1995
First Quarter
Form 10-Q
---------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1995 Commission file number 1-164
-------------- -----
ASARCO INCORPORATED
(Exact name of registrant as specified in its charter)
New Jersey 13-4924440
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
180 Maiden Lane, New York, N.Y. 10038
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 212-510-2000
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 ____
As of April 30, 1995 there were outstanding 42,200,737 shares of Asarco Common
Stock, without par value.
<PAGE>
ASARCO Incorporated
and Subsidiaries
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information:
Item 1. Financial Statements (unaudited)
Consolidated Statement of Earnings
Three Months Ended March 31, 1995 and 1994 2
Consolidated Balance Sheet
March 31, 1995 and December 31, 1994 3
Consolidated Statement of Cash Flows
Three Months Ended March 31, 1995 and 1994 4
Notes to Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8-11
Exhibit I - Report of Independent Accountants
Part II. Other Information:
Item 1. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of
Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit II - Independent Accountants' Awareness Letter
</TABLE>
<PAGE>
ASARCO Incorporated
and Subsidiaries
CONSOLIDATED STATEMENT OF EARNINGS
(unaudited)
<TABLE>
<CAPTION>
3 Months Ended
March 31,
1995 1994
(in thousands)
<S> <C> <C>
Sales of products and services $791,007 $442,981
Operating costs and expenses:
Cost of products and services 570,086 407,709
Selling, administrative and other 32,435 19,742
Provision (recovery) for bad debts 574 (3,430)
Depreciation and depletion 31,631 20,850
Research and exploration 5,110 3,874
-------- --------
Total operating costs and expenses 639,836 448,745
-------- --------
Operating income (loss) 151,171 (5,764)
Interest expense (18,903) (14,271)
Other income 7,819 5,244
Gain on sale of Asarco Australia Limited - 58,512
-------- --------
Earnings before taxes on income, minority interests and equity
earnings 140,087 43,721
Taxes on income 43,377 21,088
Minority interests in net earnings of consolidated subsidiaries
(31,369) (121)
Equity in earnings of nonconsolidated associated companies, net of
taxes of $50 in 1995 and $486 in 1994
371 4,094
-------- --------
Net earnings $ 65,712 $ 26,606
======== ========
Per share amounts:
Net earnings (a) $ 1.56 $ .64
======== ========
Cash dividends $ 0.10 $ 0.10
Weighted average number of shares outstanding 42,154 41,771
</TABLE>
(a) The effect on the calculation of net earnings per common share of the
Company's Common Stock equivalents (shares under option) was
insignificant.
See notes to financial statements
<PAGE>
ASARCO Incorporated
and Subsidiaries
CONSOLIDATED BALANCE SHEET
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 106,679 $ 18,321
Marketable securities 36,150 -
Accounts and notes receivable, net 476,252 383,724
Inventories 398,798 299,148
Other assets 56,027 46,124
----------- -----------
Total current assets 1,073,906 747,317
Investments:
Cost and available-for-sale 681,097 751,888
Equity 62,435 391,489
Property 3,906,048 2,509,072
Accumulated depreciation and depletion (2,036,534) (1,203,573)
Intangible assets 47,844 48,356
Other assets 130,804 46,476
----------- -----------
Total Assets $ 3,865,600 $ 3,291,025
=========== ===========
LIABILITIES
Current liabilities:
Bank loans $ 11,699 $ 5,125
Current portion of long-term debt 21,279 13,330
Accounts payable 313,442 296,983
Salaries and wages 28,310 20,159
Taxes on income 69,174 43,152
Reserve for closed plant and environmental matters 40,882 55,946
Other liabilities 48,853 30,838
----------- -----------
Total current liabilities 533,639 465,533
----------- -----------
Long-term debt 1,010,643 914,601
Deferred income taxes 143,917 156,450
Reserve for closed plant and environmental matters 58,987 66,458
Postretirement benefit obligations other than pensions
93,601 95,186
Other liabilities and reserves 86,880 72,967
----------- -----------
Total non-current liabilities 1,394,028 1,305,662
----------- -----------
MINORITY INTERESTS 403,308 2,443
----------- -----------
COMMON STOCKHOLDERS' EQUITY
