<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 March 31, 1995 Commission File Number 1-10040
-------------- -------
CYPRUS AMAX MINERALS COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-2684040
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9100 East Mineral Circle, Englewood, Colorado 80112
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(Address of principal executive offices) (Zip Code)
(303) 643-5000
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(Registrant's telephone number, including area code)
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 May 9, 1995, was 92,698,310
shares.
This report contains 22 pages.
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<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)
Three Months
Ended March 31
---------------------
1995 1994
------- -------
<S> <C> <C>
Revenue $ 784 $ 588
----- -----
Costs and Expenses
Cost of Sales and Operating Expenses 537 447
Selling and Administrative Expenses 27 26
Depreciation, Depletion, and Amortization 71 63
Exploration Expense 5 6
----- -----
Total Costs and Expenses 640 542
----- -----
Income from Operations 144 46
Other Income (Expense)
Interest Income 4 3
Interest Expense (28) (27)
Capitalized Interest 6 1
Equity Investments and Other (4) 1
----- -----
Income from Continuing Operations Before Income Taxes 122 24
Income Tax Provision (25) (5)
----- -----
Income from Continuing Operations 97 19
Income from Operations of Discontinued Oil and Gas
Division, Net of Applicable Taxes of $2 - 9
----- -----
Net Income 97 28
Preferred Stock Dividends (5) (5)
----- -----
Income Applicable to Common Shares $ 92 $ 23
===== =====
Earnings Per Common Share
Primary $1.00 $ .25
===== =====
Fully Diluted $ .94 $ .25/(1)/
===== =====
Average Common Shares Outstanding
Primary 92.8 92.1
Fully Diluted 102.7 102.1
</TABLE>
See accompanying notes to consolidated financial statements.
/(1)/Fully diluted earnings per share were anti-dilutive.
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<PAGE>
CYPRUS AMAX MINERALS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Millions Except Share Amounts)
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
Assets 1995 1994
---------- -------------
<S> <C> <C>
Current Assets
Cash and Cash Equivalents $ 131 $ 139
Accounts and Notes Receivable, Net 354 350
Inventories 442 453
Prepaid Expenses 76 73
Deferred Income Taxes 21 26
-------- --------
Total Current Assets 1,024 1,041
Properties - At Cost, Net 3,963 3,925
Other Assets 490 441
-------- --------
Total Assets $ 5,477 $ 5,407
======== ========
Liabilities and Shareholders' Equity
Current Liabilities
Current Portion of Long-Term Debt 26 21
Current Portion of Production Payments 48 47
Accounts Payable 129 144
Accrued Payroll and Benefits 94 92
Accrued Royalties and Interest 50 36
Other Accrued Liabilities 150 142
Taxes Payable, Other Than Income Taxes 66 61
Income Taxes Payable 74 57
Dividends Payable 19 18
-------- --------
Total Current Liabilities 656 618
-------- --------
Noncurrent Liabilities and Deferred Credits
Long-Term Debt 954 955
Production Payments 224 236
Capital Lease Obligations 197 200
Deferred Employee and Retiree Benefits 412 405
Deferred Closure, Reclamation, and Environmental 352 368
Deferred Income Taxes 126 125
Other 157 171
-------- --------
Total Noncurrent Liabilities and Deferred Credits 2,422 2,460
-------- --------
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, 4,666,478 Issued and Outstanding in 1995,
and 4,666,635 in 1994 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 96,026,845 in 1995 and 96,026,546 in 1994 1 1
Paid-In Surplus 2,955 2,962
Accumulated Deficit (422) (496)
Foreign Currency Translation Adjustment 2 6
-------- --------
2,541 2,478
Treasury Stock at Cost, 3,217,981 Shares in 1995
and 3,460,078 Shares in 1994 (74) (80)
Loan to Savings Plan (68) (69)
-------- --------
Total Shareholders' Equity 2,399 2,329
-------- --------
Total Liabilities and Shareholders' Equity $ 5,477 $ 5,407
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
CYPRUS AMAX MINERALS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Millions)
<TABLE>
<CAPTION>
(Unaudited)
Three Months
Ended March 31
-------------------
1995 1994
------ ------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income from Continuing Operations $ 97 $ 19
Adjustments to Reconcile Net Income to Net Cash Provided by
(Used for) Continuing Operations:
Depreciation, Depletion, and Amortization 71 63
Deferred Income Taxes 3 (1)
Gain on Sale of Assets 1 -
Changes in Assets and Liabilities Net of Effects
from Businesses Acquired/Sold (2) (120)
Other 16 20
----- -----
