<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1994 Commission File Number 1-10040
--------------------- -------
CYPRUS AMAX MINERALS COMPANY
- - ------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-2684040
- - ------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9100 East Mineral Circle, Englewood, Colorado 80112
- - ------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(303) 643-5000
- - ------------------------------------------------------------------------
(Registrant's telephone number, including area code)
No Change
- - ------------------------------------------------------------------------
(Former name, address, and former fiscal year,
if changed since last report)
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
----- ----
Number of shares of common stock outstanding as of August 10, 1994, was
92,441,692 shares.
This report contains 21 pages.
-1-
<PAGE>
PART I. FINANCIAL INFORMATION
-------------------------------
Item 1. Financial Statements
- - ------------------------------
CYPRUS AMAX MINERALS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In Millions Except Per Share Data)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Six Months
Ended June 30 Ended June 30
--------------------- -------------------
1994 1993 1994 1993
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenue $ 697 $ 453 $1,285 $ 828
------ ------ ------ ------
Costs and Expenses
Cost of Sales and Operating Expenses 544 304 991 608
Selling and Administrative Expenses 24 10 50 26
Depreciation, Depletion, and
Amortization 60 26 123 55
Exploration Expense 5 6 11 10
------ ----- ----- ------
Total Costs and Expenses 633 346 1,175 699
------ ----- ----- ------
Income from Operations 64 107 110 129
Other Income (Expense)
Interest Income 7 2 10 3
Interest Expense (25) (8) (52) (14)
Capitalized Interest 1 - 2 -
Equity Investments and Other (3) 4 (2) 4
------ ----- ------ ------
Income from Continuing Operations
Before Income Taxes 44 105 68 122
Income Tax Provision (12) (23) (17) (28)
------ ----- ------ ------
Income from Continuing Operations 32 82 51 94
Income from Operations of
Discontinued Oil and Gas
Division, Net of Applicable Taxes
of $2 - - 9 -
------ ------ ------ ------
Net Income 32 82 60 94
Preferred Stock Dividends (4) - (10) -
------ ------ ------ ------
Income Applicable to Common Shares $ 28 $ 82 $ 50 $ 94
====== ====== ====== ======
Earnings Per Common Share $ .30 $1.73 $ .55 $1.98
Weighted Average Common Shares
Outstanding 92.3 47.3 92.3 47.3
</TABLE>
See accompanying notes to financial statements.
-2-
<PAGE>
CYPRUS AMAX MINERALS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Millions Except Share Amounts)
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
Assets 1994 1993
---------- -----------
<S> <C> <C>
Current Assets
Cash and Cash Equivalents $ 233 $ 96
Accounts and Notes Receivable, Net 362 354
Amount Due from Alumax 41 38
Inventories 491 462
Prepaid Expenses 57 58
------ ------
Total Current Assets 1,184 1,008
Properties - At Cost, Net 3,948 4,334
Other Assets 362 283
------ ------
Total Assets $5,494 $5,625
====== ======
Liabilities and Shareholders'Equity
Current Liabilities
Current Portion of Long-Term Debt $ 269 $ 175
Current Portion of Production Payments 45 42
Accounts Payable 135 192
Accrued Payroll and Benefits 114 98
Accrued Royalties and Interest 39 118
Other Accrued Liabilities 126 163
Taxes Payable 160 159
Dividends Payable 23 20
------ ------
Total Current Liabilities 911 967
------ ------
Noncurrent Liabilities and Deferred Credits
Long-Term Debt 957 995
Production Payments 260 283
Capital Lease Obligations 59 69
Deferred Employee and Retiree Benefits 448 435
Deferred Closure, Reclamation, and Environmental 338 358
Deferred Income Taxes 104 172
Other 166 129
------ ------
Total Noncurrent Liabilities and Deferred Credits 2,332 2,441
------ ------
Shareholders' Equity
Preferred Stock, $1 Par Value,
20,000,000 Shares Authorized:
$4.00 Series A Convertible Stock, $50 Stated Value,
4,666,667 Authorized, 4,666,653 Issued and
Outstanding 5 5
Series A Preferred Stock, 500,000 Shares
Authorized, None Issued or Outstanding -
Common Stock, Without Par Value,
150,000,000 Shares Authorized,
Issued 96,026,781 in 1994 and 96,027,224 in 1993 1 1
Paid-In Surplus 2,959 2,961
Accumulated Deficit (558) (572)
------ ------
2,407 2,395
Treasury Stock at Cost, 3,632,702 Shares in 1994
and 4,491,112 Shares in 1993 (84) (103)
Loan to Savings Plan (72) (75)
------ ------
Total Shareholders' Equity 2,251 2,217
------ ------
Total Liabilities and Shareholders' Equity $5,494 $5,625
====== ======
</TABLE>
See accompanying notes to financial statements.