Common stock (a) 577,467 572,591
Unrealized gain on securities reported at fair value 44,574 91,627
Retained earnings 912,584 853,169
----------- -----------
Total Common Stockholders' Equity 1,534,625 1,517,387
----------- -----------
Total Liabilities, Minority Interests and Common Stockholders' Equity
$ 3,865,600 $ 3,291,025
=========== ===========
(a) Common shares: authorized 80,000; outstanding: 42,184 42,102
See notes to financial statements
</TABLE>
<PAGE>
ASARCO Incorporated
and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
3 Months Ended
March 31,
1995 1994
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 65,712 $ 26,606
Adjustments to reconcile net earnings to net cash provided from operating
activities:
Depreciation and depletion 31,631 21,174
Deferred income taxes 12,051 20,359
Treasury stock used for employee benefits 1,608 1,291
Undistributed equity (earnings) losses 322 (2,065)
Net gain on sale of investments and property (452) (59,119)
Increase (decrease) in reserve for closed plant
and environmental matters (22,535) 479
Minority interests 31,369 121
Cash provided from (used for) operating assets and liabilities, net of the
consolidation of SPCC:
Accounts and notes receivable 2,693 (744)
Inventories 15,478 (2,660)
Accounts payable and accrued liabilities (36,798) 7,194
Other operating liabilities and reserves (17,081) 3,154
Other operating assets (5,008) (1,475)
Foreign currency transaction (gains) losses (2,256) 2,276
-------- --------
Net cash provided from operating activities 76,734 16,591
-------- --------
INVESTING ACTIVITIES
Capital expenditures (76,347) (10,296)
Sale of securities, investments and property 41,390 79,491
Sale of available-for-sale securities 6,230 8,172
Purchase of available-for-sale securities (6,708) (8,056)
Purchase of investments (35,072) -
Cash effect of the consolidation of SPCC 93,348 -
-------- --------
Net cash provided from investing activities 22,841 69,311
-------- --------
FINANCING ACTIVITIES
Debt incurred 9,990 125
Debt retired (16,890) (78,788)
Net treasury stock transactions (236) 22
Dividends paid (4,216) (4,178)
-------- --------
Net cash used for financing activities (11,352) (82,819)
Effect of exchange rate changes on cash 135 (79)
-------- --------
Increase (decrease) in cash and cash equivalents 88,358 3,004
Cash and cash equivalents at beginning of period 18,321 12,500
-------- --------
Cash and cash equivalents at end of period $106,679 $ 15,504
======== ========
</TABLE>
See notes to financial statements
<PAGE>
ASARCO Incorporated
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A. On April 5, 1995, the Company acquired an additional 10.7% interest in
Southern Peru Copper Corporation (SPCC) for $116.4 million, increasing
its ownership from 52.3% to 63%. As a result of the acquisition, the
Company has consolidated the financial statements of SPCC in its
financial statements based on its 52.3% ownership, effective January 1,
1995. The Company previously accounted for its investment in SPCC by
the equity method. The Company will account for the acquisition as a
purchase transaction. The excess of the purchase price over the
Company's interest in the net book value of SPCC attributable to the
shares acquired is estimated to be assigned to proven and probable
sulfide reserves, proven and probable leachable reserves and
mineralized material.
In the opinion of the Company, the accompanying consolidated financial
statements contain all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the Company's financial
position as of March 31, 1995 and the results of operations and cash
flows for the three months ended March 31, 1995 and 1994. Certain
reclassifications have been made in the financial statements from
amounts previously reported. This financial data has been subjected to
a limited review by Coopers & Lybrand L.L.P., the Company's independent
accountants. Their report is filed as an exhibit to this filing. The
results of operations for the three month period are not necessarily
indicative of the results to be expected for the full year. The
accompanying consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto included in the Company's 1994 annual report on Form 10-K.