Net Cash Provided by (Used for) Continuing Operations 186 (19)
Net Cash Provided by Discontinued Operations - 14
----- -----
Net Cash Provided by (Used for) Operating Activities 186 (5)
----- -----
Cash Flows from Investing Activities
Capital Expenditures (102) (77)
Payments for Businesses Purchased - (32)
Capitalized Interest (6) (1)
Advances to Affiliates (58) (21)
Proceeds from Sale of Assets 7 788
----- -----
Net Cash Provided by (Used for) Investing Activities (159) 657
----- -----
Cash Flows from Financing Activities
Net Borrowings on Line of Credit - 150
Payments on Debt and Other Obligations (12) (45)
Proceeds of Issuance of Stock for Employee Benefits - 3
Dividends Paid (23) (23)
----- -----
Net Cash Provided by (Used for) Financing Activities (35) 85
----- -----
Net Increase (Decrease) in Cash and Cash Equivalents (8) 737
Cash and Cash Equivalents at Beginning of Year 139 96
----- -----
Cash and Cash Equivalents at End of Period $ 131 $ 833
----- -----
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
CYPRUS AMAX MINERALS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
- ------------------------------
The accompanying interim unaudited financial statements include all 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, 1994.
Note 2. Inventories
- --------------------
Inventories detailed by component are summarized below (in millions):
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1995 1994
----------- ------------
<S> <C> <C>
Component
In-Process Ores, Concentrates,
and Other $ 187 $ 193
Finished Goods 171 182
Materials and Supplies 84 78
------- -------
$ 442 $ 453
======= =======
</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 March 31, 1995, the
net carrying value of financial instruments approximated a $963 million
liability, whereas the fair value approximated a $1,027 million liability. The
difference in fair value is primarily due to lower interest rates.
Note 4. Contingencies
- ----------------------
Arbitration is pending relating to the Public Service of Indiana long-term coal
sales contract at the Cyprus Amax Wabash mine. By agreements signed in July and
October 1994, the Company and Public Service of Indiana have resolved all of the
outstanding claims for damages relating to past coal sales. The Company will
continue to defend its position in arbitration and the limited litigation.
While Cyprus Amax is not able to predict the outcome of this matter at this
time, based upon facts currently known to it, Cyprus Amax does not believe that
the ultimate resolution of any remaining matters will have a material adverse
effect on its financial condition.
On November 8, 1993, Cyprus Amax was notified by the United States Department of
Justice that it is under investigation for possible violations of the antitrust
laws of the United States regarding its molybdenum business. While Cyprus Amax
is unable to predict the outcome of this investigation, based upon facts
currently known to it, the resolution of this matter is not expected to have a
material adverse effect on the Company's financial condition.
In April 1994, Cyprus Amax was notified by the Department of Justice that the
government will be seeking civil penalties for alleged violations of the Federal
Clean Water Act in the operation of Cyprus Amax's Bagdad, Miami, and Sierrita
mines located in Arizona. These governmental actions relate to findings of
-5-
<PAGE>
violations and orders issued by the Environmental Protection Agency (EPA) to
these operations in late 1992 and early 1993. The violations are alleged to have
occurred between April 1989 and January 1993. The relief sought by the EPA under
these findings of violation and orders was penalties and corrective action to
comply with the Clean Water Act. Based upon information currently known to it,
management expects to resolve this matter in the near term.
In January 1995, Cyprus Foote Mineral Company (Cyprus Foote) agreed to sign a
Consent Order with the State of Ohio and Shieldalloy Metallurgical Corporation
(Shieldalloy) related to alleged contamination of the Shieldalloy's Cambridge,
Ohio, operating site with slag containing elevated levels of naturally occurring
radionuclides. The slag is alleged to have been produced from Foote Mineral
Company's (FMC) operation of the Cambridge ferroalloy plant from the early 1950s
to 1987 when the plant was sold by Foote to Shieldalloy. FMC's sale of the
ferroalloy facility to Shieldalloy predated Cyprus' 1988 acquisition of FMC's
stock. The Consent Order requires Cyprus Foote to participate with Shieldalloy
in funding the development of a remedial investigation and feasibility study to
be completed in early 1996.
