the "liability"
method of calculating deferred taxes. Prior to the adoption of SFAS No. 109,
the Company provided for income taxes under the provisions of APB No. 11.
Deferred income taxes reflect the future tax consequences of differences between
the tax bases of assets and liabilities and their financial reporting amounts at
each year-end.
<PAGE>
C10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- -------------------------------------------------------------------------------
2. CHANGE IN ACCOUNTING PRINCIPLE:
The Company adopted SFAS No. 109 effective January 1, 1993. The cumulative
effect of this change in accounting principle was a credit to income of $165.1
million and is shown separately on the Company's Consolidated Statement of
Operations for the year ended December 31, 1993. The adoption of the new method
resulted in an additional charge to 1993 net earnings of $4.1 million.
3. FOREIGN EXCHANGE CONTROL:
All income, except for dividend and interest income of $1.5 million, $1.3
million and $7.4 million earned in the United States in 1993, 1992 and 1991,
respectively, is derived from operations conducted by the Company's Peruvian
Branch. Export proceeds are deposited directly to the Company's accounts, which
can be maintained either in Peru or abroad.
4. PERUVIAN AND U.S. TAXES:
Taxes on income represent Peruvian income taxes, except for provision (benefit)
for U.S. taxes of ($1.5) million, $0.4 million and $2.5 million in 1993, 1992
and 1991, respectively, on income earned in the United States. United States
taxes on foreign source income have been eliminated through the utilization of
foreign taxes as either credits or deductions from taxable income. At December
31, 1993, the foreign tax credit carry forward available to reduce possible
future U.S. income taxes amounted to approximately $67.8 million of which $23.8
million expires in 1994, $9.3 million expires in 1996 and $34.7 million expires
in 1998. In addition, the Company has $0.2 million in Alternative Minimum Tax
(AMT) credits which have no expiration dates. The Company has not recognized the
benefit of existing foreign tax credits and AMT credits, since it is unlikely
that realization will occur.
The components of the Peruvian deferred tax liabilities (assets) are:
<TABLE>
<CAPTION>
(Dollars in Millions)
December 31, 1993 January 1, 1993*
<S> <C> <C>
Current:
Accounts receivable $ - $ (0.3)
Inventories 3.0 2.4
---- ------
Net current deferred liability 3.0 2.1
---- ------
Non current:
Property, plant and equipment 5.8 2.9
Accrued severence - (0.9)
Labor shares (0.2) (0.1)
----- ------
Net non current deferred liability 5.6 1.9
----- -----
Total net deferred tax liability $ 8.6 $ 4.0
----- -----
----- -----
</TABLE>
*After the adoption of SFAS No. 109.
Peruvian source income is taxed at graduated rates up to a maximum of 37% with
monthly payments required. Income generated by the Cuajone mine, however, was
subjected to a contract rate of 54.5% during the post-investment recovery period
which concluded in October 1993. The results of the Cuajone mine were taxed at
the lower general rate of 37% following the conclusion of the recovery period.
Income taxes paid were $47.7 million, $60.0 million and $21.6 million in 1993,
1992 and 1991, respectively.
<PAGE>
C11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- -------------------------------------------------------------------------------
The Peruvian income tax at the maximum statutory rate is reconciled to the
actual tax provisions as follows:
<TABLE>
<CAPTION>
(Dollars in Millions)
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Peruvian income tax at maximum statutory rates $31.6 $51.4 $6.2
Income taxed at rates lower than maximum
statutory rates (1.0) (1.8) -
Income taxed at Cuajone contract rate 11.8 17.1 1.6
Effect of exchange transactions 8.5 13.7 (0.5)
(Income not taxed) expenses not deductible (2.5) (3.4) 5.5
Effect of labor shares (1.1) (4.2) (0.9)
Reversal of taxes previously accrued (2.1) - -
----- ----- -----
Taxes on income $45.2 $72.8 $11.9
----- ----- -----
----- ----- -----
</TABLE>
<TABLE>
<CAPTION>
5. NET SALES:
Net sales were to the following customers:
(Dollars in Millions)
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Stockholders and affiliates:
ASARCO Incorporated $ 28.7 $ 64.3 $ 37.7
The Marmon Group, Inc.- Cerro
Sales Corporation 10.8 20.7 3.7
Phelps Dodge Refining Corporation 7.8 21.0 20.1
Newmont Mining Corporation 4.8 - -
----- ----- -----
52.1 106.0 61.5
----- ----- -----
Other:
Japanese Group (a group of Japanese
customers purchasing under a single
sales contract) 45.5 57.0 44.1
Metallgesellschaft Corporation 53.8 42.4 54.2
Others (none of which are individually
10% or more of total sales) 322.6 345.1 367.3
------ ------ ------
Net sales $474.0 $550.5 $527.1
------ ------ ------
------ ------ ------
</TABLE>
Pursuant to a contract which expires in the year 2000, the Company delivers
blister copper to Empresa Minera del Peru (Minero Peru), the Peruvian
Government-owned Ilo refinery, for refining on toll. In 1993, the Company
delivered 202,364 short tons of blister to Minero Peru for toll refining.
6. LABOR SHARES:
Peruvian law in effect through 1991 provided that all employees in mining
companies have increasing participation (up to a maximum of 33 1/3%) in profits,
proceeds from liquidation and "management committees" of Peruvian branches of
foreign companies.
Employees participated in 10% of Branch results in two principal ways: (a) 4.5%
of pre-tax profits payable in cash, hereafter referred to as liquid
participation; and (b) 5.5% of pre-tax results, patrimonial participation, in
the form of ownership shares and general debt obligations of the Branch.
In October 1991, a legislative decree was issued changing the workers'
participation law so that, effective 1992, workers had an 8% cash participation
in pre-tax profits and no longer received patrimonial participation.
<TABLE>
<CAPTION>
Charges to earnings under the law were: (Dollars in Millions)
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Liquid participation (8.0%) $ 8.8 $14.1 -
Liquid participation (4.5%) - - $1.6
Patrimonial participation (5.5%) - - $2.4
Labor shares' participation in income $11.2 $20.5 $3.8
</TABLE>
Labor shares represented 17.5% of the Branch capital for the years 1993 and
1992, and 16.5% for 1991.
<PAGE>
C12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- -------------------------------------------------------------------------------
7. DEBT AND AVAILABLE CREDIT FACILITIES:
At December 31, 1993, the Company had $15.6 million outstanding in long-term
debt, pursuant to various loan agreements described below, and no outstanding
short-term borrowings. Lines of credit available for export financing at
December 31, 1993, amounted to $28 million. Interest paid for short-term
borrowings was $0.6 million, $1.7 million and $8.6 million in 1993, 1992 and
1991, respectively. The carrying value of the debt approximates its fair market
value, since the interest rates are variable. The total amount of fees and
interest paid relating to the long-term debt was $621,000.
