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 September 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 September 30,
1993, as set forth in the pages attached hereto to 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.
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)
September 30, December 31,
1993 1992
------------- -------------
(in thousands)
ASSETS
Current assets:
Cash and short-term investments................ $ 8,304 $ 7,099
Accounts receivable............................ 68,487 62,574
Inventories.................................... 145,109 170,276
Prepaid expenses and other .................... 2,581 22,214
Due from FTX and affiliates.................... 3,249 -
---------- ----------
Total current assets......................... 227,730 262,163
Property, plant and equipment, net............. 1,053,016 1,074,332
Investment in geothermal assets................ 10,450 114,374
Other assets................................... 83,028 42,638
---------- ----------
Total assets................................... $1,374,224 $1,493,507
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued liabilities....... $ 86,244 $ 99,453
Long-term debt due within one year............. 461 1,575
Due to FTX and affiliates...................... - 2,913
---------- ----------
Total current liabilities.................... 86,705 103,941
Long-term debt, less current portion........... 349,631 117,213
Long-term debt due to FTX...................... 129,400 239,350
Reclamation and mine shutdown reserves......... 83,233 55,152
Accrued postretirement benefits and
other liabilities............................ 138,729 118,156
Partners' capital.............................. 586,526 859,695
---------- ----------
Total liabilities and partners' capital........ $1,374,224 $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 Nine Months Ended
September 30, September 30,
--------------------- --------------------
1993 1992 1993 1992
-------- -------- -------- --------
(in thousands, except per unit amounts)
Revenues.................... $136,945 $204,944 $ 501,052 $677,998
Cost of sales:
Production and delivery..... 116,540 147,013 427,639 492,537
Depreciation and
amortization.............. 24,393 32,920 78,590 93,590
-------- -------- -------- --------
Total cost of sales....... 140,933 179,933 506,229 585,375
Exploration expenses 1,112 2,162 2,774 4,427
Provision for restructuring
charges, net.............. - - 33,947 -
Loss on valuation and sale
of assets, net............ (1,084) - 65,547 -
General and administrative
expenses.................. 12,797 20,364 54,201 60,166
-------- -------- -------- --------
Total costs and expenses.. 153,758 202,459 662,698 649,968
-------- -------- -------- --------
Operating income (loss)..... (16,813) 2,485 (161,646) 28,030
Interest expense, net....... (6,253) - (6,253) (869)
Other income, net........... 5,015 739 9,315 1,361
-------- -------- -------- --------
Income (loss) before changes
in accounting principle... (18,051) 3,224 (158,584) 28,522
Cumulative effect of changes
in accounting principle - - (23,700) -
-------- -------- -------- --------
Net income (loss)........... $(18,051) $ 3,224 $(182,284) $ 28,522
======== ======== ======== ========
Net income (loss) per unit:
Income (loss) before changes
in accounting principle.. $(.17) $.03 $(1.53) $.28
Cumulative effect of changes
in accounting principle.. - - (.23) -
-------- -------- -------- --------
$(.17) $.03 $(1.76) $.28
======== ======== ======== ========
Average units outstanding... 103,698 103,698 103,698 100,693
======== ======== ======== ========
Distributions per
publicly held unit........ $.60 $.60 $1.80 $1.80
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOW (Unaudited)
Nine Months Ended
September 30,
--------------------------
1993 1992
--------- ---------
(in thousands)
Cash flow from operating activities:
Net income (loss)................. $(182,284) $ 28,522
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... 78,590 93,838
Provision for restructuring
charges,
net of payments............... 3,614 -
Other noncash charges
to net loss................... 7,150 -
Loss on valuation and sale
of assets, net 65,547 -
(Increase) decrease in
working capital, net of
effect of acquisitions
and dispositions:
Accounts receivable........... (5,193) 5,859
Inventories................... 8,271 5,471
Prepaid expenses and other.... (1,049) (16,415)
Accounts payable and
accrued liabilities.......... (27,304) (25,537)
Reclamation and mine
shutdown expenditures........ (8,283) (9,009)
Other........................... 8,621 4,429
--------- ---------
Net cash provided by (used in)
operating activities......... (28,620) 87,158
--------- ---------
Cash flow from investing activities:
Capital expenditures:
Main Pass....................... (36,872) (98,908)
Agricultural minerals........... (16,107) (76,309)
Proceeds from sale of assets...... 37,000 -
Other............................. 6,733 (7,239)
--------- ---------
Net cash used in