Cyprus Amax received an EPA Unilateral Order in 1994 pursuant to Section 106 of
the Comprehensive Environmental Response, Compensation, and Liability Act
(CERCLA) requiring it to participate in a cleanup of soils with elevated metals
levels in the city of Bartlesville, Oklahoma, as well as to participate in
funding a remedial investigation and feasibility study. A Cyprus Amax subsidiary
built and operated a zinc smelter near Bartlesville in the early 1900s. Cyprus
Amax is one of several identified potentially responsible parties (PRPs) at this
site and is participating in a PRP group in an effort to minimize its immediate
costs to comply with the EPA order.
In late 1994, Cyprus Amax, along with a number of other PRPs, received a
Unilateral Administrative Order for Removal Action pursuant to Section 106 of
CERCLA with regard to materials stockpiled at the Colorado School of Mines
Research Institute Creekside Superfund site, located in Golden, Colorado. The
EPA alleges that these materials result from various research operations at the
facility and that Cyprus Amax contributed materials to the site for research.
Cyprus Amax is participating with the state of Colorado and a number of other
entities in completing a remedial investigation and feasibility study for this
site.
In 1994, Cyprus Amax received several Orders from the Bureau of Land Management
(BLM) in Roswell, New Mexico, alleging Cyprus Amax's continuing responsibility
for closure and reclamation of the Horizon Potash Mine near Carlsbad, New
Mexico. Amax sold its interest in the mine in 1991, and Horizon abandoned the
site in 1993. Cyprus Amax is vigorously pursuing its legal defenses to this
potential liability and has held discussions with the BLM as to possible
settlement.
At March 31, 1995, Cyprus Amax had accruals of approximately $390 million for
expected future mine closure, reclamation, and environmental remediation
liabilities. Total reclamation costs for Cyprus Amax at the end of current mine
lives are estimated at about $550 million. Additionally, the cost range of
reasonably possible outcomes for sites where remediation costs are estimable is
from $70 million to $230 million of which approximately $105 million was
reserved at March 31, 1995. Work on these sites is expected to be substantially
completed within the next five years, subject to the inherent delays involved in
the process. Remediation costs that could not be reasonably estimated at March
31, 1995, are not expected to have a material impact on the financial condition
and ongoing operations of the Company.
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<PAGE>
Note 5. Information by Industry Segment
- ---------------------------------------
Cyprus Amax operates in three principal industry segments -- Copper/Molybdenum,
Coal, and Other -- which supply mineral products primarily to the construction,
automobile, steel, and utility industries. The financial information for these
segments is presented below (in millions):
<TABLE>
<CAPTION>
(Unaudited)
Three Months
Ended March 31
----------------
1995 1994
------ ------
<S> <C> <C>
Segment Revenue
Copper/Molybdenum $ 462 $ 287
Coal 302 265
Other 20 36
------ ------
$ 784 $ 588
====== ======
Segment Operating Income (Loss)
Copper/Molybdenum $ 128 $ 36
Coal 31 25
Other (1) (4)
------ ------
158 57
Corporate (14) (11)
Interest, Net (18) (23)
Equity Investments and Other (4) 1
------ ------
Income from Continuing Operations
Before Income Taxes 122 24
Income Tax Provision (25) (5)
------ ------
Income from Continuing Operations 97 19
Income from Operations of Discontinued Oil and Gas
Division, Net of Applicable Taxes of $2 - 9
------ ------
Net Income $ 97 $ 28
====== ======
</TABLE>
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<PAGE>
Review by Independent Accountants
- ---------------------------------
The financial information as of March 31, 1995, and for the three-month period
ended March 31, 1995, 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 9 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 Section 7 and 11 of
the Securities Act of 1933 and the liability provisions of Section 11 of such
Act do not apply.
-8-
<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 March 31, 1995, and the related
consolidated statements of operations and of cash flows for the three-month
periods ended March 31, 1995 and 1994. 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, 1994, and the related
consolidated statements of operations, of shareholder's equity, and of cash
flows for the year then ended (not presented herein), and in our report dated
February 17, 1995, 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, 1994, 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
May 9, 1995
-9-
<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 $97 million,
or $1.00 per share, on revenue of $784 million for the first quarter of 1995,
compared to 1994 earnings of $28 million, or 25 cents per share, on revenue of
$588 million.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
Selected Results (In millions except per share data) 1995 1994
-------- -------
<S> <C> <C>
Revenue $ 784 $ 588
Net Income $ 97 $ 28
Earnings Per Share $ 1.00 $ .25
</TABLE>
The 1995 revenue of $784 million was up $196 million from the comparable 1994
quarter primarily because of 38 cents per pound higher copper realizations,
$4.12 per pound higher molybdenum realizations, higher coal sales, and higher
molybdenum sales.