At December 31, 1993, the Company had three loan agreements that permit
borrowings of up to $85 million, of which $69.4 million was available at
December 31, 1993. One facility allows the Company to borrow up to $60.0 million
until May 1995. The other two facilities allow for draw downs through December
31, 1994. Borrowings under these agreements bear interest based on LIBOR, Prime
or other indices and averaged 8.01% at December 31, 1993. In addition, there are
commitment fees ranging from approximately 0.37% to 0.75% on the unused balances
of the Company's loan agreements. Aggregate maturities of the notes outstanding
at December 31, 1993 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Fiscal Year Dollars in Thousands
1994 -
1995 $2,000
1996 2,933
1997 2,933
1998 2,933
and thereafter 4,801
</TABLE>
In addition to the loan agreements mentioned above, the Company has signed two
additional loan agreements subsequent to December 31, 1993. On January 21,
1994, the Company signed a credit agreement to borrow up to $115 million. On
January 25, 1994, the Company signed a second loan agreement for $50 million.
The latter loan will be effective upon approval of the Japanese Ministry of
International Trade and Industry (MITI).
Under the most restrictive terms of the agreements, the Company must maintain a
debt to equity ratio, as defined, which cannot exceed 80%. This ratio was 3% at
December 31, 1993. In addition, the ratio of current assets to current
liabilities, as defined, cannot be less than 150% and at December 31, 1993, this
ratio was 497%. Dividends are limited to a portion of net income, as defined,
and by debt service coverage ratios, as defined. One of the agreements, signed
in January of 1994, may require the Company to hedge up to 130,000 metric tons
of its annual production based on defined conditions. As of December 31, 1993
the Company had purchased put options with an exercise price of $0.70 per pound
in compliance with the loan agreement. These options are accounted for as
hedges and the cost of these options and any gains are reported as a component
of the related sales transactions.
8. PENSION BENEFIT PLAN:
The Company has a noncontributory, defined benefit pension plan covering the
salaried employees in the United States and the expatriate employees in Peru.
Benefits are based on salary and years of service. The Company's funding policy
is to contribute amounts to the plan sufficient to meet the minimum funding
requirements set forth in the Employee Retirement Income Security Act of 1974,
plus such additional amounts as the Company may determine to be appropriate from
time to time. Plan assets are primarily invested in guaranteed investment
contracts with the Metropolitan Life Insurance Company of New York.
The net pension costs consist of:
<TABLE>
<CAPTION>
For the Year Ended December 31, 1993 Dollars In Thousands
<S> <C> <C>
Service cost $308
Interest cost on projected benefit obligations 321
Return on plan assets (281)
Other items 349
----
Total net pension cost $697
----
----
</TABLE>
<PAGE>
C13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
The funded status of the plan using the projected unit credit
method is:
<TABLE>
<CAPTION>
At December 31, 1993 Dollars In Thousands
--------------------
<S> <C>
Assets and obligations:
Vested benefit obligation $3,382
Non vested benefits 188
------
Accumulated benefit obligation $3,570
------
------
Projected benefit obligation $4,691
Less, Plan assets at fair value 2,542
-----
Excess of projected benefit obligation
over plan assets (2,149)
Items not yet recognized in earnings:
Unrecognized initial net plan obligation 2,474
Unrecognized loss 72
------
Net accrued cost $ 397
------
------
</TABLE>
The actuarial computations are based upon a discount rate on benefit obligations
of 7%, an expected long-term rate of return on plan assets of 8%, and annual
salary increases of 4%. The pension information for 1992 is not presented due to
immateriality.
<PAGE>
C14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
9. Common Stock:
At December 31, 1993, the stockholders of the Company were as follows:
<TABLE>
<CAPTION>
Number of Percent of Total
Common Shares Outstanding Common Shares
------------- -------------------------
<S> <C> <C>
ASARCO Incorporated 343,792 52.31%
Cerro Trading Company 136,003 20.70
Phelps Dodge Overseas Capital Corporation 106,808 16.25
Newmont Mining Corporation 70,572 10.74
------- ------
657,175 100.00%
------- ------
------- ------
</TABLE>
The Company declared and paid cash dividends of $18 million and $15 million in
1993 and 1992, respectively. Additionally, in 1991, the Company purchased 13.8
percent of its previously outstanding shares from its stockholders pro rata for
an aggregate purchase price of $60 million. The repurchased shares are held in
the Company's treasury and are available for issuance for general corporate
purposes.
10. RELATED PARTY TRANSACTIONS:
ASARCO Incorporated (ASARCO), a stockholder of the Company, provides various
support services to the Company. In 1993 and 1992, these activities were
principally related to legal, tax and treasury support services. In 1991, these
services also included the purchase and shipment of materials to the Company's
operations in Peru. The amounts paid to ASARCO for these services were $0.4
million, $0.2 million and $1.0 million in 1993, 1992 and 1991, respectively.
Sales to ASARCO and other affiliates are disclosed in Note 5.
Fomenta, S.A., a wholly owned Peruvian subsidiary, holds a 19% interest in the
capital of Metalurgica Peruana S.A., (MEPSA). MEPSA, a Peruvian company, is
engaged in the manufacture of metallurgical products used in the mining
industry. The Company purchases grinding media from MEPSA for use at the
Company's concentrators. Purchases were $5.3 million, $6.7 million and $9.7
million in 1993, 1992 and 1991, respectively.
11. CUAJONE JOINT VENTURER:
In September 1991, the Company purchased the Joint Venture interest in the
Cuajone mine from Billiton, B.V. for $15.2 million, to be paid in annual
installments through 1996. Provision exists, however, for acceleration of these
payments as stockholder dividends are made. Under the terms of this agreement,
$4.3 million, $4.2 million and $2.5 million were paid in 1993, 1992 and 1991,
respectively. The 1993 and 1992 amounts include acceleration payments of the
entire 1996 installment and part of the 1995 installment. Therefore, as of
December 31, 1993, only the 1994 and 1995 installments remain outstanding.
Prior to the purchase, the participation of the Joint Venturer in the net
earnings of the Company represented a pro rata allocation of Cuajone net
earnings based on the percentage of equity contribution made by the Joint
Venturer to the Cuajone operation. Cash distributions were made in accordance
with terms of the Joint Venture agreement, and were consequently determined by
other factors as well as net earnings.