<TABLE>
<CAPTION>
B. Inventories were as follows:
(in millions)
March 31, Dec. 31,
1995 1994
------ -------
<S> <C> <C>
Inventories of smelters, refineries and other
metal plants at LIFO cost or market $ 12.6 $ 12.5
Provisional cost of metals received for
which prices have not yet been fixed 59.4 78.5
Mine inventories at FIFO cost or market 104.7 119.8
Metal inventory (average cost or less) 50.9 -
Materials and supplies (average cost or less) 144.0 65.9
Other 27.2 22.4
------- -------
Total $ 398.8 $ 299.1
</TABLE>
At March 31, 1995, replacement cost exceeded inventories carried at
LIFO cost by approximately $142.3 million (December 31, 1994 - $143.2
million).
C. Hedging activities:
At March 31, 1995 the Company had copper put options with an average
strike price of 91.3 cents per pound covering 103,149 tons or
approximately 44% of Asarco's expected copper production for the
remaining nine months of 1995. The cost of acquiring these puts was
$3.7 million. Copper put options with an average strike price of 96.7
cents per pound covering 89,039 tons or approximately 26% of Asarco's
expected 1996 copper production were acquired at a cost of $2.5
million. In addition, SPCC had copper put options with an average
strike price of 107.9 cents per pound covering 66,139 tons or
approximately 33% of its expected copper production for the remaining
nine months of 1995. The cost of acquiring these puts was $2.1 million.
Copper put options with an average strike price of 96.7 cents per pound
covering 62,832 tons or approximately 21% of its expected 1996 copper
production were acquired at a cost of $1.4 million.
<PAGE>
D. Supplemental disclosures of cash flow information:
(in millions)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994
---- ----
<S> <C> <C>
Cash paid for:
Interest expense (net of amount capitalized) $ 17.8 $ 16.6
Income taxes (net of refunds) 9.5 0.7
</TABLE>
E. In the first quarter of 1994, the Company sold its remaining interest
in Asarco Australia Limited, its gold mining investment, for US $79.5
million. The sale resulted in a pre-tax gain of $58.5 million ($31.9
million after-tax).
F. Taxes on income:
Taxes on income in the first quarter of 1995 reflect increased taxes
due to higher earnings and the consolidation of SPCC. The three month
period ending March 31, 1994 includes taxes resulting from the gain on
the sale of Asarco Australia Limited. Reported earnings from the
consolidated subsidiary Asarco Australia Limited were previously
treated as permanently reinvested. First quarter 1994 taxes also
reflect tax benefits resulting from operating losses.
G. Capsulized quarterly earnings information is provided for SPCC, a
significant associated company previously accounted for by the equity
method. Equity earnings are not shown for the comparable 1995 period as
the Company is consolidating the financial statements of SPCC in its
financial statements effective with the first quarter of 1995.
<TABLE>
<CAPTION>
(in millions) SPCC
Three Months Ended
March 31, 1994
<S> <C>
Net Sales $ 146.9
=======
Earnings before Taxes $ 15.3
Taxes on Income (7.7)
-------
Net Earnings $ 7.6
=======
Asarco's ownership percentage 52.3%
Asarco's pre-tax equity earnings $ 4.0
=======
</TABLE>
Equity in earnings of other nonconsolidated associated companies
included in the Consolidated Statement of Earnings for the three months
ended March 31, 1995 and 1994 were $.4 million and $.6 million,
respectively.