Segment income is earnings before corporate overhead, interest, equity and
other, and income taxes.
<TABLE>
<CAPTION>
Copper/Molybdenum
Three Months Ended
March 31,
------------------
Selected Results (In millions) 1995 1994
------ ------
<S> <C> <C>
Revenue $ 462 $ 287
Segment Operating Income $ 128 $ 36
</TABLE>
Copper/Molybdenum earned a record $128 million during the first quarter,
compared to earnings of $36 million in the 1994 period. Earnings were
significantly higher primarily due to 40 percent increased copper realizations
and $47 million higher molybdenum results, partially offset by higher costs of
copper sold. These costs represented prior periods inventoried costs from the
third and fourth quarters of 1994.
First quarter copper realizations averaged $1.33 per pound, 38 cents higher than
in the 1994 quarter. First quarter realizations were reduced by the inclusion
of put expense and prices realized from the sale of 50 million pounds of hedged
forward sales, which represent production from Tohono and the sale of scrap
copper which was reprocessed. Cyprus Amax continues to buy copper puts to
provide price protection, which ensure a minimum average realization on a London
Metals Exchange (LME) basis of an average of $1.05 per pound on 250 million
pounds for the second half of 1995, an average of 87 cents per pound on the
remaining 1995 sales, and an average of 90 cents per pound on about 700 million
pounds for 1996. As of March 31, 1995, Cyprus Amax has sold forward remaining
1995 production of 40 million pounds of copper on both the LME and COMEX with
prices ranging from $1.24 (LME) to $1.30 (COMEX) per pound and 1996 production
of 46 million pounds at a price of $1.07 (LME) per pound.
COMEX copper prices have remained strong throughout the quarter due in part to
lower inventories on the world metal exchanges and strong U.S. demand. Combined
LME/COMEX inventories decreased by approximately 25 percent from year-end and
have declined further in the month of April.
-10-
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
Other Operating Data (In millions except as noted) 1995 1994
------ ------
<S> <C> <C>
Copper Sales Volume, Pounds 203 197
Produced Copper Sold, Pounds 160 156
Copper Production, Pounds 159 151
Average Copper Realization, $/Pound $ 1.33 $ .95
Cost of Sales, $/Pound $ .82 $ .73
Net Cash Cost, $/Pound $ .49 $ .68
Full Cost, $/Pound $ .59 $ .74
Bagdad
- ------
Production - Pounds 53 49
Material Mined - Tons 15.0 16.5
Ore Mined - Tons 7.9 6.8
Stripping Ratio .90 1.43
Ore Milled - Tons 7.6 6.6
Ore Grade - % .39 .43
Miami
- -----
Production - Pounds 25 30
Material Mined - Tons 17.4 21.0
Ore Mined - Tons 5.8 8.5
Stripping Ratio 2.03 1.46
Ore Grade - % .48 .35
Sierrita/Twin Buttes
- --------------------
Production - Pounds 57 66
Material Mined - Tons 18.7 18.7
Ore Mined - Tons 10.5 9.8
Stripping Ratio - Sierrita/Twin Buttes .72 .84
Ore Milled - Tons 10.0 9.4
Ore Grade - % .30 .37
Molybdenum Sales - Pounds 22 20
Produced Molybdenum Sold - Pounds 22 17
Molybdenum Production - Pounds 20 14
Average Realization - $/Pound 7.91 3.79
Henderson
- ---------
Production - Pounds 11 5
Material Mined - Tons 2.1 1.0
Ore Milled - Tons 2.1 1.0
Ore Grade - % .31 .30
</TABLE>
During the quarter, Cyprus Amax sold 160 million pounds of produced copper, 4
million pounds more than in the 1994 first quarter. Cost of sales increased
nine cents per pound from the 1994 period to 82 cents per pound for the first
quarter of 1995 due to the inclusion of higher start-up costs at Cerro Verde in
Peru, higher costs at the new Tohono project, and higher sulfide costs at Bagdad
and Sierrita inventoried from the second half of 1994, partially offset by
higher molybdenum by-product credits.