-3-
<PAGE>
CYPRUS AMAX MINERALS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Millions)
<TABLE>
<CAPTION>
(Unaudited)
Six Months
Ended June 30
-------------------
1994 1993
------ ------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income from Continuing Operations $ 51 $ 94
Adjustments to Reconcile Net Income to Net Cash
Used for Continuing Operations:
Depreciation, Depletion, and Amortization 123 55
Deferred Income Taxes 13 5
Gain on Sale of LTV Claim - (105)
Changes in Assets and Liabilities Net of Effects
from Businesses Acquired/Sold (314) (42)
Other 32 5
------ ------
Net Cash Provided by (Used for) Continuing Operations (95) 12
------ ------
Net Income from Discontinued Operations 9 -
Adjustments to Reconcile Net Income to Net Cash
Provided by Discontinued Operations:
Depreciation, Depletion, and Amortization 14 -
Changes in Assets and Liabilities Net of Effects
from Businesses Acquired/Sold (7) -
Other (2) -
------ ------
Net Cash Provided by Discontinued Operations 14 -
Net Cash Provided by (Used for) Operating Activities (81) 12
------ ------
Cash Flows from Investing Activities*
Capital Expenditures (182) (117)
Payments for Businesses Purchased (362) (135)
Capitalized Interest (2) -
Advances to Affiliates (29) -
Proceeds from Sale of Assets 796 73
Proceeds from Sale of LTV Claim - 105
------ ------
Net Cash Provided by (Used for) Investing Activities 221 (74)
------ ------
Cash Flows from Financing Activities*
Borrowings on Line of Credit 150 -
Payments on Line of Credit (50) -
Net Proceeds from Issuance of Long-Term Debt - 147
Payments on Debt and Other Obligations (62) (10)
Proceeds from Issuance of Stock for Employee Benefits 5 2
Purchase of Treasury Stock - (5)
Dividends Paid (46) (19)
------ ------
Net Cash Provided by (Used for) Financing Activities (3) 115
------ ------
Net Increase in Cash and Cash Equivalents 137 53
Cash and Cash Equivalents at Beginning of Year 96 90
------ ------
Cash and Cash Equivalents at End of Period $ 233 $ 143
====== ======
</TABLE>
*For purposes of this statement, investing and financing activities are reported
on a cash basis versus an accrual basis of accounting.
See accompanying notes to financial statements.
-4-
<PAGE>
CYPRUS AMAX MINERALS COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Note 1. Basis of Presentation
- - ------------------------------
The accompanying interim unaudited financial statements include all normal
recurring adjustments which are, in the opinion of management, necessary for a
fair presentation. Results for any interim period are not necessarily indicative
of the results that may be achieved in future periods. The financial information
as of this interim date should be read in conjunction with the financial
statements and notes thereto contained in Cyprus Amax's Annual Report on Form
10-K for the year ended December 31, 1993.
Note 2. Inventories
- - --------------------
Inventories detailed by component are summarized below (in millions):
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1994 1993
----------- ------------
<S> <C> <C>
Component
In-Process Ores, Concentrates,
and Other $ 186 $ 203
Finished Goods 216 166
Materials and Supplies 89 93
----- -----
$ 491 462
===== =====
</TABLE>
Note 3. Fair Value of Financial Instruments
- - --------------------------------------------
The estimated fair values for financial instruments under SFAS No. 107,
"Disclosures About Fair Value of Financial Instruments," are made at discrete
points in time based on relevant market information. These estimates involve
uncertainties and cannot be determined with precision. At June 30, 1994 the
carrying value of financial instruments approximates fair value.
Note 4. Acquisitions and Dispositions
- - --------------------------------------
On June 28, 1994, Cyprus Amax acquired a 51 percent interest in El Abra, a
significant copper deposit in Chile, for $330 million. Development of the mine
will require an investment estimated at approximately $1 billion, allowing for
the effects of inflation, interest during construction, working capital and
contingencies.
On March 21, 1994, Cyprus Amax acquired approximately 91.5 percent of the shares
of Sociedad Minera Cerro Verde, S.A., a producing copper mine in Peru at a cost
of approximately $32 million. The initial development for Cerro Verde is
expected to be $100 million, including expanding SX-EW production and upgrading
mine equipment. Cyprus Amax's additional future investment commitment for Cerro
Verde is $375 million which is conditional based upon a favorable feasibility
study to develop a modern milling facility, stable copper prices, a stable
political environment, and other conditions.