12. COMMITMENTS AND CONTINGENCIES:
Refining Assessment:
In 1986 and 1987, Minero Peru claimed additional refining charges for the period
1981 through March 1987 from the Company and two of its blister customers. The
Company negotiated with Minero Peru on behalf of all parties and agreed to
reimburse the two blister customers involved for their pro rata portion of any
negotiated settlement. Claims for all years concern the application of
escalator clauses in toll refining contracts. Claims for the period 1983
through March 1987 were settled in 1988.
During 1993, the assessment claims relating to the 1981 and 1982 years was
settled by arbitration in the Company's favor. This resulted in the reversal of
prior years' accruals of $11.1 million which is included in 1993's earnings.
<PAGE>
C15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- -------------------------------------------------------------------------------
CUAJONE INVESTMENT RECOVERY:
In December 1991, the Company and the Government of Peru entered an agreement
resolving all open issues concerning the conclusion of the investment recovery
contract which governed the development and operation of the Cuajone mine. The
Company agreed to undertake a $300 million investment program over the five
years 1992-1996, and the Peruvian Government agreed not to discriminate against
the Company in comparison with treatment given to other mining companies. As
part of this agreement, in 1991 the Company transferred $55 million from its
accounts in New York to an account with the Central Reserve Bank of Peru, to be
withdrawn by the Company at its discretion solely for application to the $300
million investment program. At December 31, 1993, the balance of this account
with the Central Reserve Bank of Peru was $58.3 million.
The projects specified in the investment program are in various stages.
External financing, as described in Note 7 above, has been obtained by the
Company for use in the investment program.
Litigation:
On February 26, 1993, the Mayor of Tacna brought a lawsuit against the Company
seeking $100 million in damages from alleged harmful deposition of tailings and
slag, and smelter emissions. In another lawsuit previously brought by the Mayor
of Tacna, also relating to the disposal of mine tailings, the Peruvian Supreme
Court has ruled that the Company must cease its current method of disposal. The
Company has submitted plans to the Ministry of Mines and Energy and is awaiting
the Ministry's approval for modifying the tailings disposal. Adoption of the
modified tailings disposal plan should, in the Company's belief, resolve this
matter. In another pending lawsuit, a group named the Association of Retired
Employees of Southern Peru Copper Corporation has challenged the accounting of
the Company's Peruvian branch and its allocations of financial results to the
Mining Community in the 1970's.
It is the opinion of the Company's management that the outcome of the legal
proceedings mentioned, and other miscellaneous litigation and proceedings now
pending, will not materially adversely affect the financial position of the
Company and its consolidated subsidiaries.
<PAGE>
C16
<TABLE>
<CAPTION>
SOUTHERN PERU COPPER CORPORATION
and CONSOLIDATED SUBSIDIARIES
Schedule V - Property, Plant and Equipment
For the years ended December 31, 1993, 1992 and 1991
- ---------------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Balance at Additions Balance at
beginning of at Other end
Classification period cost Retirements changes of period
- ---------------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
1993
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Buildings and equipment $1,012,695 $ 724 $ 6,819 $ 27,329 (a) $1,033,929
Mine development 114,780 114,780
Mineral land 12,176 50 12,226
Land, other than mineral 1,243 (380) (a) 863
Construction in progress 14,514 31,085 (22,957) (a) 22,642
---------- -------- ------- -------- ----------
Total property $1,155,408 $ 31,859 $ 6,819 $ 3,992 (b) $1,184,440
---------- -------- ------- -------- ----------
---------- -------- ------- -------- ----------
1992
----------------------------------------------------------------------
Buildings and equipment $ 983,468 $ 2,499 $ 1,989 $ 28,717 (a) $1,012,695
Mine development 114,780 114,780
Mineral land 12,176 12,176
Land, other than mineral 709 52 586 (a) 1,243
Construction in progress 19,369 20,564 (25,419) (a) 14,514
---------- -------- ------- -------- -----------
Total property $1,130,502 $ 23,063 $ 2,041 $ 3,884 (b) $1,155,408
---------- -------- ------- -------- ----------
---------- -------- ------- -------- ----------
1991
----------------------------------------------------------------------
Buildings and equipment $ 968,944 $ 4,320 $ 18,844 (a) $983,468
Mine development 114,780 114,780
Mineral land 12,176 12,176
Land, other than mineral 696 $ 13 709
Construction in progress 6,871 31,342 (18,844)(a) 19,369
---------- -------- ------- -------- --------
Total property $1,103,467 $ 31,355 $ 4,320 $ - 0 - $1,130,502
---------- -------- ------- --------- ----------
---------- -------- ------- --------- ----------
(a) Transfers.
(b) Includes $3,992 and $3,884 in 1993 and 1992, respectively, of transfers from inventory of items purchased in prior years.
</TABLE>
<PAGE>
C17
<TABLE>
<CAPTION>
SOUTHERN PERU COPPER CORPORATION
and CONSOLIDATED SUBSIDIARIES
Schedule VI - Accumulated Depreciation, Depletion and Amortization
of Property, Plant and Equipment
For the years ended December 31, 1993, 1992 and 1991
- -----------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Additions
Balance at charged to Balance at
beginning costs and Other end
Description of period expenses Retirements changes of period
- -----------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
1993
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Buildings and equipment $ 673,887 $ 30,784 $ 6,701 $ 697,970
Mine development 81,012 3,648 84,660
Mineral land 10,322 169 10,491
--------- -------- ------- --------- ---------
Total property $ 765,221 $ 34,601 $ 6,701 - 0 - $ 793,121
--------- -------- ------- --------- ---------
--------- -------- ------- --------- ---------
1992
------------------------------------------------------------------------
Buildings and equipment $ 647,184 $ 28,614 $ 1,911 $ 673,887
Mine development 77,303 3,709 81,012
Mineral land 10,154 168 10,322
--------- -------- ------- --------- ---------
Total property $ 734,641 $ 32,491 $ 1,911 - 0 - $ 765,221
--------- -------- ------- --------- ---------
--------- -------- ------- --------- ---------
1991
------------------------------------------------------------------------
Buildings and equipment $ 618,788 $ 32,715 $ 4,319 $ 647,184
Mine development 73,625 3,678 77,303
Mineral land 9,988 166 10,154
--------- -------- ------- --------- ---------
Total property $ 702,401 $ 36,559(a) $ 4,319 - 0 - $ 734,641
--------- -------- ------- --------- ---------
--------- -------- ------- ---------
</TABLE>
(a) Does not include $5,534 relating to the amortization of goodwill.