-11-
<PAGE>
Cyprus Amax set a record for the lowest net cash cost in a quarter of 49 cents
per pound, which was 19 cents lower than the 68 cents per pound for the first
quarter of 1994. Excluding the Cerro Verde and Tohono projects, which increased
average costs segment-wide by six cents per pound, first quarter 1995 cash costs
would have been 43 cents per pound. The lower cash costs primarily reflect
higher by-product credits from molybdenum of 37 cents per pound in the first
quarter of 1995 compared to 14 cents per pound in 1994. These lower cash costs
are still in inventory and their impact will be reflected in lower copper cost
of sales when sold in future quarters.
Copper production totalled 159 million pounds for the quarter compared to 151
million pounds in 1994. The increase was due to the addition of Cerro Verde and
Tohono production and record mill throughput at Bagdad and Sierrita, partially
offset by lower copper ore grades at Bagdad and Sierrita and a temporary
production outage at Miami. Copper production is expected to increase in the
remaining three quarters of 1995. Production rates at Cerro Verde increased 40
percent during the quarter and Miami daily production rate increased ten percent
during the quarter due to increased solution flow and ore grade. Cyprus Amax
expects that 1995 copper production will be about 675 million pounds.
In mid-January 1995, a smelter turnaround at Miami commenced to perform normal
annual maintenance and to install a newly designed gas off-take cooling hood.
Full production resumed in mid-February and in March the smelter operated at
over design capacity and had a record month for treatment and unit cash costs.
Through mid-April the smelter has operated at slightly above design capacity.
Due to limited anode availability from the smelter turnaround and defective
insulators on cathode blanks, refinery production in the first quarter of 1995
was about 50 percent of design capacity. The insulators are being changed,
production is increasing, and all insulators will be replaced by the end of
June.
Molybdenum operations earned $50 million for the first quarter of 1995 compared
to $3 million for the comparable quarter in 1994. Production increased to 20
million pounds from 14 million pounds, and produced sales increased to 22
million pounds from 17 million pounds for the first quarters of 1995 and 1994,
respectively. Additionally, the 1995 first quarter realizations averaged $7.91
per pound compared to $3.79 per pound during the first quarter of 1994. Since
most of Cyprus Amax's molybdenum products are generally priced one quarter
ahead, the 1995 second quarter molybdenum realizations are expected to be
significantly higher than the first quarter.
During the first quarter of 1995, Cyprus Amax announced the reopening of the
Climax molybdenum mine near Leadville, Colorado, in response to increased
customer demand for molybdenum products. Mining and milling operations began in
April 1995. With the increase in production from the Climax mine, Cyprus Amax
expects that 1995 molybdenum production will be about 75 to 80 million pounds.
Strong molybdenum consumption in Europe and the U.S. approached record levels in
the first quarter of 1995, and strong molybdenum demand is expected to continue
during 1995. All end-use applications of molybdenum -- stainless steel, alloy,
and chemicals -- showed growth.
<TABLE>
<CAPTION>
Coal
Three Months Ended
March 31,
------------------
Selected Results (In millions) 1995 1994
------- -------
<S> <C> <C>
Revenue $ 302 $ 265
Segment Operating Income $ 31 $ 25
</TABLE>
Coal reported first quarter earnings of $31 million compared to 1994 first
quarter earnings of $25 million. The increase in earnings primarily was due to
the absence of adverse weather in the East during the first quarter of 1994
which had a negative effect on earnings of approximately $7 million and higher
1995
-12-
<PAGE>
shipments from the Powder River Basin with a higher proportion under long-term
contracts. Partially offsetting these increases were a weaker 1995 first quarter
in the Midwest due to reduced shipments at Minnehaha, and reduced production and
higher unit costs at Delta due to unscheduled dragline repairs and unfavorable
stripping ratios.