On March 31, 1994, Cyprus Amax closed the sale of its wholly-owned subsidiary,
Amax Oil & Gas, Inc., to Union Pacific Resources Company for approximately $819
million in gross proceeds or $680 million after-tax net proceeds. During the
first quarter of 1994, Amax Oil & Gas, Inc. reported income from discontinued
operations of $9 million after tax and earnings per share of 10 cents. As the
majority of Amax Oil & Gas,
-5-
<PAGE>
Inc.'s assets were acquired in the merger of Cyprus Minerals Company and AMAX,
Inc. on November 15, 1993, there are no comparable first and second quarters of
1993.
Note 5. Information by Industry Segment
- - ----------------------------------------
Cyprus Amax operates in three principal industry segments -- Coal, Copper, and
Other Minerals which supply mineral products primarily to the utility,
construction, automobile, and steel industries. The financial information for
these segments is presented below (in millions):
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Six Months
Ended June 30 Ended June 30
-------------- --------------
1994 1993 1994 1993
------ ------ ------ ------
<S> <C> <C> <C> <C>
Segment Revenue
Coal $ 337 $ 202 $ 602 $ 324
Copper 302 184 589 394
Other Minerals 58 67 94 110
----- ----- ------ -----
$ 697 $ 453 $1,285 $ 828
===== ===== ====== =====
Segment Income (Loss)
Coal $ 34 $ 95 $ 59 $ 124
Copper 35 10 71 4
Other Minerals 4 5 1 12
----- ----- ------ -----
73 110 131 140
Corporate (9) (3) (21) (11)
Interest, Net (17) (6) (40) (11)
Equity Investments and Other (3) 4 (2) 4
----- ----- ------ -----
Income from Continuing
Operations
Before Income Taxes 44 105 68 122
Income Tax Provision (12) (23) (17) (28)
----- ----- ------ -----
Income from Continuing
Operations 32 82 51 94
Income from Operations of
Discontinued Oil and Gas
Division, Net of Applicable
Taxes of $2 - - 9 -
----- ----- ------ -----
Net Income $ 32 $ 82 $ 60 $ 94
===== ===== ====== =====
</TABLE>
-6-
<PAGE>
Review by Independent Accountants
- - ---------------------------------
The financial information as of June 30, 1994, and for the three-month and six-
month periods ended June 30, 1994, included in Part I pursuant to Rule 10-01 of
Regulation S-X has been reviewed by Price Waterhouse LLP, the Company's
independent accountants, in accordance with standards established by the
American Institute of Certified Public Accountants. Price Waterhouse LLP's
report is included as page 8 of this quarterly report.
Price Waterhouse LLP does not carry out any significant or additional audit
tests beyond those which would have been necessary if its report had not been
included in this quarterly report. Accordingly, such report is not a "report"
or "part of a registration statement" within the meaning of Sections 7 and 11 of
the Securities Act of 1933 and the liability provisions of Section 11 of such
Act do not apply.
-7-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Shareholders of Cyprus Amax Minerals Company
We have reviewed the accompanying consolidated balance sheet of Cyprus Amax
Minerals Company and its subsidiaries as of June 30, 1994, and the related
consolidated statements of operations and of cash flows for the three-month and
six-month periods ended June 30, 1994 and 1993. These 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.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying interim financial information for it to be in
conformity with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing standards,
the consolidated balance sheet as of December 31, 1993, and the related
consolidated statements of operations, of retained earnings, and of cash flows
for the year then ended (not presented herein), and in our report dated March 1,
1994, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet information as of December 31, 1993, is fairly stated
in all material respects in relation to the consolidated balance sheet from
which it has been derived.
Price Waterhouse LLP
Denver, Colorado
August 11, 1994
-8-
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
- - -------------------------------------------------------------------------
Financial Condition
- - -------------------
Results of Operations
- - ---------------------
Cyprus Amax Minerals Company reported consolidated net income of $32 million, or
30 cents per share, on revenue of $697 million, compared with 1993 earnings of
$82 million, or $1.73 per share, on revenue of $453 million. The 1994 results
include the impact of the merger with Amax, Inc. completed November 15, 1993.
The 1993 second quarter results include an after-tax gain of $59 million or
$1.24 per share, from the sale of LTV bankruptcy claims.