<PAGE>
C18
<TABLE>
<CAPTION>
SOUTHERN PERU COPPER CORPORATION
and CONSOLIDATED SUBSIDIARIES
Schedule X - Supplementary Income Statement Information
For the years ended December 31, 1993, 1992 and 1991
- -----------------------------------------------------------------------------------------------------------------------------------
Column A Column B
-------- --------
Item Charged to cost and expenses
- -----------------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
1993 1992 1991
-----------------------------------------------------
<S> <C> <C> <C>
Maintenance and repairs $ 60,139 $ 50,411 $ 58,674
Taxes, other than income and
payroll taxes:
Peruvian sales and export taxes $ - 0 - $ - 0 - $ 23,982
</TABLE>
<PAGE>
D1 Form 10K
ASARCO Incorporated
EXHIBIT INDEX
Exhibit Indexed
No. Description on page
- ------- ----------- -------
3. Certificate of Incorporation and By-Laws
(a) Certificate of Incorporation - restated, filed May 4, 1970
(Filed as an Exhibit to the Company's 1980 Annual Report on
Form 10-K and incorporated herein by reference)
(b) Certificate of Amendment to the Certificate of
Incorporation effective April 23, 1975
(Filed as an Exhibit to the Company's 1980 Annual Report on
Form 10-K and incorporated herein by reference)
(c) Certificate of Amendment of Certificate of Incorporation
executed April 14, 1981
(Filed as an Exhibit to the Post-Effective Amendment No. 8
to Registration Statement No. 2-47616, filed April 30, 1981
and incorporated herein by reference)
(d) Certificate of Amendment of Restated Certificate of
Incorporation filed on May 6, 1985
(Filed as an Exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1985 and
incorporated herein by reference)
(e) Certificate of Amendment of Certificate of Incorporation
filed July 21, 1986
(Filed as an Exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1986 and
incorporated herein by reference)
(f) Certificate of Amendment of Restated Certificate of
Incorporation, as amended filed April 22, 1987
(Filed as an Exhibit to the Company's 1987 Annual Report
on Form 10-K and incorporated herein by reference)
(g) Statement of Cancellation filed July 31, 1987 whereby
155,000 shares of Series A Cumulative Preferred Stock and
862,500 shares of $9.00 Convertible Exchangeable Preferred
Stock were cancelled
(Filed as an Exhibit to the Company's 1987 Annual Report
on Form 10-K and incorporated herein by reference)
(h) Statement of Cancellation filed November 20, 1987 whereby
1,026,900 shares of Series A Cumulative Preferred Stock
were cancelled
(Filed as an Exhibit to the Company's 1987 Annual Report
on Form 10-K and incorporated herein by reference)
(i) Statement of Cancellation filed December 18, 1987 whereby
1,250,000 shares of Series B Cumulative Convertible
Preferred Stock were cancelled
(Filed as an Exhibit to the Company's 1987 Annual Report
on Form 10-K and incorporated herein by reference)
(j) Statement of Cancellation filed March 3, 1988 whereby
27,000 shares of Series A Cumulative Preferred Stock
were cancelled (Filed as an Exhibit to the Company's
1987 Annual Report on Form 10-K and incorporated herein
by reference)
<PAGE>
D2 Form 10K
ASARCO Incorporated
EXHIBIT INDEX
(Continued)
Exhibit Indexed
No. Description on page
- ------- ----------- -------
(k) Certificate of Amendment of Restated Certificate of
Incorporation, as amended, filed August 7, 1989
(Filed as an Exhibit to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1989 and
incorporated herein by reference)
(l) By-Laws as last amended on June 26, 1991
(Filed as an Exhibit to the Company's 1991 Annual Report
on Form 10-K and incorporated herein by reference.)
4. Instruments defining the rights of security holders, including
indentures
(a) There are currently various separate indentures,
agreements or similar instruments under which long-term
debt of Asarco is currently outstanding. The Registrant
hereby agrees to furnish to the Commission, upon request,
a copy of any of the instruments which define the rights
of holders of long-term debt securities. None of the
outstanding instruments represents long-term debt
securities in excess of 10% of the total assets of Asarco
as of December 31, 1993
(b) Form of Rights Agreement dated as of July 26, 1989,
between the Company and First Chicago Trust Company of
New York, as Rights Agent, defining the rights of
shareholders under a July 1989 Shareholders' Rights plan
and dividend declaration
(Filed as an Exhibit to the Company's report on Form 8-K
filed on July 28, 1989 and incorporated herein by
reference)
(c) Rights Agreement Amendment dated as of September 24, 1992,
between the Company and The Bank of New York, as Successor
Rights Agent under the Rights Agreement listed above
(Filed as an Exhibit to the Company's 1992 Annual Report
on Form 10-K and incorporated herein by reference)
(d) Indenture Agreement dated as of February 1, 1993 between
the Company and Bankers Trust Company, as Trustee,
covering the issuance of debt securities registered by
the Company in April 1992, not to exceed $250 million
(Filed as an Exhibit to the Company's 1992 Annual Report
on form 10-K and incorporated herein by reference)
10. (a) Stock Option Plan as amended through November 24, 1987
(Filed as an Exhibit to the Company's 1988 Annual Report
on Form 10-K and incorporated herein by reference)
(b) Form of Employment Agreement entered into in 1985, as
amended in March and April 1989, among the Company and
currently 12 of its executive officers, including
Messrs. R. de J. Osborne, F.R. McAllister, A.B.
Kinsolving, R.J. Muth and R.M. Novotny
(Filed as an Exhibit to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1989 and
incorporated herein by reference)
(c) Deferred Fee Plan for Directors, as amended through D9-D13
January 26, 1994
(d) Supplemental Pension Plan for Designated Mid-Career
Officers, as amended through January 31, 1990
(Filed as an Exhibit to the Company's 1989 Annual Report
on Form 10-K and incorporated herein by reference)
<PAGE>
D3
ASARCO Incorporated
EXHIBIT INDEX
(Continued)
Exhibit Indexed
No. Description on page
- ------- ----------- -------
(e) Retirement Plan for Non-Employee Directors, as amended
through January 25, 1989
(Filed as an Exhibit to the Company's 1988 Annual Report
on Form 10-K and incorporated herein by reference)
(f) Directors' Stock Award Plan, as amended through January
27, 1993 (Filed as an Exhibit to the Company's 1992
Annual Report on Form 10-K and incorporated herein by
reference)
(g) Stock Incentive Plan adopted by the Company's
Shareholders on April 25, 1990
(Filed as an Exhibit to the Company's 1990 Annual Report
on Form 10-K and incorporated herein by reference)
11. Statement re Computation of Earnings Per Share D-4
21. Subsidiaries of the registrant D-5 - D-8
23. Report of Independent Accountants on Financial Statement
Schedules and Consent of Independent Accountants are included
on page A58 of this Annual Report on Form 10-K.