<PAGE>
H. Consolidation of SPCC - Pro Forma Results of Operations:
Note A describes the Company's acquisition of an additional 10.7% of
SPCC at April 5, 1995. The table below summarizes unaudited pro forma
consolidated results of operations of Asarco Incorporated and
Subsidiaries for the quarters ended March 31, 1995 and 1994, assuming
that Asarco had acquired an additional 10.7% of the outstanding stock
of SPCC on January 1, 1995 and January 1, 1994, respectively. In
preparing the pro forma data, adjustments have been made for the
amortization of the excess of the purchase price over the Company's
interest in the net book value of SPCC attributable to the shares
acquired, the interest expense on additional debt incurred in
connection with the acquisition, the income tax benefit from
amortization and additional interest expense and the SPCC earnings
attributable to Asarco's additional interest net of the related income
tax expense. The unaudited pro forma financial information is based on
management's assumptions and does not purport to represent the results
that actually would have occurred if the acquisition had, in fact, been
completed on the dates assumed.
<TABLE>
<CAPTION>
Pro Forma Results of Operations Three Months Ended
(in millions, except per share amounts) March 31,
1995 1994
---- ----
<S> <C> <C>
Sales of products and services $ 791.0 $ 579.7
Net earnings $ 68.7 $ 25.9
Net earnings per common share $ 1.63 $ 0.62
</TABLE>
I. Subsequent Event:
On April 21, 1995, the Company sold $150 million of 8.5% debentures due
May 1, 2025. The sale was made under Asarco's universal shelf
registration statement filed with the U.S. Securities and Exchange
Commission in October, 1994 for up to $300 million of securities. The
Company intends to use the proceeds to repay, in part, revolving credit
bank borrowings. Borrowings under the revolving credit were used to
fund the purchase of an additional 10.7% interest in SPCC on April 5,
1995 and for general corporate purposes.
J. Impact of New Accounting Standards:
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets To Be Disposed Of." The Company is currently
assessing the impact of this statement, which will be effective for
financial statements issued for fiscal years begining after December
15, 1995.
<PAGE>
Part I Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Earnings: The Company reported net earnings of $65.7 million, or $1.56 per
share, for the first quarter ended March 31, 1995, compared with net earnings of
$26.6 million, or $.64 per share, for the first quarter of 1994. Results for the
first quarter of 1994 included a $31.9 million after-tax gain, ($58.5 million
pre-tax) on the sale of the Company's remaining interest in Asarco Australia
Limited and a $2.6 million after-tax gain related to recovery of a bad debt
previously written off. The improvement in earnings was principally due to
higher base metal prices and increased earnings by SPCC.
On April 5, 1995, Asarco acquired an additional 10.7% interest in SPCC for
$116.4 million, increasing its ownership from 52.3% to 63%. As a result of the
acquisition, Asarco is consolidating the financial statements of SPCC in its
financial statements, effective with the first quarter of 1995. Asarco had
previously accounted for its investment in SPCC by the equity method. Had SPCC
been consolidated in the Company's financial statements in the first quarter of
1994, based on its 52.3% ownership, there would have been no effect on net
earnings.
Prices: Prices for the Company's metals are established principally on the New
York Commodity Exchange ("COMEX") or the London Metal Exchange ("LME").
