SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1993
Commission File Number: 1-9164
FREEPORT-MCMORAN RESOURCE PARTNERS, LIMITED PARTNERSHIP
Organized in Delaware 72-1067072
(IRS Employer Identification No.)
1615 Poydras Street, New Orleans, Louisiana 70112
Registrant's telephone number, including area code:
(504) 582-4000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes_X __No___
The registrant hereby amends its Form 10-Q for the quarter ended June 30,
1993, as set forth in the pages attached hereto and as discussed below.
After discussions with the staff of the Securities and Exchange
Commission (SEC), Freeport-McMoRan Resource Partners, Limited Partnership
(FRP) reclassified certain expenses and accruals previously recorded in 1993
as restructuring and valuation of assets. In response to inquiries, FRP
advised the SEC staff that $3.2 million originally reported as restructuring
and valuation of assets represented the cumulative effect of changes in
accounting principle resulting from the adoption of the new accounting
policies that FRP considered preferable. FRP also informed the SEC staff of
the components of other charges included in the amount originally reported as
restructuring and valuation of assets. FRP concluded that the
reclassification and the related supplemental disclosures more accurately
reflect the nature of these charges to 1993 net income in accordance with
generally accepted accounting principles. These reclassifications had no
impact on net income or net income per share for the six-month period ended
June 30, 1993.
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
TABLE OF CONTENTS
Page
Part I. Financial Information
Financial Statements:
Condensed Balance Sheets............................ 4
Statements of Operations............................ 5
Statements of Cash Flow............................. 6
Notes to Financial Statements....................... 7
Remarks................................................. 8
Management's Discussion and Analysis
of Financial Condition and
Results of Operations............................... 9
Signature
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS (Unaudited)
June 30, December 31,
1993 1992
---------- ------------
(in thousands)
ASSETS
Current assets:
Cash and short-term investments............. $ 1,079 $ 7,099
Accounts receivable......................... 56,614 62,574
Inventories................................. 162,675 170,276
Prepaid expenses and other.................. 1,127 22,214
---------- ----------
Total current assets...................... 221,495 262,163
Property, plant and equipment, net.......... 1,062,563 1,074,332
Investment in geothermal assets............. 10,450 114,374
Other assets................................ 81,513 42,638
---------- ----------
Total assets................................ $1,376,021 $1,493,507
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued liabilities.... $ 119,791 $ 99,453
Long-term debt due within one year.......... 1,575 1,575
Due to FTX and affiliates................... 7,035 2,913
---------- ----------
Total current liabilities................. 128,401 103,941
Long-term debt, less current portion........ 314,395 117,213
Long-term debt due to FTX................... 105,400 239,350
Reclamation and mine shutdown reserves...... 68,430 55,152
Accrued postretirement benefits and
other liabilities......................... 124,522 118,156
Partners' capital........................... 634,873 859,695
---------- ----------
Total liabilities and partners' capital..... $1,376,021 $1,493,507
========== ==========
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ---------------------
1993 1992 1993 1992
-------- -------- --------- --------
(in thousands, except per unit amounts)
Revenues...................... $201,684 $244,518 $ 364,107 $473,054
Cost of sales:
Production and delivery....... 171,094 174,188 311,099 344,524
Depreciation and amortization. 33,811 33,070 54,197 60,918
-------- -------- --------- --------
Total cost of sales......... 204,905 207,258 365,296 405,442
Exploration expenses.......... 958 1,253 1,662 2,265
Provision for restructuring
charges..................... 30,749 - 33,947 -
Loss on valuation and sale of
assets, net................. 26,631 - 66,631 -
General and administrative
expenses.................... 23,747 20,770 41,404 39,802
-------- -------- --------- --------
Total costs and expenses.... 286,990 229,281 508,940 447,509
-------- -------- --------- --------
Operating income (loss)....... (85,306) 15,327 (144,833) 25,545
Interest expense, net......... - - - (869)
Other income, net............. 5,690 2,436 4,300 622
-------- -------- --------- --------