<TABLE>
<CAPTION>
Three Months Six Months
Selected Results Ended June 30 Ended June 30
------------- -------------
(In millions except per share data) 1994 1993 1994 1993
------ ----- ------ -----
<S> <C> <C> <C> <C>
Revenue $ 697 $ 453 $1,285 $ 828
Net Income $ 32 $ 82 $ 60 $ 94
Earnings Per Share $ .30 $1.73 $ .55 $1.98
</TABLE>
The 1994 revenue of $697 million was up $244 million from the comparable 1993
quarter primarily because of the inclusion of the former Amax businesses. Also
attributing to the higher revenues were higher copper realizations and increased
produced copper sales of $32 million, partially offset by the sale of the LTV
bankruptcy claim for $82 million and the absence of Gold revenue of $16 million
as a result of the sale of Gold properties in 1993.
For the first six months, Cyprus Amax earned $60 million, or 55 cents per share,
compared with 1993 earnings of $94 million, or $1.98 per share, which included
$75 million or $1.59 per share from the sale of the LTV claims. The 1993
earnings also included $19 million after tax cost resulting from record heavy
rains and flooding at Cyprus' Arizona copper operations.
Segment income is earnings before corporate overhead, interest, equity and
other, and income taxes.
<TABLE>
<CAPTION>
Coal
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
Selected Results (In millions) 1994 1993 1994 1993
------ ----- ------ -----
<S> <C> <C> <C> <C>
Revenue $ 337 $ 202 $ 602 $ 324
Segment Operating Income $ 34 $ 95 $ 59 $ 124
</TABLE>
Coal reported second quarter earnings of $34 million, compared to 1993 second
quarter earnings of $13 million, excluding the 1993 pretax gain of $82 million
on the sale of the remaining LTV claim. The increase in earnings resulted from
the merger with Amax, Inc.
-9-
<PAGE>
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
-------------- --------------
Selected Operating Data 1994 1993 1994 1993
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sales Volume - Millions of Tons
- - -------------------------------
Eastern Mines 7.8 2.6 13.5 4.7
Western Mines - Powder River Basin 9.1 - 17.6 -
Western Mines - Other 3.1 2.5 5.6 4.5
------ ------ ---- -----
Total Sales 20.0 5.1 36.7 9.2
------ ------ ----- -----
Oakbridge Equity Share 1.2 - 2.4 -
Average Realization - $/Ton $16.39 $23.03 $15.97 $23.32
East Average Contract Price - $/Ton $31.52 $29.93 $31.71 $30.29
East Average Spot Price - $/Ton $22.94 $21.73 $23.16 $22.33
West - Powder River Basin Contract Price - $/Ton $ 6.95 $ - $ 6.90 $ -
West - Powder River Basin Spot Price - $/Ton $ 3.35 $ - $ 3.37 $ -
West - Other Average Contract Price - $/Ton $18.19 $20.35 $18.60 $20.35
West - Other Average Spot Price - $/Ton $12.33 $13.85 $12.77 $14.23
Average Cost of Sales - $/Ton $14.78 $20.42 $14.48 $21.14
Average Unit Costs - $/Ton $14.62 $20.28 $14.22 $20.99
Clean Production - Millions of Tons
- - -----------------------------------
Pennsylvania 2.0 1.2 3.8 1.9
Kentucky 1.3 1.0 2.3 2.0
West Virginia 1.6 .3 2.9 .7
Midwest 2.3 - 4.6 -
Wyoming - Powder River 9.1 - 17.6 -
Colorado 2.3 1.3 4.6 2.8
Utah .9 1.0 1.9 1.8
------ ------ ------ ------
Total Production 19.5 4.8 37.7 9.2
Oakbridge Equity Share 1.0 .3 2.0 .3
</TABLE>
An average realization of $16.39 per ton, with average cost of sales of $14.78
per ton, yielded a book profit margin of $1.61 per ton. Cash margins exceeded
$4 per ton and generated $80 million of cash flow in the second quarter of 1994.
Coal markets continue to show strength as utilities rebuild inventories.
Western coal market demand generally is strong, but prices are constrained at
present by the competitiveness and availability of coal supplies. Rail service
in the Powder River Basin and Northwest Colorado has not been able to keep pace
with customer orders and should foster strong demand well into 1995. Market
prices for low to mid sulfur Eastern coals have held up better than expected
because of increased power generation attributable to warm weather and
transportation constraints, which have prevented utilities from rebuilding
stockpiles following the union strike. Mine closures announced by other
producers in the East and Midwest have tempered downward price pressures for
higher sulfur coals.
Reflecting improved market interest in long-term supply commitments, Cyprus Amax
agreed in the second quarter to terms for multi-year contracts with four
utilities to supply a total of seven million tons of coal from our Western
operations and one million tons from our Eastern operations.
-10-
<PAGE>
As a result of the merger, coal production and sales of 20 million tons in the
second quarter was 15 million tons higher than in 1993. Productivity improved
10 percent during the first half of 1994 for the Cyprus Amax operations over
full year 1993. This improvement resulted from scheduling changes at our
Eastern underground operations whereby longer shifts are worked and crews are
changed on the "working coal face," and the replacement of older haul trucks at
the Powder River Basin mines. During the first half of 1994, 13 monthly
production records were set at seven operations.