Price/Volume Data:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
Average Metal Prices 1995 1994
-------------------- ---- ----
<S> <C> <C>
Copper (per pound - COMEX) $ 1.38 $ .87
Copper (per pound - LME) 1.33 .85
Lead (per pound - LME) .28 .22
Silver (per ounce) 4.70 5.28
Gold (per ounce) 379.00 384.00
Zinc (per pound-LME) .49 .44
Molybdenum (per pound - Metals Week Dealer Oxide) 13.77 2.75
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
March 31,
Sales Volume (in thousands): 1995 1994
--------------------------- ---- ----
<S> <C> <C>
Copper (pounds)
Asarco 257,520 295,152
SPCC 127,196 170,036
------- -------
Consolidated 384,716 465,188
Asarco Beneficial Interest 324,044 384,080
Lead (pounds)
Asarco 99,302 91,538
SPCC - -
------- -------
Consolidated 99,302 91,538
Asarco Beneficial Interest 99,302 91,538
Silver (ounces)
Asarco 9,576 7,484
SPCC 528 894
------- -------
Consolidated 10,104 8,378
Asarco Beneficial Interest 9,852 7,952
Gold (ounces)
Asarco 51 11
SPCC - -
------- -------
Consolidated 51 11
Asarco Beneficial Interest 51 11
Zinc (pounds)(1)
Asarco 57,182 61,486
SPCC - -
------- -------
Consolidated 57,182 61,486
Asarco Beneficial Interest 57,182 61,486
Molybdenum (pounds)(1)
Asarco 1,331 844
SPCC 1,892 1,458
------- -------
Consolidated 3,223 2,302
Asarco Beneficial Interest 2,321 1,607
</TABLE>
(1) Volume represents pounds of zinc and molybdenum metal
contained in concentrate.
Note: SPCC presented at 100%. Asarco's interest in SPCC was 52.3%
through March 31, 1995. Consolidated and Asarco Beneficial
Interest amounts shown for 1994 are proforma and assume that
Asarco consolidated SPCC effective January 1, 1994 based on
Asarco's 52.3% ownership of SPCC and is presented for
comparison purposes.
<PAGE>
At March 31, 1995, the Company had copper put options with an average strike
price of 91.3 cents per pound covering 103,149 tons or approximately 44% of
Asarco's expected copper production for the remaining nine months of 1995. The
cost of acquiring these puts was $3.7 million. Copper put options with an
average strike price of 96.7 cents per pound covering 89,039 tons or
approximately 26% of Asarco's expected 1996 copper production were acquired at a
cost of $2.5 million. In addition, SPCC had copper put options with an average
strike price of 107.9 cents per pound covering 66,139 tons or approximately 33%
of its expected copper production for the remaining nine months of 1995. The
cost of acquiring these puts was $2.1 million. Copper put options with an
average strike price of 96.7 cents per pound covering 62,832 tons or
approximately 21% of its expected 1996 copper production were acquired at a cost
of $1.4 million. The cost of the put options for both Asarco and SPCC are
amortized during the period in which the options are exercisable.
The pre-tax gain (loss) on the Company's hedging activities, net of amortized
transaction costs for the three month period ending March 31, 1995 and 1994 were
as follows:
<TABLE>
<CAPTION>
Hedging Activities
(in thousands)
Three Months Ended
March 31,
Metal 1995 1994
----- ---- ----
<S> <C> <C>
Copper $ (735) $ 3,389
Zinc - 62
------- -------
Total Gain (Loss) $ (735) $ 3,451
======= =======
</TABLE>
Sales: Sales in the first quarter of 1995 were $791.0 million, compared with
$443.0 million in the first quarter of 1994. The increase in sales reflected
$199.5 million due to the consolidation of SPCC, higher base metal prices and
increased specialty chemical and aggregate sales.
Cost of Products & Services: Cost of products and services were $570.0 million
in the first quarter of 1995, compared with $407.8 million in the first quarter
of 1994. The increase in costs reflected $95.6 million due to the consolidation
of SPCC, the higher price effect on costs of outside copper purchases and higher
costs in specialty chemicals due to increased sales volumes.
Other Expenses: Selling, administrative and other costs increased to $32.4
million in the first quarter of 1995 from $19.7 million in the first quarter of
1994, primarily due to the consolidation of SPCC. Depreciation and depletion
expense increased to $31.6 million for the first quarter of 1995 from $20.9
million in the first quarter of 1994, primarily due to the consolidation of
SPCC. The provision (recovery) for bad debts for the first quarter 1994 included
a recovery of $4.0 million from the settlement of litigation related to a bad
debt written off in 1991.