investing activities............ (9,246) (182,456)
--------- ---------
Cash flow from financing activities:
Distributions to partners......... (90,884) (120,385)
Proceeds from debt................ 455,445 887,263
Repayment of debt................. (325,490) (1,095,954)
Proceeds from sale of
partnership units............... - 430,534
--------- ---------
Net cash provided by
financing activities............ 39,071 101,458
--------- ---------
Net increase in cash
and short-term investments...... 1,205 6,160
Cash and short-term
investments at beginning
of year......................... 7,099 3,854
--------- ---------
Cash and short-term
investments at end of period $ 8,304 $ 10,014
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. RESTRUCTURING AND VALUATION CHARGES
RESTRUCTURING CHARGES. During the first half of 1993, Freeport-McMoRan
Resource Partners, Limited Partnership (FRP) recognized expense of $33.9
million for restructuring the administrative organization (including personnel
related costs, the cost to downsize the computing and management information
systems (MIS) structure, and a write-off of excess facilities and other
miscellaneous assets) of Freeport-McMoRan Inc. (FTX), the parent company of
FRP, primarily due to formation of the joint venture with IMC Fertilizer, Inc.
(IMC) discussed below. 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. During the second quarter, FRP recognized expense
of $26.6 million primarily representing a reduction in the book value of its
investment in the non-Main Pass sulphur assets because of persistent weak
market conditions. FRP has accrued future reclamation and mine shutdown costs
related to these assets totaling $52.8 million. 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), recognizing a $31 million charge to
expense. FRP also recorded a $9 million charge to expense for impairment of
its undeveloped geothermal properties.
2. IMC-AGRICO COMPANY
FRP and IMC formed a joint venture (IMC-Agrico Company), effective July 1,
1993, for their respective phosphate fertilizer businesses, including
phosphate rock and uranium. FRP's "Current Interest", reflecting cash to be
distributed from ongoing operations, initially is 58.6% and its "Capital
Interest", reflecting the purchase or sale of long-term assets or any required
capital contributions to IMC-Agrico Company is 46.5% initially. These
ownership percentages decline in annual increments ultimately to 40.6% for the
fiscal year ending June 30, 1998 and remain constant thereafter. FRP
proportionately consolidates its interest in IMC-Agrico Company.
3. INTEREST COSTS
Interest expense excludes capitalized interest of $4.3 million in the third
quarter of 1992, and $11.1 million and $14 million in the first nine months of
1993 and 1992, respectively. No interest was capitalized in the third quarter
of 1993.
4. RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the first nine months of 1993
resulted in a shortfall of $169.7 million compared with a ratio of 1.9 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 (Note 2).
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) formed a joint venture (IMC-Agrico Company), effective
July 1, 1993, for their respective phosphate fertilizer businesses, including
phosphate rock and uranium. IMC-Agrico Company is governed by a policy
committee having equal representation from each company and is managed by IMC.
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 in the second year of operations. As discussed
below, significant restructuring charges were recorded in connection with this
transaction.
As a result 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 has varying sharing ratios in IMC-Agrico Company, as
discussed in Note 2 to the financial statements, which 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.
FRP proportionately consolidates its interest in IMC-Agrico Company.
Accordingly, FRP recognizes its proportionate interest in the combined assets
contributed by FRP and IMC to the joint venture. As a result, operating
results reported by FRP subsequent to the formation of IMC-Agrico Company vary
significantly in certain respects from those previously reported. Phosphate
fertilizer realizations and unit production costs are fundamentally changed as
the majority of the FRP contributed fertilizer production facilities are
located on the Mississippi River, whereas the IMC contributed fertilizer
production facilities are located in Florida. Fertilizer produced on the
Mississippi River commands a higher sales price in the domestic market because
of its proximity to markets; however, raw material transportation costs at the
Florida facilities are lower for phosphate rock, partially offset by increased
sulphur transportation costs. As discussed below, IMC-Agrico Company has
significantly curtailed its fertilizer production in response to weak market
conditions. The curtailment was effected principally by reducing production
at the Mississippi River facilities previously owned by FRP.