Report on Form 11-K relating to the Savings Plan for Salaried Employees of
ASARCO Incorporated and Participating Subsidiaries is to be filed by
amendment on Form 8.
Copies of exhibits may be acquired upon written request to the Treasurer and the
payment of processing and mailing costs.
<PAGE>
D4 Form 10K
Exhibit (11) STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
This calculation is submitted in accordance with regulation S-K item 601(b)(11).
<TABLE>
<CAPTION>
FULLY DILUTED EARNINGS PER COMMON SHARE
(in thousands, except per share amounts)
For the years ended December 31,
1993 1992 1991
------------ ----------- -----------
<S> <C> <C> <C>
Net earnings (loss) applicable to common stock
before cumulative effects of changes in
accounting principles $(70,676) $(29,127) $45,957
Cumulative effect of changes in accounting
principles 86,295 (53,964) -
------------------------------------
Net earnings (loss) applicable to common stock $ 15,619 $(83,091) $45,957
------------------------------------
------------------------------------
Weighted average number of common shares
outstanding 41,594 41,364 41,128
Shares issuable from assumed exercise
of Common Stock Purchase Warrants - - 11
Shares issuable from assumed exercise
of Stock Options 7 40 40
------------------------------------
Weighted average number of common shares
outstanding, as adjusted 41,601 41,404 41,179
------------------------------------
------------------------------------
FULLY DILUTED EARNINGS PER SHARE:
Net earnings (loss) applicable to common
stock before cumulative effects of changes
in accounting principles $ (1.70) $ (0.70) $ 1.12
Cumulative effect of changes in accounting
principles 2.08 (1.31) -
------------------------------------
Net earnings (loss) applicable to common
stock $ .38 $ (2.01) $ 1.12
------------------------------------
------------------------------------
PRIMARY EARNINGS PER SHARE:
Net earnings (loss) applicable to common
stock before cumulative effect of changes
in accounting principles $ (1.70) $ (0.70) $ 1.12
Cumulative effect of changes in
accounting principles 2.08 (1.31) -
------------------------------------
Net earnings (loss) applicable to common
stock $ .38 $ (2.01) $ 1.12
------------------------------------
------------------------------------
</TABLE>
<PAGE>
D5 Form 10K
Item 14. (c) Exhibit 21 Subsidiaries of the registrant
<TABLE>
<CAPTION>
Percentage of voting
securities owned or Key to
other bases notes
Name of Company of control below
--------------- ----------------------- ---------
<S> <C> <C> <C>
PARENTS: None
-------
Registrant: ASARCO Incorporated (A)
SUBSIDIARIES AND OTHER ASSOCIATED COMPANIES:
--------------------------------------------
1 American Limestone Company, Inc. (Delaware) 100.0 (A)
2 American Smelting and Refining Company (New Jersey) 100.0 (C)
3 AR Mexican Explorations Inc. (Delaware) 100.0 (A)
4 Compania Minera Real de Las Lomas, S.A. de C.V. 34.0 (A)
(Mexico)
5 Minera San Bernardo, S.A. de C.V. (Mexico) 49.0 (A)
6 Minera Santa Regina, S.A. de C.V. (Mexico) 49.0 (A)
7 AR Mexican Holdings, Inc. (Delaware) 100.0 (A)
8 AR Specialty Chemicals, S. A. de C.V. (Mexico) 100.0 (A)
9 Enthone-OMI de Mexico S.A. de C.V. (Mexico) 100.0 (A)
10 Rafco Kemicals S.A. de C.V. (Mexico) (See 40) 17.0 (B) (E)
11 AR Montana Corporation (Delaware) 100.0 (A)
12 Asarco Australia Limited (Australia) 45.3 (B) (D)
13 Asarco Developments (NZ) Limited (New Zealand) 100.0 (A)
14 Asarco Gold Pty. Ltd. (Australia) 100.0 (A)
15 Asarco Metals Pty. Ltd. (Australia) 100.0 (A)
16 Asarco (Delaware) Incorporated (Delaware) 100.0 (A)
17 Mexico Desarrollo Industrial Minero, S.A. de C.V. 2.87 (B) (E)
(Mexico) (See 22 & 95)
18 Asarco Exploration Company of Canada, Limited 100.0 (A)
(Canada)
19 Asarco Finance Limited (Bermuda) 100.0 (A)
20 Asarco International Corporation (Delaware) 100.0 (A)
21 Asarco de Mexico (Delaware) Inc. (Delaware) 100.0 (A)
22 Mexico Desarrollo Industrial Minero, S.A.de C.V. 0.11 (B) (E)
(Mexico) (See 17 & 95)
23 Asarco de Mexico, S.A. de C.V. (Mexico) 100.0 (A)
24 Asarco Oil and Gas Company, Inc. (New York) 100.0 (A)
25 ASARCO Santa Cruz, Inc. (Delaware) 100.0 (A)
26 Covington Land Company (Delaware) 100.0 (A)
27 BioTrace Laboratories, Incorporated (Utah) 100.0 (A)
28 Capco Pipe Company, Inc. (Alabama) 100.0 (A)
29 Compania Minera Asarco, S.A. (Chile) 100.0 (A)
30 Copper Basin Railway, Inc. (Delaware) 45.0 (B) (D)
31 Domestic Realty Company, Inc. (Montana) 100.0 (A)
32 Encycle, Inc. (Delaware) 100.0 (A)
33 Hydrometrics, Inc. (Delaware) 100.0 (A)
34 Encycle/Texas, Inc. (Delaware) 100.0 (A)
</TABLE>
<PAGE>
D6 Form 10K
Item 14. (c) Exhibit 21 Subsidiaries of the registrant
<TABLE>
<CAPTION>
Percentage of voting
securities owned or Key to
other bases notes
Name of Company of control below
--------------- ------------------------ ----------
<S> <C> <C> <C>
SUBSIDIARIES AND OTHER ASSOCIATED COMPANIES,