Nonoperating Items: Interest expense in the first quarter ended March 31, 1995
was $18.9 million compared with $14.3 million in the first quarter of 1994. The
increase reflected $1.5 million due to the consolidation of SPCC, a higher debt
level and higher interest rates on short term borrowings. The increase in
minority interests is a result of the consolidation of SPCC.
Taxes on Income: Taxes on income for the first quarter 1995 were $43.4 million,
compared with $21.1 million for the first quarter of 1994. The increase was due
to an increase in earnings and the consolidation of SPCC, partially offset by
the higher taxes resulting from the gain on the sale of Asarco Australia Limited
in the first quarter of 1994. Reported earnings from the consolidated subsidiary
Asarco Australia Limited were previously treated as permanently reinvested.
<PAGE>
Cash Flows: Net cash provided from operating activities was $76.7 million in the
first quarter of 1995, compared with cash provided from operating activities of
$16.6 million in the first quarter of 1994. The improvements reflected the
consolidation of SPCC and higher net earnings partially offset by an increase in
cash used for closed plants and environmental matters, primarily at the
Company's former Tacoma, Washington smelter.
Net cash provided from investing activities was $22.8 million in the first
quarter of 1995, compared with cash provided from investing activities of $69.3
million in the first quarter of 1994. The change reflected the cash effect of
the consolidation of SPCC, $43.4 million of SPCC capital expenditures, higher
mine development costs at the Ray mine in the first quarter of 1995, and cash
provided from the proceeds of the sale of Asarco Australia Limited in the first
quarter of 1994.
Financing activities included the prepayment of the Company's 9-3/4% Sinking
Fund Debentures at par value plus a premium of .9% in the first quarter of 1994.
Liquidity and Capital Resources: At March 31, 1995, the Company's debt as a
percentage of total capitalization was 35.0%, compared with 38.1% at December
31, 1994. Consolidated debt at the end of the first quarter 1995 was $1,043.6
million compared with $933.1 million at the end of 1994. The increase in debt
reflected $126.4 million due to the consolidation of SPCC. Additional
indebtedness permitted under the terms of the Company's credit agreements
totaled $714 million at March 31, 1995.
On April 21, 1995, the Company sold $150 million of 8.5% debentures due May 1,
2025. The sale was made under Asarco's universal shelf registration statement
filed with the U.S. Securities and Exchange Commission in October, 1994 for up
to $300 million of securities. The Company used the proceeds to repay, in part,
revolving credit bank borrowings. Borrowings under the revolving credit were
used to fund the purchase of an additional 10.7% interest in SPCC on April 5,
1995 and for general corporate purposes.
The Company expects that it will meet its cash requirements for 1995 and beyond
from internally generated funds, cash on hand and from borrowings under its
revolving credit agreements or from additional debt or equity financing.
In April, the Board of Directors declared an increased quarterly dividend on the
common stock of 20 cents per share payable June 1, 1995 to stockholders of
record at the close of business on May 8, 1995.
Impact of New Accounting Standards: In March 1995, the Financial Accounting
Standards Board issued SFAS No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets To Be Disposed Of." The Company is currently
assessing the impact of this statement, which will be effective for financial
statements issued for fiscal years begining after December 15, 1995.
<PAGE>
COOPERS & LYBRAND L.L.P.
Exhibit I
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of ASARCO Incorporated:
We have reviewed the accompanying interim condensed consolidated balance sheet
of ASARCO Incorporated and Subsidiaries as of March 31, 1995 and the related
interim condensed consolidated statements of earnings and cash flows for the
three month periods ended March 31, 1995 and 1994. These interim condensed
consolidated financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
As described in Note A, the Company has consolidated the financial statements of
Southern Peru Copper Corporation effective January 1, 1995.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying interim condensed consolidated financial statements
for them to be in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
New York, New York
April 24, 1995
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
1. Asarco and two of its wholly-owned subsidiaries, Lac d'Amiante du Quebec,
Ltee ("LAQ") and Capco Pipe Company, Inc. ("Capco"), have been named as
defendants, among numerous other defendants, in additional asbestos personal
injury lawsuits of the same general nature as the lawsuits reported on Form 10-K
for 1994 and prior years. As of March 31, 1995, there were pending against
Asarco and its subsidiaries 840 lawsuits brought by 9388 primary and 7094
secondary plaintiffs in 24 states and one Canadian province seeking substantial
damages for personal injury or death allegedly caused by exposure to asbestos.