<TABLE>
<CAPTION>
Three Months Ended
Selected Operating Data March 31,
------------------
1995 1994
------ ------
<S> <C> <C>
Sales Volume - Millions of Tons
- -------------------------------
Eastern Mines 6.6 5.7
Western Mines - Powder River Basin 9.0 8.6
Western Mines - Other 2.7 2.5
------- -------
Total Sales 18.3 16.8
------- -------
Oakbridge Equity Share 1.5 1.2
Average Realization - $/Ton $ 16.11 $ 15.48
Domestic Average Contract Price - $/Ton $ 17.20 $ 18.32
Domestic Average Spot Price - $/Ton $ 12.28 $ 10.51
Oakbridge Contract Price - $/Ton $ 24.95 $ 23.94
Oakbridge Spot Price - $/Ton $ 20.34 $ 19.22
Average Cost of Sales - $/Ton $ 14.49 $ 14.17
Average Unit Costs - $/Ton $ 14.13 $ 13.74
Clean Production - Millions of Tons
- -----------------------------------
Pennsylvania 2.1 1.8
Kentucky 1.2 1.0
West Virginia 1.6 1.3
Midwest 2.2 2.3
Wyoming - Powder River 9.0 8.6
Colorado 2.5 2.3
Utah 0.6 0.9
------- -------
Total Production 19.2 18.2
------- -------
Oakbridge Equity Share 1.4 1.0
</TABLE>
The 1995 first quarter reflected nearly a 25 percent increased profit margin
with an average realization of $16.11 per ton, average cost of sales of $14.49
per ton and a profit margin of $1.62 per ton. Cash margins were $4.00 per ton
in the quarter. This compares to an average realization of $15.48, an average
cost of sales of $14.17, yielding a profit margin of $1.31 per ton for the first
quarter 1994. Since there was a smaller proportion of tonnage from the Powder
River Basin in the first quarter of 1995, average realizations and cost of sales
are higher.
Both coal production and sales of 21 million tons and 20 million tons,
respectively, in the first quarter of 1995 were 2 million tons higher than in
1994. The severe winter weather in the eastern U.S. in the first quarter of
1994 disrupted operations and shipments in the East and Midwest. Productivity
improved three percent in the first quarter 1995 over the 1994 comparable
quarter. Additionally, Cyprus Amax coal mines set five monthly production
records during the quarter. The Company expects that 1995 production will be
approximately 84 million tons compared to 80 million tons in 1994, including
Cyprus Amax's share of Oakbridge's production. Over 95 percent of 1995 domestic
production is committed for sale, with 75 percent to be shipped under contracts
of one year or longer.
-13-
<PAGE>
Cyprus Amax expects the coal market to remain strong in 1995 with the demand
returning to normal levels in the second half of 1995. First quarter demand and
shipments were reduced by the mild winter weather. Utility inventories have
recovered to a large degree due to the mild weather and improved transportation,
however a strong demand for compliance Western coals continues. The Western
U.S. rail systems continue to increase consistency and improve performance. The
Eastern U.S. continues to experience barge shortages, increasing barge rates and
stable rail service.
During the quarter, Coal announced the reorganization of the Midwest operations
whereby the administrative functions currently being performed in the
Evansville, Indiana, office will be shifted to locations more central to the
mines in Indiana and Illinois. The Evansville office will be closed in mid-1995
and a $1 million reorganization charge was recorded during the quarter.
Other Minerals
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
Selected Data (In millions) 1995 1994
------ ------
<S> <C> <C>
Segment Operating Income (Loss) $ (1) $ (4)
==== ====
Lithium $ 6 $ 4
Iron Ore - 1
Businesses Sold/Non-Operating (2) (3)
Exploration (5) (6)
---- ----
Total $ (1) $ (4)
==== ====
Lithium
Sales Volumes - Millions of Lbs. Carbonate Equiv. 8.5 8.5
Iron Ore
Sales Volumes - Thousands of Long Tons - 405
Gold
Sales Volumes - Thousands of Ounces
(including 42% equity share of Amax Gold) 24 23
Gold Price - $/Ounce 406 401
</TABLE>
Other Minerals, which includes Lithium, Exploration, and Businesses Sold/Non-
Operating, had a combined loss for the first quarter of 1995 of $1 million
compared to a loss of $4 million in 1994. Lithium earned $6 million, $2 million
more than 1994 due primarily to the absence of the reorganization charge
recorded in the first quarter 1994. Exploration expense of $5 million was $1
million lower than in 1994, primarily due to the timing of expenditures in 1995.
Corporate
Corporate expense of $14 million for the first quarter was $3 million higher
than in 1994 due to an increase in incentive compensation reflecting higher
stock prices.
Interest, Equity, and Other expense of $22 million for the 1995 first quarter
was comparable to the 1994 quarter. Net interest expense of $18 million for
this first quarter of 1995 was $5 million lower than the same period in 1994
primarily due to capitalized interest for the El Abra development. Cyprus
Amax's equity share (approximately 43 percent) in Oakbridge's earnings was a
loss of $1 million for 1995 compared to earnings of $3 million in the first
quarter 1994 which included an unrealized currency exchange gain of $2 million.