RESULTS OF OPERATIONS
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.
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Third Quarter Nine Months
-------------- -------------------
1993 1992 1993 1992
------ ------ ------ ------
(in millions, except per unit amounts)
Revenues.................... $136.9 $204.9 $501.1 $678.0
Operating income (loss)..... (16.8) 2.5 (161.6)a 28.0
Net income (loss)........... (18.1) 3.2 (182.3)a,b 28.5
Net income (loss)
per unit................. (.17) .03 (1.76)a,b .28
a. Includes $125.3 million ($1.21 per unit) related to administrative
restructuring and asset recoverability charges (Note 1), and adjustments
to general and administrative expenses and production and delivery costs
discussed below.
b. Includes a charge of $23.7 million ($.23 per unit) related to the changes
in accounting principle (Note 5).
Results for the third-quarter and nine-month periods of 1993 reflect
significant decreases in phosphate fertilizer, phosphate rock, sulphur, and
oil revenues, primarily due to reduced sales volumes and market prices for
these products. Additionally, the nine-month period of 1993 was adversely
impacted by administrative restructuring and asset recoverability charges
(Note 1), and adjustments to general and administrative expenses and
production and delivery costs discussed below. Depreciation and amortization
expense declined primarily because of reduced sales volumes. The reduction in
general and administrative expenses reflects the benefits from the 1993
restructuring activities; substantial future declines are anticipated.
Interest expense increased due to no interest being capitalized during the
current quarter because the Main Pass sulphur operations became operational
for accounting purposes on July 1, 1993.
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.
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
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, phosphate
rock, and sulphur businesses, reported a third-quarter 1993 loss of $13.2
million on revenues of $121.7 million compared with a loss of $2.8 million on
revenues of $176.2 million for the 1992 period. For the first nine months of
1993, a loss of $50.6 million was generated on revenues of $464.2 million
compared with earnings of $25.6 million on revenues of $611 million for the
year-ago period.
Significant items impacting FRP's agricultural minerals segment earnings
are as follows:
Third Quarter Nine Months
------------- -------------
(in millions)
Agricultural minerals earnings - 1992.... $( 2.8) $ 25.6
------ ------
Major increases (decreases)
Sales volumes - DAP and sulphur........ (23.4) (32.4)
Realizations - DAP and sulphur......... (13.6) (64.7)
Other product volumes and
realizations.......................... (17.5) (49.7)
------ ------
Net revenue variance................. (54.5) (146.8)
Cost of sales.......................... 31.0 49.9*
General and administrative
and other............................ 13.1 20.7*
------ ------
(10.4) (76.2)
------ ------
Agricultural minerals earnings - 1993.... $(13.2) $(50.6)
* Includes $17.5 million in cost of sales and $7.3 million in general and
administrative expenses resulting from the restructuring project discussed
above.
Weak industrywide demand and changes due to FRP's proportionate share of
IMC-Agrico Company resulted in FRP's third-quarter 1993 sales volumes for
diammonium phosphate (DAP), its principal fertilizer product, declining 35%
from that of the year-ago period. The continued weakness in the phosphate
fertilizer market prompted IMC-Agrico Company to make strategic curtailments
in its phosphate fertilizer production. Unit production cost declined from
the 1992 period reflecting initial production efficiencies from the joint
venture, reduced raw material costs for sulphur and lower phosphate rock
mining expenses, partially offset by increased natural gas costs and lower
production volumes. Contributing to the decline in phosphate rock costs is
the change in production facilities under IMC-Agrico Company discussed
earlier. FRP's realization for DAP was lower reflecting the near 20-year low
prices as well as an increase in the lower-priced Florida sales recognized
under the joint venture.