Income (loss) before changes
in accounting principle..... (79,616) 17,673 (140,533) 25,298
Cumulative effect of changes
in accounting principle..... - - (23,700) -
-------- -------- --------- --------
Net income (loss)............. $(79,616) $ 17,673 $(164,233) $ 25,298
======== ======== ========= ========
Net income (loss) per unit:
Income (loss) before changes
in accounting principle... $(.77) $.17 $(1.35) $.26
Cumulative effect of changes
in accounting principle... - - (.23) -
----- ---- ------ ----
$(.77) $.17 $(1.58) $.26
===== ==== ====== ====
Average units outstanding..... 103,698 103,698 103,698 99,174
======= ======= ======= ======
Distributions per publicly
held unit................... $.60 $.60 $1.20 $1.20
==== ==== ===== =====
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOW (Unaudited)
Six Months Ended
June 30,
-----------------------
1993 1992
--------- --------
(in thousands)
Cash flow from operating activities:
Net income (loss)................................ $(164,233) $ 25,298
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Cumulative effect of changes in
accounting principle......................... 23,700 -
Depreciation and amortization.................. 54,197 60,918
Provision for restructuring charges,
net of payments.............................. 28,371 -
Other noncash charges to net loss.............. 7,150 -
Loss on valuation and sale of assets, net...... 66,631 -
(Increase) decrease in working capital, net
of effect of acquisitions and dispositions:
Accounts receivable.......................... 6,114 16,651
Inventories.................................. 7,745 11,912
Prepaid expenses and other................... 606 (2,318)
Accounts payable and accrued liabilities..... (10,009) (29,020)
Reclamation and mine shutdown expenditures..... (7,387) (10,649)
Other.......................................... 2,500 3,444
--------- --------
Net cash provided by operating activities........ 15,385 76,236
--------- --------
Cash flow from investing activities:
Capital expenditures:
Main Pass...................................... (36,542) (82,300)
Agricultural minerals.......................... (10,152) (59,936)
Proceeds from sale of geothermal assets.......... 23,000 -
Other............................................ (354) (5,445)
--------- --------
Net cash used in investing activities............ (24,048) (147,681)
--------- --------
Cash flow from financing activities:
Distributions to partners........................ (60,589) (82,292)
Proceeds from debt............................... 216,722 699,709
Repayment of debt................................ (153,490) (977,430)
Proceeds from sale of partnership units.......... - 430,534
--------- --------
Net cash provided by financing activities........ 2,643 70,521
--------- --------
Net decrease in cash and short-term
investments.................................... (6,020) (924)
Cash and short-term investments at beginning
of year........................................ 7,099 3,854
--------- --------
Cash and short-term investments at end of
period......................................... $ 1,079 $ 2,930
========= ========
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. DISTRIBUTIONS
On July 20, 1993, Freeport-McMoRan Resource Partners, Limited Partnership
(FRP) declared a second quarter distribution of 60 cents per publicly held
unit, payable August 14, 1993. To enable FRP to make the distribution,
Freeport-McMoRan Inc. (FTX), the parent company of FRP, will defer receipt of
$31.9 million in distributions (60 cents for each FRP unit that it owns),
bringing FTX's total deferral to $181.6 million. Deferrals by FTX are
recoverable from a portion of any future quarterly distributable cash in
excess of 60 cents per unit.
2. RESTRUCTURING AND VALUATION CHARGES
RESTRUCTURING CHARGES. FRP recorded second-quarter 1993 expense of $30.7
million for the restructuring of FTX's administrative organization (including
personnel related costs, the cost to downsize its computing and management
information systems (MIS) structure, and a write-off of excess facilities and
other miscellaneous assets) due primarily to the formation of the phosphate
fertilizer joint venture with IMC Fertilizer, Inc. consummated on July 1,
1993. During the first quarter of 1993, FRP recorded expense of $3.2 million
related primarily to the outsourcing of FTX's research and engineering,
environmental, and safety functions. See Management's Discussion and Analysis
of Financial Condition and Results of Operations for information about a
reclassification of restructuring charges from those previously reported
resulting from views expressed by the Securities and Exchange Commission
staff.