Cyprus Amax's equity share of Amax Gold Inc. ("AGI" or "Amax Gold") losses was
$3 million, reflecting the Company's 42 percent ownership.
-14-
<PAGE>
Discontinued Operations included income from Oil & Gas for the first quarter of
1994 of $7 million after-tax and a $2 million after-tax gain on the sale of
Cyprus-owned oil and gas assets in March 1994.
Liquidity and Capital Resources
At March 31, 1995, the Company continued to have a strong financial condition
with a ratio of long-term debt to total capitalization of 36.4 percent and a
ratio of current assets to current liabilities of 1.6 to 1.0. At December 31,
1994, the comparable ratios were 37.4 percent and 1.7 to 1.0, respectively. The
decrease in the debt to total capitalization ratio resulted from the payment of
$12 million of debt. Cyprus Amax's non-cash working capital decreased $47
million from a positive $284 million at December 31, 1994, to a positive $237
million at March 31, 1995, primarily due to an increase in current taxes payable
of $22 million essentially due to increased earnings and increased accrued
interest payable of $13 million.
The Company's cash balance decreased from $139 million at year-end to $131
million at March 31 due primarily to capital expenditures of $102 million and
advances to El Abra and Amax Gold of $58 million, offset by cash provided by
continuing operations of $186 million.
Capital expenditures, excluding capitalized interest, were $102 million for the
first quarter. Coal expenditures of $23 million were primarily for sustaining
and replacement capital. Copper expenditures of $78 million included $34
million for the El Abra project and $10 million for the Cerro Verde project.
Total capital spending for 1995 is projected to be approximately $775 million
with over 75 percent and 20 percent spent on Copper and Coal projects,
respectively. For 1995 the Company's share of El Abra capital spending will
approximate $320 million, which includes $30 million of capitalized interest.
Development of the mine will require a total investment of approximately $1
billion. Funding of the billion dollar investment to develop the oxide reserves
will include approximately $300 million of subordinated loans from Cyprus Amax
to the shareholders and approximately $700 million of limited recourse debt
financing, which will be arranged by Cyprus Amax. The Company expects to
complete project financing for the El Abra project in 1995. Over the remainder
of 1995, $70 million is expected to be expended for Cerro Verde, 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.
For the full year 1995, Cyprus Amax expects to spend approximately $120 million
for reclamation, remediation, and environmental compliance.
In March 1995, Cyprus Amax signed a Revolving Credit Agreement with AGI whereby
the Company will provide AGI with an additional $80 million in revolving credits
which may be repaid with the issuance of AGI Convertible Preferred Stock. Both
companies have conversion rights that permit conversion of the outstanding loan
balance into Amax Gold Common Stock, with Cyprus Amax's conversion price at
$5.362 per share and Amax Gold's conversion price at $4.196 per share. This new
revolving credit agreement is subject to approval by the shareholders of Amax
Gold. In March 1995, AGI arranged to borrow up to $40 million under the $80
million line of credit during the period prior to receipt of shareholder
approval. Under this temporary arrangement, the equity features of the credit
line are suspended and the loan is secured by a 20 percent interest in AGI's
Fort Knox project. If shareholder approval is not received, AGI will have until
October 15, 1995, to repay the loan. As of March 31, 1995, AGI had borrowed $5
million under this temporary arrangement. Additionally, during 1994 Cyprus Amax
entered into an agreement whereby it would provide AGI with a $100 million
convertible line of credit with terms similar to the Revolving Credit Agreement
above with Cyprus Amax's conversion price at $8.265 per share and Amax Gold's
conversion price at a maximum of $8.265 per share and a minimum price of $5.854
per share. Potential conversion of the $180 million lines of credit into AGI
common stock would increase Cyprus Amax's ownership of AGI's outstanding shares
to approximately 57 percent.
During 1995, Cyprus Amax expects to be able to provide sufficient funds for
general corporate purposes, including capital expenditures, acquisitions, and
financial restructuring through internally generated funds and existing or new
borrowings, including project financing for El Abra.
-15-
<PAGE>
Cyprus Amax paid regular dividends of 20 cents per share on its Common Stock and
$1.00 per preferred share during the quarter. At March 31, 1995, 92,808,864
shares of the Company's Common Stock were outstanding.
-16-
<PAGE>
PART II--OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings
- --------------------------
See Note 4 to Consolidated Financial Statements.
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
- ------------------------------------------------------------
(a) The annual meeting of shareholders was held on May 3, 1995.
(b) This information is omitted pursuant to instruction 3.