For the first six months, Coal earned $59 million compared to $19 million
(excluding the 1993 pretax gain of $105 million for the sale of the LTV claim)
for the first half of 1993 primarily as a result of the merger with Amax, Inc.
<TABLE>
<CAPTION>
Copper
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
Selected Results (In millions) 1994 1993 1994 1993
------ ----- ------ -----
<S> <C> <C> <C> <C>
Revenue $ 302 $ 184 $ 589 $ 394
Segment Operating Income $ 35 $ 10 $ 71 $ 4
</TABLE>
Copper, including molybdenum, earned $35 million during the second quarter,
compared with $10 million in the 1993 period. Earnings were higher primarily
due to lower cost of copper sold, higher realizations, improved molybdenum
results, and increased produced copper sales.
For the first six months, Copper's earnings were $71 million compared to $4
million in 1993. The higher earnings primarily reflect the absence of rain-
related costs of $25 million pretax that occurred in 1993 due to record Arizona
rainfall, improved molybdenum results of $12 million, higher produced sales of
49 million pounds or 18 percent, and lower cost of goods sold of 7 cents per
pound.
Second quarter copper realizations averaged 98 cents per pound, 5 cents higher
than the 1993 quarter. Cyprus Amax continued to buy copper puts to provide
price protection, which ensure a minimum average realization on a London Metals
Exchange (LME basis) of approximately 81 cents per pound on 300 million pounds
for the balance of 1994 and an average of approximately 85 cents per pound (LME
basis) on approximately 700 million pounds for 1995.
<TABLE>
<CAPTION>
Three Months Six Months
Other Operating Data Ended June 30 Ended June 30
------------- --------------
(In millions except as noted) 1994 1993 1994 1993
------ ------ ------ ------
<S> <C> <C> <C> <C>
Produced Copper Sold, Pounds 173 144 329 280
Copper Production, Pounds 162 154 313 300
Copper Sales Volume, Pounds 224 166 422 351
Average Copper Realization, $/Pound $ .98 $ .93 $ .97 $ .96
Cost of Sales, $/Pound $ .77 $ .83 $ .75 $ .82
Net Cash Cost, $/Pound $ .71 $ .77 $ .70 $ .78
Full Cost, $/Pound $ .79 $ .82 $ .77 $ .83
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
Three Months Six Months
Other Operating Data (continued) Ended June 30 Ended June 30
------------- -------------
(In millions except as noted) 1994 1993 1994 1993
------ ----- ------ -----
<S> <C> <C> <C> <C>
Bagdad
- - ------
Production - Pounds 46 49 95 100
Material Mined - Tons 16.8 16.5 33.3 30.4
Ore Mined - Tons 7.3 7.0 14.1 14.1
Stripping Ratio 1.31 1.34 1.36 1.14
Ore Milled - Tons 6.9 6.3 13.5 12.9
Ore Grade - % .38 .50 .40 .51
Miami
- - -----
Production - Pounds 29 30 59 58
Material Mined - Tons 22.1 15.3 43.1 25.1
Ore Mined - Tons 8.0 7.0 16.5 12.0
Stripping Ratio 1.76 1.18 1.61 1.10
Ore Grade - % .39 .35 .37 .37
Sierrita/Twin Buttes
- - --------------------
Production - Pounds 66 71 132 129
Material Mined - Tons 18.0 19.4 36.6 36.2
Ore Mined - Tons 9.7 9.4 19.5 18.0
Stripping Ratio - Sierrita/Twin Buttes .79 1.00 .81 .94
Ore Milled - Tons 9.4 9.1 18.8 17.6
Ore Grade - % .38 .42 .37 .40
Molybdenum Sales - Pounds 21 8 40 17
Molybdenum Production - Pounds 13 7 27 12
Average Realization - Metals Week Dealer
Oxide Price - $/Pound 3.18 2.25 2.99 2.13
Henderson
- - ---------
Production - Pounds 5.4 - 10.8 -
Material Mined - Tons .9 - 1.9 -
Ore Milled - Tons .9 - 1.9 -
Ore Grade - % .52 - .51 -
</TABLE>
During the quarter, Cyprus Amax sold 173 million pounds of produced copper, 29
million pounds more than in the 1993 second quarter, because of higher produced
metal availability and strong rod demand. Cost of sales declined 6 cents per
pound from the 1993 period to 77 cents per pound for the second quarter of 1994.