ASSET SALES/RECOVERABILITY. FRP recorded a second-quarter 1993 charge to
expense of $26.6 million related primarily to the recoverability of its
investment in certain sulphur related assets, including the Caminada sulphur
mine. Persistent weak market conditions for sulphur resulted in an estimate
by management that book values of these assets will not be recovered in future
operations. In April 1993, FRP sold its remaining interests in producing
geothermal properties for $63.5 million, consisting of $23 million in cash and
interest-bearing notes totaling $40.5 million (included in other assets). FRP
also determined that the book carrying value of its undeveloped geothermal
properties should be reduced to provide for impairment of capitalized costs.
A $40 million first-quarter 1993 charge to expense was recognized, $31 million
for producing and $9 million for undeveloped geothermal properties.
3. INTEREST COSTS
Interest expense excludes capitalized interest of $5.7 million and $4.6
million in the second quarter of 1993 and 1992, respectively, and $11.1
million and $9.7 million in the first six months of 1993 and 1992,
respectively.
4. RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the first six months of 1993
resulted in a shortfall of $151.6 million compared with a ratio of 2.4 to 1
for the 1992 period. For this calculation, earnings are income from
continuing operations (including the restructuring and valuation charges
discussed above) before fixed charges. Fixed charges are interest and that
portion of rent deemed representative of interest.
5. CHANGES IN ACCOUNTING PRINCIPLE
Effective January 1, 1993, FRP adopted the following changes to accounting
policies:
Periodic Scheduled Maintenance Costs - Costs related to periodic scheduled
maintenance (turnarounds) were previously capitalized when incurred and
amortized generally over six months to two years. Effective January 1, 1993,
the method of accounting was changed to expense these costs when incurred,
which conforms to the accounting policy of IMC-Agrico Company.
Deferred Charges - The accounting for deferred charges was changed to provide
for deferral of only those costs that directly relate to the acquisition,
construction, and development of assets and to the issuance of debt and
related instruments. Previously, certain other costs that benefitted future
periods were amortized over the periods benefitted.
Management Information Systems - Costs of MIS equipment and software that have
a material impact on periodic measurement of net income are capitalized and
amortized over their estimated productive lives. Other MIS costs, including
equipment and purchased software that involve relatively immaterial amounts
(currently individual expenditures of less than $.5 million) and short
estimated productive lives (currently less than three years) are charged to
expense when incurred. Previously, most expenditures for MIS equipment and
purchased software were capitalized. The accounting for MIS costs was changed
to recognize the rapid rate of technology change in MIS which results in short
productive lives of equipment and software and a need for continuing
investments.
The changes in accounting policy were adopted to improve the measurement of
operating results by reporting cash expenditures as expenses when incurred
unless they are directly related to long-lived asset additions. In addition,
the administrative costs of accounting for assets will be reduced by not
capitalizing and amortizing relatively insignificant expenditures that do not
have a material effect on measuring periodic net income.
_____________________
Remarks
The information furnished herein should be read in conjunction with FRP's
financial statements contained in its 1992 Annual Report to unitholders and
incorporated by reference in its Annual Report on Form 10-K.