--------------------------------------------
cont'd:
-------
35 Enthone, Incorporated (New York) 100.0 (A)
36 Ionic International Inc. (Michigan) 100.0 (A)
37 Meltex, Inc. (Japan) 16.25 (B) (D)
38 Enthone-OMI (Singapore) Pte. Ltd. (Singapore) 8.0 (A)
(See 84)
39 Micro Image Inc. (New York) 100.0 (A)
40 Rafco Kemicals, S.A. de C.V. (Mexico) (See 10) 34.0 (B) (E)
41 Enthone-OMI, Inc. (Delaware) 100.0 (A)
42 Ebara-Udylite Co., Ltd. (Japan) 45.0 (B) (D)
43 Electroplating Engineers of Japan Ltd. (Japan) 25.0 (B) (D)
(See 75)
44 Alpha Metals of Japan (Japan) 50.0 (B) (D)
45 Electroplating Engineers S.A. (Switzerland) 24.0 (B) (D)
(see 47)
46 Enthone-OMI (Benelux) B.V. (The Netherlands) 100.0 (A)
47 Electroplating Engineers S.A. (Switzerland) 20.0 (B) (D)
(see 45)
48 Enthone-OMI (France) S.A. (France) (See 53) 28.5 (A)
49 Ometec, S.A. (Switzerland) 51.0
50 Enthone-OMI (Canada) Inc. (Ontario, Canada) 100.0 (A)
51 Enthone-OMI (Deutschland)GmbH (Germany) 100.0 (A)
52 Imasa B.V. (The Netherlands) 100.0 (A)
53 Enthone-OMI (France) S.A. (France) (See 48) 71.5 (A)
54 Enthone-OMI Holdings (U.K.) Ltd. (United 82.41 (A)
Kingdom) (see 70)
55 AMZA Ltd. (Israel) 33.3 (B) (D)
56 Enthone-OMI Marketing (Europe) Ltd. (United 100.0 (A)
Kingdom)
57 Enthone-OMI (U.K.) Limited (United Kingdom) 100.0 (A)
58 Friedr. Blasberg Svenska AB (Sweden) (See 62) 24.7 (B) (D)
59 Imasa Limited (United Kingdom) 100.0 (A)
60 L.P.W. Chemie GmbH (Germany) 49.0 (B) (D)
61 Blasberg Oberflaechentechnik GmbH (Germany) 100.0 (A)
62 Friedr. Blasberg Svenska AB (Sweden) 24.7 (B) (D)
(See 58)
63 Galvano Production Chemie GmbH (Germany) 100.0 (A)
64 Nihon LPW K.K. (Japan) 5.0 (B) (E)
65 Enthone-OMI (Hong Kong) Company Limited (Hong 5.5 (A)
Kong) (See 82)
66 Enthone-OMI (Italia) S.p.A. (Italy) (See 71) 51.6 (A)
67 Enthone-OMI K.K. (Japan) 100.0 (A)
68 Enthone-OMI (Sverige) A.B. (Sweden) 100.0 (A)
69 Finima S.A. (France) 100.0 (A)
70 Enthone-OMI Holdings (U.K.) Ltd. (United 17.59 (A)
Kingdom) (see 54)
</TABLE>
<PAGE>
D7 Form 10K
Item 14. (c) Exhibit 21 Subsidiaries of the registrant
<TABLE>
<CAPTION>
Percentage of voting
securities owned or Key to
other bases notes
Name of Company of control below
--------------- ------------------------ ----------
<S> <C> <C> <C>
SUBSIDIARIES AND OTHER ASSOCIATED COMPANIES,
--------------------------------------------
cont'd:
-------
71 Enthone-OMI (Italia) S.p.A. (Italy) (See 66) 48.4 (A)
72 Imasa A.G. (Switzerland) 40.0 (B) (D)
73 Internacional de Manufacturas Asociadas, S.A. 100.0 (A)
(Spain)
74 OMI Holding S.A. (Switzerland) 100.0 (A)
75 Electroplating Engineers of Japan Ltd. (Japan) 25.0 (B) (D)
(See 43)
76 Enthone-OMI (Suisse) S.A. (Switzerland) 100.0 (A)
77 OMI International Corporation (Delaware) 100.0 (A)
78 Enthone-OMI (Australia) Pty. Ltd. (Victoria, 100.0 (A)
Australia)
79 Enthone-OMI (Austria) GmbH (Austria) 100.0 (A)
80 Enthone-OMI (Espana) S.A. (Spain) 100.0 (A)
81 Enthone-OMI (Europe) Corporation (Delaware) 100.0 (A)
82 Enthone-OMI (Hong Kong) Company Limited (Hong 94.5 (A)
Kong) (See 65)
83 Hua-Mei Electroplating Co. Ltd. (People's 45.0 (B) (D)
Rep.of China)
84 Enthone-OMI (Singapore) Pte. Ltd. (Singapore) 60.0 (A)
(See 38)
85 Enthone-OMI (Malaysia) SDN BHD (Malaysia) 100.0 (A)
86 Federal Mining and Smelting Company (Idaho) 100.0 (A)
87 Federated Metals Canada Limited (Canada) 100.0 (A)
88 Federated Genco Limited (Canada) 60.0 (B) (D)
89 Federated Metals Corporation (New York) 100.0 (A)
90 Lone Star Lead Construction Corp. (New York). 100.0 (A)
91 Metales Federados, S.A. de C.V. (Mexico) 100.0 (A)
92 Geominerals Insurance Company, Ltd. (Bermuda) 100.0 (A)
93 Lac d'Amiante du Quebec, Ltee (Delaware) 100.0 (A)
94 LAQ Canada, Ltd. (Delaware) 100.0 (A)
95 Mexico Desarrollo Industrial Minero, S.A. de C.V. 25.33 (B) (E)
(Mexico) (See 17 & 22)
96 M.I.M. Holdings Limited (Australia) 17.2 (B) (E)
97 Mines Trading Company Ltd. (United Kingdom) 100.0 (A)
98 Mining Development Company (Delaware) 100.0 (A)
99 Puya Raymondi Empresa Minera S.A. (Bolivia) 70.0 (A)
100 Mission Exploration Company (Delaware) 100.0 (A)
101 NCRB, Inc. (Delaware) 100.0 (A)
102 Neptune Mining Company (Delaware) 52.2 (B) (D)
103 Northern Peru Mining Corporation (Delaware) 100.0 (A)
104 Corporacion Minera Nor Peru, S.A. (Peru) 80.0 (A)
105 Protective Technologies International, Inc. 100.0 (A)
(Delaware)
106 Southern Peru Copper Corporation (Delaware) 52.3 (B) (D)
107 The International Metal Company (New York) 100.0 (A)
108 Tulipan Company, Inc. (Delaware) 52.3 (B) (E)
</TABLE>
NOTES
(A) Included in financial statements of Registrant and consolidated
subsidiaries at December 31, 1993, filed as part of this Form 10-K.
(B) Excluded from financial statements of Registrant and consolidated
subsidiaries filed as part of this Form 10-K, except to the extent noted in
Notes D and E. These companies are not in the aggregate considered significant.