Comex copper prices have increased throughout the quarter due in part to buying
by investment funds, lower inventories on the world metal exchanges and strong
U.S. demand. Combined LME/Comex inventories decreased by 28 percent during the
second quarter and have declined by 40 percent in the first half of 1994.
Second quarter net cash costs for copper equalled 71 cents per pound, 6 cents
lower than the 77 cents per pound for the second quarter of 1993. The lower
cash costs reflect higher by-product credits for molybdenum and the realization
of significant efficiencies from the mine fleet modernization program, workforce
reductions, and re-engineering of work processes.
-12-
<PAGE>
Copper production totalled 162 million pounds for the quarter, 8 million pounds
higher than in 1993, primarily due to the addition of Cerro Verde production of
12 million pounds in 1994. Copper production for the second quarter was lower
than anticipated due to lower ore grade and mill throughput at Bagdad, lower
Sierrita ore grade and throughput related to the campaigning of Twin Buttes ore,
and lower concentration of leach solution at Miami due to the lingering effects
of the 1993 rains. It is expected that 1994 production will be about 675
million pounds.
The 1994 smelter maintenance shutdown commenced earlier than planned in mid-May
to re-brick the Isasmelt vessel and to make further hood modifications. These
modifications, completed in mid-June with other repairs in July, reworked
identified problem areas. This should allow continued operation until
installation of an updated hood design during the next maintenance shutdown
currently planned next year.
Molybdenum operations earned $5 million for the second quarter compared to a
loss of $1 million for the 1993 period. With the addition of the Henderson
mine, production increased to 13 million pounds from 7 million pounds, and sales
increased to 21 million pounds from 8 million for the second quarters of 1994
and 1993, respectively.
On June 28, 1994, Cyprus Amax acquired a 51 percent interest in El Abra, a
significant copper deposit in Chile, for $330 million. Cyprus Amax's share of
production from El Abra, when added to the production from the Cerro Verde
property in Peru acquired earlier this year, is expected to give Cyprus Amax
approximately 360 million pounds of South American copper cathode production by
1998 with cash costs under 50 cents per pound. This should help Cyprus Amax
achieve its goal of annual copper production in excess of 1 billion pounds with
total average cash costs of less than 60 cents per pound.
<TABLE>
<CAPTION>
Other Minerals
Three Months Six Months
Ended June 30 Ended June 30
---------------- ---------------
Selected Data (In millions) 1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
Segment Operating Income $ 4 $ 5 $ 1 $ 12
====== ====== ====== =======
Lithium $ 6 $ 6 $ 10 $ 13
Iron Ore 3 3 4 4
Businesses Sold/Non-Operating
(Gold, Barite, Other) - 2 (2) 5
Exploration Expense (5) (6) (11) (10)
------ ------ ------ ------
Total $ 4 $ 5 $ 1 $ 12
====== ====== ====== ======
Lithium
Sales Volumes - Millions of Lbs.
Carbonate Equiv. 7.8 8.3 16.5 16.3
Iron Ore
Sales Volumes - Thousands of Long Tons 1,150 1,077 1,556 1,135
Gold
Sales Volumes - Thousands of Ounces 28 52 52 95
(including 40% equity share of Amax Gold)
Gold Price - $/Ounce 402 351 402 354
</TABLE>
Other Minerals, which includes lithium, gold, iron ore, and exploration, had
combined earnings for the second quarter of 1994 of $4 million, compared to $5
million for 1993. Lithium earned $6 million and the Northshore iron ore
operation earned $3 million, both comparable to last year's quarters.
Exploration
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<PAGE>
expense of $5 million was $1 million lower than in 1993. Cyprus' gold interests
in the South Pacific operations, sold early in the second quarter 1993, had
reported earnings of $2 million for the 1993 period.
Year-to-date earnings for Other Minerals equalled $1 million, or $11 million
less than in the first six months of 1993 primarily due to the absence of $6
million of Gold income as a result of the sale last year of interests in two
gold mines in the second quarter of 1993 and a $3 million charge in 1994 to
relocate the Lithium headquarters, research, and other operations from
Pennsylvania to North Carolina.
On July 26, 1994, Cyprus Amax announced the signing of a letter of intent to
sell its Cyprus Northshore iron ore mine and processing facilities and the
adjacent Silver Bay power plant in Minnesota to Cleveland-Cliffs, Inc. of
Cleveland, Ohio. The sale is expected to close in the third quarter, subject to
the satisfactory completion of due diligence review, a definitive agreement,
regulatory approvals and other customary closing conditions.