(c) Set forth below are the votes cast for the election of Directors:
<TABLE>
<CAPTION>
For Withheld
---------- ---------
<S> <C> <C>
William C. Bousquette 72,461,979 1,170,429
Thomas V. Falkie 72,472,291 1,160,117
Ann Maynard Gray 72,430,143 1,202,265
Theodore M. Solso 72,438,909 1,193,499
James A. Todd, Jr. 72,446,989 1,185,419
</TABLE>
The shareholders also voted to approve the Non-Employee Directors' Deferred
Compensation Plan. Votes cast in favor were 69,360,572 representing almost 75
percent of the shares entitled to vote, against were 2,967,315, abstaining were
1,303,169. The shareholders voted to approve the appointment of Price
Waterhouse LLP as Independent Accountants. Votes cast in favor were 72,653,115
representing almost 78 percent of the shares entitled to vote, against were
702,718, abstaining were 276,575. Additionally, the shareholders voted down the
shareholder proposal relating to elimination of a classified board. Votes cast
in favor were 28,360,017 representing almost 31 percent of the shares entitled
to vote, against were 31,704,538, abstaining were 3,852,543.
(d) Not applicable.
Item 5. Other Information
- --------------------------
None.
-17-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) The following Exhibit is filed as part of this Quarterly Report on Form
10-Q:
<TABLE>
<CAPTION>
Exhibit
Number Document
- -------------- -----------------------------------------------
<S> <C>
(11) Statement re computation of per share earnings.
(15) Letter re unaudited financial information.
(27) Financial data schedule.
</TABLE>
(b) No Current Report on Form 8-K was filed during the quarter ended March 31,
1995.
-18-
<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: May 9, 1995 /s/ John Taraba
---------------- ----------------------------
John Taraba
Vice President and
Controller
-19-
<PAGE>
EXHIBIT 11
CYPRUS AMAX MINERALS COMPANY & SUBSIDIARIES
-------------
Computation of Per Share Earnings
(In millions except per share data)
<TABLE>
<CAPTION>
Three Months
Ended March 31
---------------
1995 1994
------ ------
<S> <C> <C>
Net Income $ 97 $ 28
Preferred Stock Dividends (5) (5)
------ ------
Income Applicable to Common Shares $ 92 $ 23
====== ======
Primary:
Average Common Shares Outstanding 92.8 92.1
====== ======
Fully Diluted:
Average Common Shares Outstanding 92.8 92.1
Common Stock Equivalents - Options/(1)/ .3 .4
Conversion of Series B Preferred Stock 9.6 9.6
------ ------
Fully Diluted Average Common Shares Outstanding 102.7 102.1
====== ======
Earnings per Common Share $ 1.00 $ .25
Fully Diluted Earnings per Share $ .94 $ .27
</TABLE>
/(1)/ Common stock equivalents are not included in primary earnings per share
because they are less than three percent dilutive.
<PAGE>
EXHIBIT 15
May 9, 1995
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, DC 20459
We are aware that Cyprus Amax Minerals Company has included our report dated May
9, 1995, (issued pursuant to the provisions of Statements 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 March 31,
1995, which is incorporated by reference 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-8 (No. 33-51011) with respect to the 1988
Amended and Restated Stock Option Plan of Cyprus Amax Minerals Company.
(e) Registration Statement on Form S-3 (No. 33-36413) with respect to Cyprus
Amax Minerals Company Savings Plan and Trust.
(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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 131
<SECURITIES> 0
<RECEIVABLES> 312
<ALLOWANCES> 5
<INVENTORY> 442
<CURRENT-ASSETS> 1,024
<PP&E> 5,492
<DEPRECIATION> 1,529
<TOTAL-ASSETS> 5,477
<CURRENT-LIABILITIES> 656
<BONDS> 1,375
<COMMON> 1
0
5
<OTHER-SE> 2,393
<TOTAL-LIABILITY-AND-EQUITY> 5,477
<SALES> 776
<TOTAL-REVENUES> 784
<CGS> 608
<TOTAL-COSTS> 635
<OTHER-EXPENSES> 5
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12<F1>
<INCOME-PRETAX> 122
<INCOME-TAX> 25
<INCOME-CONTINUING> 97
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 97
<EPS-PRIMARY> 1.00
<EPS-DILUTED> .94
<FN>
<F1>Net of interest income, $4 million, and capitalized interest, $6 million.
</FN>
</TABLE>