The information furnished herein reflects all adjustments which are, in the
opinion of management, necessary for a fair statement of the results for the
periods. All such adjustments are, in the opinion of management, of a normal
recurring nature.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
IMC-AGRICO COMPANY
Freeport-McMoRan Resource Partners, Limited Partnership (FRP) and IMC
Fertilizer Inc. (IMC) through subsidiaries formed a joint venture (IMC-Agrico
Company), effective July 1, 1993, which includes their respective phosphate
fertilizer businesses, including phosphate rock and uranium. IMC-Agrico
Company is governed by a policy committee which has equal representation from
each company and is managed by IMC through a subsidiary. Combined annual
savings of at least $95 million in production, marketing, and general and
administrative costs are expected to result from this transaction, the full
effect beginning with the second year of operations. As discussed below,
significant restructuring charges were recorded in connection with this
transaction.
As a result of the formation of the joint venture, FRP is engaged in the
phosphate rock mining, fertilizer production and uranium oxide extraction
business only through IMC-Agrico Company. FRP will continue to operate its
sulphur and oil businesses. FRP's "Current Interest", reflecting cash
distributions from ongoing operations, initially is 58.6% and declines in
annual increments ultimately to 40.6% for the fiscal year ending June 30, 1998
and remains constant thereafter. FRP's "Capital Interest", reflecting the
purchase or sale of long-term assets or capital contributions to IMC-Agrico
Company, if required, is 46.5% initially and declines in annual increments
ultimately to 40.6% for the fiscal year ending June 30, 1998 and remains
constant thereafter. The sharing ratios were based on the projected
contributions of FRP and IMC to the cash flow of the joint venture and on an
equal sharing of the anticipated savings.
SECOND-QUARTER AND SIX-MONTHS 1993 RESULTS OF OPERATIONS COMPARED WITH SECOND-
QUARTER AND SIX-MONTHS 1992
After discussions with the staff of the Securities and Exchange Commission
(SEC), FRP reclassified certain expenses and accruals previously recorded in
1993 as restructuring and valuation of assets. In response to inquiries, FRP
advised the SEC staff that $3.2 million originally reported as restructuring
and valuation of assets represented the cumulative effect of changes in
accounting principle resulting from the adoption of the new accounting
policies that FRP considered preferable, as described in Note 5 to the
financial statements. FRP also informed the SEC staff of the components of
other charges included in the amount originally reported as restructuring and
valuation of assets. FRP concluded that the reclassification and the related
supplemental disclosures more accurately reflect the nature of these charges
to 1993 net income in accordance with generally accepted accounting
principles. These reclassifications had no impact on net income or net income
per share for the six-month period ended June 30, 1993.
FRP reported a second-quarter 1993 net loss of $79.6 million ($.77 per unit)
compared with net income of $17.7 million ($.17 per unit) for the 1992 period.
For the six months ended June 30, 1993, before the cumulative effect of the
changes in accounting principle (Note 5) of $23.7 million ($.23 per unit), FRP
reported a net loss of $140.5 million ($1.35 per unit) compared with net
income of $25.3 million ($.26 per unit) for the year-ago period. The second-
quarter and six-month periods of 1993 were negatively impacted by charges
totaling $82.1 million ($.79 per unit) and $125.3 million ($1.21 per unit),
respectively, related to administrative restructuring costs caused primarily
by formation of IMC-Agrico Company, the sale of producing geothermal assets,
and the recoverability of FRP's investment in certain sulphur related assets,
principally the Caminada sulphur mine (Note 2) and adjustments to general and
administrative expenses and production and delivery costs discussed below.
Also contributing to FRP's lower net income for 1993 was reduced earnings from
its agricultural minerals operations.
Revenues for the second-quarter and six-month periods of 1993 were 18% and
23% lower, respectively, than in the year-ago periods reflecting decreases in
phosphate fertilizer, sulphur and oil revenues, due primarily to reduced sales
volumes for these products and lower phosphate fertilizer and sulphur
realizations. Production and delivery costs were higher as a percentage of
revenues than in the 1992 periods due primarily to lower product realizations.