Corporate expenses for the second quarter were $9 million, or $6 million higher,
and for the first half of 1994 were $21 million, or $10 million higher, than the
same periods in 1993. Changes in stock appreciation rights (SARs), attributable
to Cyprus Amax's higher stock price in 1994, accounted for $4 million of the
quarter change and $5 million for the first half change. Other expenses
increased for the quarter and first half due to the incremental cost of the
combined Cyprus Amax entity.
Interest, Equity and Other expense was $20 million for the 1994 second quarter
compared to expense of $2 million for 1993. Higher interest expense primarily
reflected the assumption of Amax, Inc.'s long-term debt resulting from the
merger. Cyprus Amax's equity share in Oakbridge's loss and Amax Gold's loss was
$2 million and $1 million, respectively. For the second quarter, Amax Gold
reported improvements in gold production and average cash costs of 24 percent
and 29 percent, respectively, over the 1993 period. Year-to-date interest,
equity, and other expense of $42 million was $35 million higher than in 1993
primarily due to increased interest of $29 million and Cyprus Amax's equity
share of $4 million of losses in Amax Gold.
Liquidity and Capital Resources
At June 30, 1994, the Company maintained its strong financial condition with
long-term debt as a percentage of total capitalization of 35.1 percent and a
ratio of current assets to current liabilities of 1.3 to 1.0. At December 31,
1993, the comparable ratios were 36.6 percent and 1.0 to 1.0, respectively. The
decrease in the debt to total capitalization ratio resulted from the retirement
of $62 million of debt.
The Company's cash balance increased from $96 million at year-end to $233
million at June 30 due primarily to the sale of the oil and gas business for
after-tax net proceeds of $680 million, net borrowing on the $1 billion line of
credit of $100 million, partially offset by capital expenditures of $182
million, $330 million payment for the El Abra mineral interest, and the $73
million payment for settlement of the Minerals Management Service coal royalty.
Cash used for continuing operations was $95 million and included working capital
changes of $132 million, the $73 million royalty settlement, income tax payments
of $52 million, and net interest payments of $52 million.
For the first six months of 1994, capital expenditures for Copper and Coal were
$104 million and $61 million, respectively. In Copper, the new electrorefinery
at Miami accounted for $37 million of spending while Coal's capital spending was
primarily for sustaining and replacement capital. Total capital spending in
1994 excluding acquisitions is projected to be approximately $470 million, with
over 60 percent and over 30 percent spent on copper and coal projects,
respectively.
On June 28, 1994, Cyprus Amax acquired a 51 percent interest in El Abra, a
significant copper deposit in Chile, for $330 million. Development of the mine
will require an investment estimated at approximately $1 billion, allowing for
the effects of inflation, interest during construction, working capital and
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<PAGE>
contingencies. Funding of the billion dollar investment to develop the oxide
reserves will include approximately $300 million of subordinated shareholder
loans contributed by Cyprus Amax and approximately $700 million of limited
recourse debt financing, which will be underwritten by Cyprus Amax. In March
1994, Cyprus Climax Metals acquired 91.5 percent of the shares of Sociedad
Minera Cerro Verde, S.A., a producing copper mine in southern Peru at a cost of
approximately $34 million. The initial capital program for Cerro Verde is
expected to be $100 million, including expanding SX-EW production and upgrading
mine equipment. Cyprus Amax's additional future investment commitment for Cerro
Verde is $375 million, which is conditional based upon a favorable feasibility
study to develop a modern milling facility, favorable copper prices, a stable
political environment, and other conditions.
Cyprus Amax expects to fund the growth of its core businesses partly through the
sale of selected, non-strategic assets, such as the sale of Oil & Gas and the
signing on July 26, 1994 of a letter of intent to sell its Northshore iron ore
mine and processing facilities. Also, in June 1994 Cyprus Amax filed a
"universal shelf" registration statement with the Securities and Exchange
Commission that will enable the Company to sell an aggregate of up to $500
million of equity and/or debt securities.
For the full year 1994 Cyprus expects to spend approximately $100 million for
reclamation, remediation, and environmental compliance.
On April 15, 1994, Cyprus Amax and Amax Gold Inc. (AGI) entered into an
agreement whereby the Company will provide AGI with a $100 million double
convertible line of credit. The outstanding indebtedness under the line of
credit may be repaid by AGI with the issuance of AGI convertible preferred
stock, which in turn could be converted into AGI common stock at $8.265 per
share. This represents approximately 12.1 million AGI shares. As of June 30,
1994, AGI had borrowed $8 million under this line of credit.
Additionally, as of June 30, 1994, Cyprus Amax had loaned AGI $26 million. In
February 1994 the AGI Board of Directors approved the purchase by Cyprus Amax of
three million shares of AGI common stock as repayment of $21 million of the
amounts outstanding under such note. AGI shareholder approval for these
transactions was received in July 1994.