In addition, on April 11, 1995 a lawsuit naming both Asarco and Capco along with
177 other defendants was brought by 1,443 primary and 880 secondary plaintiffs
in state court in Texas. As of March 31, 1995, LAQ, Asarco and Capco have
settled or have been dismissed from a total of 4,889 asbestos personal injury
lawsuits brought by approximately 36,257 primary and 23,004 secondary
plaintiffs.
2. With respect to the environmental matters concerning the Company's former
smelter site in Tacoma, Washington, reported on Form 10-K for 1994, during the
first quarter of 1995 the Environmental Protection Agency ("EPA")issued a Record
of Decision ("ROD"). The ROD incorporates the remedy set forth in the agreement
in principle reached among the Company, the City of Tacoma, the Town of Ruston
and the Metropolitan Park District, which provides for site redevelopment and
the placement of untreated soils in an on-site containment facility.
3. With respect to the lawsuits alleging that the Company was illegally
discharging untreated water from its Omaha plant without a permit, reported on
Form 10-K for 1994, on March 24, 1995 the federal court in Nebraska granted
partial summary judgment in favor of the EPA and citizen plaintiffs and against
the Company, holding that the Company had been unlawfully discharging water
without a permit until June 1994. The judge ruled that factual issues including
issues related to damages remained for trial and scheduled the case for trial
during the summer of 1995. In the meantime settlement discussions between the
Company and EPA are continuing.
4. In March 1995 the Company was sued in federal court in Tacoma, Washington by
a retirement home with 200 residents and 21 acres of property seeking damages
for diminution of property value, response costs and attorneys' fees. The suit
contains allegations similar to those advanced in the Tacoma class action
settled by the Company in January 1995, and reported on Form 10-K for 1994.
5. With respect to the action pending in state court in Duval County, Texas
concerning alleged exposure to materials, including metals, reported on Form
10-K for 1994, further amendments to the complaint were filed during the first
quarter of 1995 increasing the number of plaintiffs to approximately 379.
6. With respect to the lawsuit filed in May 1989 in state court in Butte,
Montana by Montana Mining Properties, reported on Form 10-K for 1994 and prior
years, in April 1995 the Supreme Court of Montana reversed, as to all defendants
except Asarco, the trial court's grant of summary judgment and it remanded the
case for trial. Accordingly, Asarco is no longer a party to the litigation, but
the case remains pending against Asarco's partner in the Montana Resources
partnership and the partnership itself, in which Asarco has a 49.9 percent
interest.
7. On March 7, 1995, a 60-day notice under the Clean Water Act was received from
the Land and Water Fund of the Rockies on behalf of its client the Cabinet
Resource Group (the "Group"), alleging that the Company has failed to obtain a
water discharge permit for its Troy unit. The notice indicates that upon the
expiration of the statutory 60-day waiting period a lawsuit may be initiated
against the Company by the Group. No action has yet been filed and the Company
is discussing the matter with the Group.
<PAGE>
Item 4 - Submission of Matters to a Vote of Security Holders
At the annual meeting of stockholders of the Company held on April 26, 1995,
stockholders were asked to elect six directors (the remaining directors continue
to serve in accordance with their previous election), to approve the selection
of auditors for 1995, and to vote on a shareholder proposal concerning the
Company's non-employee directors' retirement plan.