Depreciation and amortization expense, excluding certain nonrecurring charges,
declined primarily because of reduced oil sales volumes. The reduction in
general and administrative expenses, excluding certain nonrecurring charges,
reflects the initial benefits from the restructuring during the first quarter
of 1993. As a result of the additional restructuring during the second
quarter of 1993, substantial reductions in future general and administrative
expenses are anticipated. Interest costs of $5.7 million and $4.6 million for
the second quarter of 1993 and 1992, respectively, associated with Main Pass
sulphur development were capitalized.
RESTRUCTURING ACTIVITIES. During the second quarter of 1993, Freeport-McMoRan
Inc. (FTX), the parent company of FRP, undertook a restructuring of its
administrative organization. This restructuring represented a major step by
FTX to lower its costs of operating and administering its businesses in
response to weak market prices of the commodities produced by its operating
units. As part of this restructuring, FTX significantly reduced the number of
employees engaged in administrative functions, changed its management
information system (MIS) environment to achieve efficiencies, reduced its
needs for office space, outsourced a number of administrative functions, and
implemented other actions to lower costs. As a result of this restructuring
process, which included the formation of IMC-Agrico Company, the level of
FRP's administrative cost has been reduced substantially over what it would
have been otherwise, which benefit will continue in the future. However, the
restructuring process entailed incurring certain one-time costs by FTX, a
portion of which were allocated to FRP pursuant to its management services
agreement with FTX.
FRP's restructuring costs totaling $33.9 million, including $22.1 million
allocated from FTX based on historical allocations, consisting of the
following: $15.5 million for personnel related costs; $7.0 million relating
to excess office space and furniture and fixtures resulting from the staff
reduction; $1.8 million relating to the cost to downsize its computing and MIS
structure; $8.8 million related to costs directly associated with the
formation of IMC-Agrico Company; and $.8 million of deferred charges relating
to FRP's credit facility which was substantially revised in June 1993.
In connection with the restructuring project, FRP changed its accounting
systems and undertook a detailed review of its accounting records and
valuation of various assets and liabilities. As a result of this process, FRP
recorded charges totaling $24.9 million, comprised of the following: (a) $10.0
million of production and delivery costs consisting of $6.3 million for
revised estimates of environmental liabilities and $3.7 million primarily for
adjustments in converting accounting systems, (b) $7.6 million of depreciation
and amortization costs consisting of $6.5 million for estimated future
abandonment and reclamation costs and $1.1 million for the write-down of
miscellaneous properties, and (c) $7.3 million of general and administrative
expenses consisting of $4.0 million to downsize FRP's computing and MIS
structure and $3.3 million for the write-off of miscellaneous assets.
Agricultural Minerals Operations
FRP's agricultural minerals segment, which includes its fertilizer and sulphur
businesses, reported second-quarter 1993 losses of $22.5 million on revenues
of $186.8 million compared with $15.5 million on revenues of $220 million for
the 1992 period. For the first six months of 1993, a loss of $37.4 million
was generated on revenues of $342.5 million compared with earnings of $28.4
million on revenues of $434.8 million for the year-ago period. Earnings
during 1993 reflect extremely low market prices for phosphate fertilizers and
sulphur.
FRP's second-quarter 1993 phosphate fertilizer production was 8% greater
than in the year-ago period. Unit production costs, excluding the charges
related to the restructuring project discussed above, averaged 7% less than
during the 1992 period (6% less than the prior quarter) due to reduced raw
material costs for sulphur, lower phosphate rock mining expenses, and previous
cost efficiency programs, partially offset by higher natural gas costs.
Phosphate fertilizer production volumes and unit cost for the six months ended
June 30, 1993 were negatively impacted by FRP temporarily halting production
or taking earlier than planned maintenance turnarounds at its phosphate
fertilizer plants during the first quarter of 1993 due to weak market prices
and for inventory control purposes. FRP's current quarter sales volumes were
13% and 47% higher than during the 1992 period and previous quarter,
respectively. However, the average realization fell 21% and 9% compared to
the year-ago period and previous quarter, respectively, reflecting the near
20-year low in market prices. Domestic demand increases were offset by the
worst export market volumes since 1986.