(C) Inactive, having no assets or liabilities.
<PAGE>
D8 Form 10K
(D) Carried on the equity method. None of the 50%-or-less owned companies
constitutes a significant subsidiary. Separate Financial Statements are
submitted herewith for Southern Peru Copper Corporation and its
consolidated subsidiaries.
(E) M.I.M. and Medimsa are carried on the cost method. Commencing in the third
quarter of 1988, Asarco changed from its equity method of accounting for
Southern Peru Copper Corporation and commencing in 1993 returned to the
equity method of accounting.
<PAGE>
D9 Form 10K
EXHIBIT 10C
-----------
ASARCO INCORPORATED
DEFERRED FEE PLAN FOR DIRECTORS
As Last Amended on January 26, 1994
SECTION 1. EFFECTIVE DATE. The effective date of the ASARCO Incorporated
Deferred Fee Plan For Directors (the "Plan"), is January 1, 1982.
SECTION 2. ELIGIBILITY. Any Director of ASARCO Incorporated (the
"Company") is eligible to participate in the Plan.
SECTION 3. DEFERRED COMPENSATION ACCOUNT. A deferred compensation
account shall be established for each Director who elects to participate in the
Plan. Each Director's deferred compensation account shall consist of a cash
subaccount and a stock subaccount.
SECTION 4. AMOUNT OF DEFERRAL. A participant may elect to defer receipt
of all or one-half of the compensation payable to the participant for serving on
the Board of Directors or committees of the Board of Directors of the Company.
An amount equal to the compensation deferred will be credited to the
participant's deferred compensation account on the date such compensation is
otherwise payable.
SECTION 5. TIME OF ELECTION OF DEFERRAL. The first election to defer
compensation received during the calendar year, and any subsequent election
modifying the prior election as provided in Section 10, shall be effective when
made and, with respect to the percentage of compensation deferred, shall only
apply to compensation not then earned. An election, as subsequently modified,
shall continue in force with respect to compensation earned during such calendar
year until the Company is notified in writing that the participant no longer
wishes to defer compensation for future services on the Board of Directors.
SECTION 6. CASH SUBACCOUNT. Any compensation which a director elects to
defer pursuant to this Plan shall be credited to such Director's cash subaccount
unless such Director elects in writing that all or a portion of such deferral be
credited to his stock subaccount in accordance with Section 7 of this Plan.
Each deferred compensation cash subaccount will be credited with interest from
the date on which deferred compensation would normally have been paid, until
payment, at a rate equal to the prime rate of The Chase Manhattan Bank (National
Association), on the first day of each calendar quarter in which such interest
is credited to the participant's deferred compensation cash subaccount.
Interest shall be compounded quarterly.
SECTION 7. STOCK ELECTION. A Director may elect in writing that all or a
portion, in increments of 25%, of the compensation he is deferring pursuant to
the Plan for any year be credited to his deferred compensation stock subaccount
in lieu of his deferred compensation cash subaccount.
An election by a Director to have an amount credited to his deferred
compensation stock subaccount must be received by the Company prior to January 1
of the calendar year during which the election is to be effective and shall be
irrevocable for the entire year. Such election shall remain in effect for
subsequent years unless changed prior to the January 1 of any such subsequent
year. Notwithstanding the foregoing, however, any such election which is to
take effect in 1988 must be received by the Company prior to April 1, 1988 and
shall be effective only for compensation earned on and after that date.
A bookkeeping entry shall be made of the number of whole shares of Company
common stock which could be purchased at fair market value with the compensation
credited to such stock subaccount on the day such amount normally would have
been paid to the Director.
The stock subaccount also shall be credited with a bookkeeping entry
indicating the number of additional whole shares which would be payable as a
stock dividend on the shares previously credited to the stock subaccount.
Any deferred compensation amounts which are insufficient to permit the
crediting of a whole share of Company common stock and any amounts which would
represent cash dividends on Company common stock credited to a stock subaccount
shall be carried as a cash balance bookkeeping entry in such stock subaccount.
At such time as the cash balance equals at
<PAGE>
D10 Form 10K
least the fair market value of one share of Company common stock, the cash
balance bookkeeping entry shall be converted to an entry representing the number
of additional whole shares of Company common stock which could be purchased at
fair market value with such balance. No interest shall be credited on any such
stock subaccount cash balance.
For purposes of this Section 7, "fair market value" of a share of Company
common stock shall mean the average of the opening and closing prices of a
single share of Company common stock as reported by the New York Stock Exchange
as of the first trading day coincident with or next following the day as of
which such value is to be determined.
No election may be made to have amounts previously credited to a Director's
deferred compensation cash subaccount credited instead to his stock subaccount,
and no election may be made to have amounts previously credited to a Director's
stock subaccount credited instead to a cash subaccount.
SECTION 8. VALUE OF DEFERRED COMPENSATION ACCOUNTS. The value of each
participant's deferred compensation account shall include the compensation
deferred pursuant to Section 4 which is credited to a Director's deferred
compensation cash subaccount, the interest credited on such compensation
pursuant to Section 6, the value of any shares of Company common stock credited
to the Director's deferred compensation stock subaccount and the cash balance
credited to such stock subaccount, less any payments made under Section 9.
SECTION 9. PAYMENT OF DEFERRED COMPENSATION. The value of a
participant's deferred compensation cash subaccount and deferred compensation
stock account shall be payable solely in cash. All payments of a participant's
deferred compensation account shall be made in a lump sum or in annual
installments in accordance with an election made by the participant as provided
in Section 10. At a participant's election, such payments may commence on
January 15 of any year subsequent to the fourth year following the year in which
such fees are earned, provided, that in all cases payment shall commence on the
January 15 of the calendar year following termination of services as a Director.
If the annual installments are elected, such payments shall be made on each
January 15 in accordance with the participant's election as provided in Section
10. The amount of the first payment attributable to the cash subaccount shall
be a fraction of the value of the participant's cash subaccount, the numerator
of which is one and the denominator of which is the total number of installments
elected, and the amount of each subsequent payment shall be a fraction of the
value (including interest earned) on the date preceding each subsequent payment,
the numerator of which is one and the denominator of which is the total number
of installments elected minus the number of installments previously paid.
The amount of the first payment attributable to the stock subaccount shall
be a fraction of the value of the participant's stock subaccount (based upon the
fair market value of the stock determined under Section 7 plus any cash
balance), the numerator of which is one and the denominator of which is the
number of installments elected, and the amount of each subsequent payment shall
be a fraction of the redetermined value of the participant's stock subaccount,
the numerator of which is one and the denominator of which is the total number
of installments elected minus the number of installments previously paid.