Votes cast in the election of directors were as follows:
<TABLE>
<CAPTION>
Names Number of Shares
For Withheld
<S> <C> <C>
James W. Kinnear 35,357,052 193,225
Francis R. McAllister 35,232,012 318,265
Michael T. Nelligan 35,356,410 193,867
John D. Ong 35,355,085 195,192
Martha T. Muse 35,338,537 211,740
David C. Garfield 35,363,756 186,521
</TABLE>
Stockholders approved the selection of auditors as follows:
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
35,242,352 239,719 68,206
The shareholder proposal received the following votes:
For Against Abstain
10,810,888 18,976,225 802,171
</TABLE>
There were 4,960,993 "broker nonvotes" relating to the shareholder proposal
at the meeting: that is, brokers holding shares in nominee name for beneficial
owners were not permitted under applicable regulations to vote on the matters
presented at the annual meeting in the absence of any instructions from the
beneficial owners after timely delivery to them of soliciting proxy materials.
Item 6 - Exhibits and Reports on Form 8-K
(b) Current Reports on Form 8-K
1 - Current Report dated April 6, 1995 reporting the purchase by the Company on
April 5, 1995 of the 10.7% interest in Southern Peru Copper Corporation ("SPCC")
held by Newmont Gold Company.
2 - Current Report dated April 7, 1995 on Form 8-K/A amending the Current Report
on Form 8-K dated April 6, 1995 to delete certain unrelated information which
forms part of a Current Report on Form 8-K filed on February 24, 1995.
3 - Current Report filed on April 24, 1995 on the acquisition of the 10.7%
interest in SPCC and including unaudited pro forma consolidated financial
statements for the year-ended December 31, 1994 to give effect to the
acquisition and the resulting consolidation of SPCC based on the Company's 63%
interest in SPCC as though the purchase had occurred in 1994.
<PAGE>
SIGNATURES
Pursuant to the requirement 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.
ASARCO Incorporated
(Registrant)
Date: May 11, 1995 /s/ Kevin R. Morano
-------------------
Kevin R. Morano
Vice President, Finance and
Chief Financial Officer
Date: May 11, 1995 /s/ William Dowd
----------------
William Dowd
Controller
<PAGE>
Exhibit II
COOPERS & LYBRAND L.L.P.
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
We are aware that our report dated April 24, 1995 on our review of the interim
financial information of ASARCO Incorporated and Subsidiaries as of March 31,
1995 and for the three month periods ended March 31, 1995 and 1994 and included
in this Form 10-Q for the quarter ended March 31, 1995 is incorporated by
reference in the Company's Registration Statements on Form S-8 (File Nos.
2-67732, 2-83782, and 33-34606) and Form S-3 (File Nos. 33-45631 and 33-55993).
Pursuant to Rule 436(c) under the Securities Act of 1933, this report should not
be considered a part of the Registration Statements prepared or certified by us
within the meaning of Sections 7 and 11 of that Act.
Coopers & Lybrand L.L.P.
New York, New York
April 24, 1995
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> QTR-1
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 106679
<SECURITIES> 36150
<RECEIVABLES> 483609
<ALLOWANCES> 7357
<INVENTORY> 398798
<CURRENT-ASSETS> 1073906
<PP&E> 3906048
<DEPRECIATION> 2036534
<TOTAL-ASSETS> 3865600
<CURRENT-LIABILITIES> 533639
<BONDS> 0
<COMMON> 577467
0
0
<OTHER-SE> 957158
<TOTAL-LIABILITY-AND-EQUITY> 3865600
<SALES> 791007
<TOTAL-REVENUES> 791007
<CGS> 570086
<TOTAL-COSTS> 570086
<OTHER-EXPENSES> 36741
<LOSS-PROVISION> 574
<INTEREST-EXPENSE> 18903
<INCOME-PRETAX> 140087
<INCOME-TAX> (43377)
<INCOME-CONTINUING> 65341
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65712
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 1.56
<FN>
<F1>
</FN>
</TABLE>