The outlook for the remainder of 1993 is for lower industry volumes and a
possible gradual improvement in prices. Major international buyers, primarily
China, have yet to commit for second half phosphate fertilizer needs.
Meanwhile, torrential rains and widespread flooding in the upper Mississippi
River valley continue to disrupt normal domestic traffic for fertilizers,
dimming the prospects for an immediate turnaround in industry conditions. To
compensate for soft demand, IMC-Agrico Company and other industry participants
have announced various plant shutdowns and curtailments to avoid building
inventories.
Second Quarter Six Months
-------------------- -----------------------
1993 1992 1993 1992
Phosphate fertilizers --------- --------- --------- ---------
(short tons)a
Production............ 1,543,400 1,427,300 2,718,500 2,913,700
Internal consumption.. 472,100 443,700 837,800 900,800
Sales................. 1,208,400 1,073,700 2,029,000 2,119,800
Average realized
price b............. $181.76 $229.75 $188.75 $231.07
Phosphate rock
(short tons)
Production............ 2,779,400 2,973,800 5,449,200 5,894,800
Internal consumption.. 1,957,900 1,760,800 3,417,600 3,582,700
Sales................. 807,700 862,600 1,682,200 1,759,700
Sulphur (long tons)
Production............ 325,400 219,500 595,700 464,800
Purchases............. 242,300 292,900 542,700 601,200
Internal consumption.. 417,300 375,300 731,200 783,100
Sales c 124,900 185,200 248,200 358,600
a. Includes phosphoric acid, diammonium phosphate (DAP), monoammonium
phosphate (MAP), and granular triple superphosphate.
b. Average realized price is per nutrient ton.
c. Excludes capitalized Main Pass start-up sales.
Second-quarter 1993 sulphur production rose 48% compared with the 1992
period, with the Caminada and Main Pass mines experiencing increased
production rates. Caminada's unit production cost declined 29% from the year-
ago quarter due to continued high production rates and cost containment
efforts. However, because of the continuing decline in the market price of
sulphur, FRP recorded a noncash charge to earnings (Note 2) for the excess
capitalized cost over expected realization of its non-Main Pass sulphur
assets, primarily the Caminada sulphur mine. Sales volumes for the second
quarter of 1993 declined 33%, primarily because of reduced purchases of
sulphur by phosphate fertilizer producers.
In the sulphur market, prices remain depressed. Reduced global demand
has forced production cutbacks worldwide. However, a rebound in price is not
expected until demand improves.
At Main Pass, FRP continues to concurrently produce sulphur and oil from
a common reservoir. The rate of progress in heating the orebody to the extent
necessary to achieve planned sulphur production of two million tons per year
(approximately 5,500 tons per day) continues to be adversely affected by
actions taken to maximize oil production. Expectations are for production to
continue to increase gradually; however, the timing of achieving full
production cannot be predicted. With sulphur prices at their lowest level in
almost 20 years (currently less than $70 per ton in Tampa, Florida), FRP is
maximizing oil production rates. As a result of Main Pass sulphur production
now averaging nearly 1500 tons per day, these activities became operational
for accounting purposes beginning July 1, 1993. Recognizing Main Pass
operations in income and discontinuing associated capitalized interest will
not affect cash flow, but will adversely affect second-half sulphur reported
operating results. Main Pass sulphur operations will have a more positive
effect on FRP's future reported operating results as production increases to
targeted rates of two million tons per year and if sulphur prices improve from
their current low levels. As of June 30, 1993, FRP's investment in its Main
Pass sulphur operation totaled approximately $475 million. The recoverability
of this investment will depend on production rate increases, achieving related
cost efficiencies, and realizing (over the approximately 30 year life of the
mine) somewhat higher than the current depressed sulphur price.