If one lump sum payment is elected, such payment shall be made on the date
designated in accordance with the participant's election as provided in Section
10.
SECTION 10. MANNER OF ELECTING DEFERRAL AND PAYMENT; CHANGES IN ELECTION.
A participant shall elect to defer compensation by giving written notice to the
Company on a form provided by the Company, which notice shall include (1) the
percentage amount to be deferred; (2) an election of a lump sum payment or the
number of annual installments (not to exceed ten) for the payment of the
deferred compensation; and (3) the date of the lump sum payment or of the first
installment payment, as appropriate. A participant's election shall remain in
effect unless changed in the manner set forth below. A participant may change
his election with respect to the percentage of deferral at any time by
submitting a new written notice to the Company, provided, that such a changed
election will be effective only for compensation subsequently earned during the
calendar year to which the election applies. All deferred elections shall be
irrevocable as to compensation previously earned and may not be changed as to
the form or time of payments. Notwithstanding the foregoing, prior to the
calendar year in which payments would otherwise commence, a participant may
request the Company, subject to the discretion of the Company, (i) to change his
election with respect to the form and time of payments of
<PAGE>
D11 Form 10K
his cash subaccount and/or (ii) to change his election with respect to the form
and time of payments of his stock subaccount in connection with his retirement
or termination as a Director, provided, that no such change may accelerate the
time of the initial payment date of any deferred amount, or delay the scheduled
initial payment day for a period of less than three years.
SECTION 11. DESIGNATION OF BENEFICIARY. A participant may designate a
beneficiary by giving written notice to the Company on the form described in
Section 10. If no beneficiary is designated, the beneficiary will be the
participant's estate. If more than one beneficiary statement has been filed, the
beneficiary designated in the statement bearing the most recent date will be
deemed the valid beneficiary.
SECTION 12. DEATH OF PARTICIPANT OR BENEFICIARY. In the event of a
participant's death before he has received all of the deferred payments to which
he is entitled hereunder, the value of the participant's deferred compensation
account shall be paid to the estate or designated beneficiary of the deceased
participant in one lump sum on the first January 15 or July 15 following such
date of death, or as soon as reasonably possible after such January 15 or July
15, unless the participant has elected to continue without change the schedule
for payment of benefits.
If the distribution is to be made to a beneficiary and such beneficiary
dies before such distribution has been made, the amount of the distribution will
be paid to the estate of the beneficiary in one lump sum.
SECTION 13. PARTICIPANT'S RIGHTS UNSECURED. The right of any participant
to receive future installments under the provisions of the Plan shall be
contractual in nature only, however, the amounts of such installments may be
held in a trust, the assets of which shall be subject to the claims of the
Company's general creditors in the event of bankruptcy or insolvency only. Any
installment paid from such trust shall reduce the amount of benefits owed by the
Company.
SECTION 14. STATEMENT OF ACCOUNT. Statements will be sent to participants
by the end of February of each year as to the value of their deferred
compensation accounts as of the end of December of the preceding year.
SECTION 15. ASSIGNABILITY. No right to receive payments hereunder shall
be transferable or assignable by a participant or beneficiary, except by will or
by the laws of descent and distribution.
SECTION 16. PARTICIPATION IN OTHER PLANS. Nothing in this Plan will
affect any right which a participant may otherwise have to participate in any
other retirement plan or agreement which the Company may have now or hereafter.
SECTION 17. AMENDMENT. This Plan may at any time or from time to time be
amended, modified or terminated by the Board of Directors of the Company. No
amendment, modification or termination shall, without the consent of a
participant, adversely affect such participant's accruals in his deferred
compensation account.
SECTION 18. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
<PAGE>
D12 Form 10K
FORM 1
ASARCO INCORPORATED DEFERRED FEE PLAN FOR DIRECTORS
ELECTION APPLICABLE TO FEES EARNED DURING 1994
A. In accordance with the provisions of the ASARCO Incorporated Deferred
Fee Plan for Directors (the "Plan"), I hereby elect to defer compensation
otherwise payable to me during 1994 for future services on the Board of
Directors to ASARCO Incorporated and its committees to the extent of the
following percentage of each such payment:
Check One: Amount of Deferral
50% / / 100% / /
This election will continue in effect as to the percentage of compensation
deferred indicated above until the earlier of January 1, 1995 or notice to the
contrary is given by me to the Company. I understand the compensation deferred
will earn interest according to the method described in Section 6 of the Plan
unless I furnish a common stock equivalent election form to you.
B. The compensation deferred is to be paid to me in _____ (insert number
not to exceed 10) annual installments on January 15 of each applicable year,
beginning:
______ the January 15 of the calendar year following
the termination of my services, or
______ the earlier of (i) January 15, 19__ (a date not earlier than
January 15, 1999) or (ii) the January 15 of the calendar year
following termination of my services.
C. I hereby designate the person(s) named below as my beneficiary(ies)
to receive my interest in my deferred compensation account in the event of my
death, and I hereby revoke all prior designation(s) of beneficiary(ies), if any,
made by me under the Plan. If no beneficiary is designated, the beneficiary
will be my estate. If no election is made under the following sentence, payment
of benefits will be in a lump sum under Section 12 of the Plan.
Name Address
---- -------
/ / I hereby elect that in the event of my death payment be continued of
any outstanding annual installments under this or prior years' deferrals to be
made of my deferred compensation account to my designated beneficiary(ies) on
the same time basis as the schedule of annual installments in effect immediately
prior to my death.
/ / I hereby cancel a previous election made under the prior sentence.
Note: If any of the elections in Part B or C are not completed, the elections
contained in the most recent Election form under the Plan will remain in effect.
This election is subject to all the terms of the Plan.
Dated:__________,19__
________________________________
Signature
________________________________
Print Name
<PAGE>
D13 Form 10K
FORM 2
ASARCO INCORPORATED
DEFERRED FEE PLAN FOR DIRECTORS
STOCK EQUIVALENT INVESTMENT ELECTION FOR PERIOD
JANUARY 1, 1994 - DECEMBER 31, 1994
In accordance with the provisions of the ASARCO Incorporated Deferred Fee
Plan for Directors (the "Plan"), I hereby elect that the following percentage of
my Plan deferrals during January 1, 1994 through December 31, 1994 for
compensation for services on the Board of Directors of ASARCO Incorporated and
its committees from and after January 1, 1994 be credited to the Asarco common
stock equivalent account under Section 7 of the Plan:
Percentage Treated as Invested in Stock (check one)
25% / / 75% / /
50% / / 100% / /
Dated:_______________, 19__
________________________________
Signature
________________________________
Print Name