Cyprus Amax paid a regular quarterly dividend of $.20 per share on its Common
Stock and $1.00 per preferred share during the quarter. At June 30, 1994,
92,394,079 shares of the Company's Common Stock were outstanding.
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<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
- - --------------------------
None.
Item 2. Changes in Securities
- - ------------------------------
Not applicable.
Item 3. Defaults upon Senior Securities
- - ----------------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
- - ------------------------------------------------------------
Not applicable.
Item 5. Other Information
- - --------------------------
On March 31, 1994, Cyprus Amax sold its oil and gas business to Union Pacific
Resources Company. Although Note 19 to the December 31, 1993, Financial
Statements states that the effective date of the sale transaction is September
30, 1993, for business purposes the effective date utilized in accounting for
the transaction was March 31, 1994.
Item 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
(a) The following Exhibits are being filed as part of this Quarterly Report on
Form 10-Q:
<TABLE>
<CAPTION>
Page in
Sequential
Exhibit Numbering
Number Document System
- - --------- -------------------------------------------------- ----------
<S> <C> <C>
(11) Statement re computation of per share earnings. 19
(15) Letter re unaudited interim financial information. 21
</TABLE>
(b) A report on Form 8-K dated March 31, 1994, which reported the sale of
Amax Oil & Gas, Inc. was filed on April 15, 1994.
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<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CYPRUS AMAX MINERALS COMPANY
----------------------------
Registrant
Date: __________________ /s/ John Taraba
--------------------------------------
Vice President and
Controller
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<PAGE>
EXHIBIT 11
To Cyprus Amax Minerals Company's
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 1994
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<PAGE>
EXHIBIT 11
CYPRUS AMAX MINERALS COMPANY & SUBSIDIARIES
-------------
Computation of Per Share Earnings
(In thousands except per share data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
-------------------- --------------------
1994 1993 1994 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Income $ 32 $ 82 $ 60 $ 94
Preferred Stock Dividends (4) - (10) -
--------- --------- --------- ---------
Income Applicable to Common Shares $ 28 $ 82 $ 50 $ 94
========= ========= ========= =========
Average Common Shares Outstanding 92.3 47.3 92.3 47.3
Common Stock Equivalents - Options .4 .1 .4 .3
--------- --------- --------- ---------
Weighted Average Primary Shares
Outstanding 92.7 47.4 92.7 47.6
Conversion of Series A Preferred Stock 9.6 - 9.6 -
--------- --------- --------- ---------
Fully Diluted Average Common
Shares Outstanding 102.3 47.4 102.3 47.6
========= ========= ========= =========
Primary Earnings per Common Share .30 1.73 .55 1.98
Fully Diluted Earnings per Share .32(1) 1.73 .58(1) 1.96(1)
</TABLE>
(1) Fully diluted earnings per share was anti-dilutive in 1994 and was less than
three percent different from earnings per common share in 1993.
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<PAGE>
EXHIBIT 15
To Cyprus Amax Minerals Company's
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 1994
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<PAGE>
August 11, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
We are aware that Cyprus Amax Minerals Company has included our report
dated August 11, 1994, (issued pursuant to the provisions of Statement on
Auditing Standards Nos. 71 and 42) in the Quarterly Report Under Section
13 or 15(d) of the Securities Exchange Act of 1934 on Form 10-Q for the
quarter ending June 30, 1994, which is incorporated in the Prospectuses
constituting a part of each of the following Registration Statements:
(a) Registration Statements on Form S-8 (Nos. 33-1600, 33-22939 and 33-
53792) with respect to Cyprus Amax Minerals Company Savings Plan
and Trust.
(b) Registration Statements on Form S-8 (Nos. 33-1603, 33-21501 and 33-
53794) with respect to the Management Incentive Program of Cyprus
Amax Minerals Company and its participating subsidiaries.
(c) Registration Statement on Form S-8 (No. 33-52812) with respect to
the Stock Plan for Non-Employee Directors of Cyprus Amax Minerals
Company.
(d) Registration Statement on Form S-3 (No. 33-36413) with respect to
the Cyprus Amax Minerals Company Savings Plan and Trust.
(e) Registration Statement on Form S-8 (No. 33-51011) with respect to
the 1988 Amended and Restated Stock Option Plan of Cyprus Amax
Minerals Company.
(f) Registration Statement on Form S-3 (No. 33-54097), as amended,
with respect to Cyprus Amax Minerals Company and Cyprus Amax
Finance Corporation.
We are also aware of our responsibilities under the Securities Act of
1933.
Yours very truly,
Price Waterhouse LLP
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