Phosphate rock production and sales volumes for the second quarter of
1993 declined 7% and 6%, respectively, from the 1992 period. For the six
months ended June 30, 1993, FRP's phosphate rock production and sales volumes
were 8% and 4% lower, respectively, than in the year-ago period.
Oil Operation
FRP's sole oil operation, Main Pass, generated second-quarter 1993 earnings of
$.9 million on sales of .9 million barrels net to FRP at an average
realization of $16.01 per barrel compared with $2.6 million on sales of 1.5
million barrels at an average realization of $16.63 per barrel in the 1992
period. Operations for the first six months of 1993 generated a net loss of
$.8 million on sales of 1.4 million barrels at an average realization of
$15.86 per barrel compared with a net loss of $.6 million on sales of 2.5
million barrels at an average realization of $15.19 per barrel in the year-ago
period. Development drilling was completed in mid-April, which raised oil
production from approximately 10,000 per day during the first quarter of 1993
to a current rate of approximately 23,000 barrels per day. FRP estimates that
its share of 1993 oil production will approximate 3 million barrels.
Subsequent to June 30, 1993, the price being received for Main Pass oil
declined to less than $14 per barrel. The ultimate recovery of this asset is
dependent upon future prices realized, costs incurred, and reserves produced.
Low future prices, increases in costs, or negative reserve revisions could
result in a charge to future earnings.
CAPITAL RESOURCES AND LIQUIDITY
Cash flow provided by operating activities during the first six months of 1993
was $15.4 million compared with $76.2 million during the 1992 period, due
primarily to lower income from operations. Net cash used in investing
activities declined to $24 million compared with $147.7 million for the 1992
period, reflecting the reduced level of capital expenditures (following the
completion of Main Pass development expenditures and the cost efficiency
program during 1992) and the proceeds from the geothermal property sale (Note
2). Net cash provided by financing activities was $2.6 million compared with
$70.5 million for the year-ago period, reflecting the deferral of
distributions on units owned by FTX since early-1992 and net borrowings of
$63.2 million. The 1992 period had a net reduction of borrowings totaling
$277.7 million funded by $430.5 million in proceeds from the public sale of
FRP units.
In June 1993, FTX amended its credit agreement (the New Credit Agreement)
in which FRP participates. The New Credit Agreement expires on December 31,
1999 and is structured as a three year revolving line of credit followed by a
3 1/2 year reducing revolving line of credit. As of July 16, 1993, $488.3
million was available under the credit facility. To the extent FTX and its
other subsidiaries incur additional borrowings, the amount available to FRP
under the credit facility will be reduced.
Publicly owned FRP units have cumulative rights to receive quarterly
distributions of 60 cents per unit through December 31, 1996 (the Preference
Period) before any distributions may be made to FTX. Past distributions to
FTX amounting to $181.6 million, including $31.9 million during the second
quarter of 1993, have been deferred and will be paid to FTX only to the extent
of part of the excess of future quarterly FRP distributions over 60 cents per
unit for all units. At current and expected near-term prices of FRP's
commodities, FTX anticipates receiving no distributions from FRP. FRP's
ability to continue to distribute cash to its public unitholders during the
Preference Period is dependent on the operating results of IMC-Agrico Company
which will be determined primarily by prices of its commodities and the cost
reductions achieved by its combined operations and the future profitability of
FRP's sulphur and oil operations. FRP believes that its short-term cash
requirements will be met from internally generated funds and borrowings under
its existing credit facility.
_______________________________
The results of operations reported and summarized above are not necessarily
indicative of future operating results.
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FREEPORT-McMoRan RESOURCE PARTNERS,
LIMITED PARTNERSHIP
(A Limited Partnership)
By: /s/ Nancy D. Bonner
-----------------------------
Nancy D. Bonner
Vice President and Controller
(authorized signatory and
Principal Accounting Officer)
Date: July 20, 1994