The outlook for the remainder of 1993 and into early 1994 is for somewhat
improved prices under more normal market demand levels. Lower domestic
operating rates have kept inventory levels from rising in spite of reduced
third quarter demand. Late in the third quarter, increased export purchases
contributed to a rise in market prices, with firming export prices helping to
rekindle domestic buying interests which had been unwilling to make purchase
commitments. Additionally, domestic phosphate fertilizer demand is expected
to benefit from increased corn acreage planted due to lower government set-
asides, and increased fertilizer application rates necessitated by the
widespread flooding that caused a depletion of nutrients in a number of mid-
western states.
FRP's proportionate share of the larger IMC-Agrico Company phosphate rock
operation resulted in sales volumes for the third quarter of 1993 increasing
from the 1992 period, with IMC-Agrico Company utilizing its least-costly
operations to maximize efficiencies.
Third-quarter 1993 sulphur production at the Caminada and Main Pass mines
increased compared with the 1992 period. Sales volumes for the current
quarter declined 26%, primarily because of reduced usage by the IMC-Agrico
Company operations caused by its curtailed fertilizer production. During the
second quarter of 1993, due to the continuing decline in the market price of
sulphur, FRP recorded a noncash charge to earnings (Note 1) for the excess
capitalized cost over expected realization of its non-Main Pass sulphur
assets, primarily the Caminada sulphur mine. Due to significant improvements
in Main Pass sulphur production, FRP no longer needs the marginally profitable
Caminada operation and is now taking steps to cease Caminada operations over
the next several months. The shutdown of Caminada will have no significant
impact on FRP's reported earnings. In the sulphur market, prices remain
depressed. Although reduced global demand has forced production cutbacks
worldwide, a rebound in price is not expected until demand improves.
Third Quarter Nine Months
---------------- ------------------
1993 1992 1993 1992
------ ------ ------ ------
Phosphate fertilizers
(short tons):a
Diammonium phosphate
Sales:
Florida.............. 220,900
Louisiana............ 177,600
Other................ 31,800
---------
Total sales........ 430,300 661,700 1,769,600 2,029,800
Average realized price:b
Florida.............. $100.94
Louisiana............ 112.03
Monoammonium phosphate
Sales:
Granular ............ 58,700 89,300 369,500 408,800
Powdered ............ 22,300 22,300
Average realized price:b
Granular............. $115.34
Powdered............. 93.95
Granular triple superphosphate
Sales.................. 89,700 183,000 430,300 564,500
Average realized
price:b............... $86.59
Phosphate rock (short tons):a
Sales.................. 1,026,700 796,200 2,708,900 2,555,900
Average realized
price:b............... $20.20
Sulphur (long tons)
Sales:c................. 418,900 566,400 1,446,500 1,708,100
a. Beginning July 1, 1993, reflects FRP's 46.5% share of the assets of IMC-
Agrico Company during the year ended June 30, 1994. FRP is entitled to
58.6% of the cash flow generated by IMC-Agrico Company during such
period.
b. Represents average realization f.o.b. plant/mine.
c. Includes 149,600 tons, 403,600 tons, 929,000 tons, and 1,186,700 tons
for the third-quarter and nine-month periods of 1993 and 1992,
respectively, which represent internal consumption and Main Pass start-
up sales that are not included in sales for accounting purposes.
At Main Pass, sulphur production is presently in excess of 3,400 tons per
day, up from 1,300 tons per day at the end of the second quarter. Sulphur
production continues to accelerate toward its full production level of two
million tons per year (5,500 tons per day). Given the rapid increases
achieved during 1993, full production will probably be reached in 1994. As a
result of the sulphur production increases, these activities became
operational for accounting purposes beginning July 1, 1993. Recognizing Main
Pass sulphur operations in income and discontinuing associated capitalized
interest did not affect cash flow, but did adversely affect reported operating
results. Main Pass sulphur operations will have a more positive effect on
FRP's future earnings as production increases and if sulphur prices improve
from their current low levels.
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Oil Operation
Third Quarter Nine Months
-------------------- ---------------------
1993 1992 1993 1992
--------- -------- -------- --------
Sales (barrels)......... 1,066,100 1,705,000 2,425,300 4,208,000
Average realized price.. $14.25 $16.82 $15.15 $15.85
Earnings (in millions).. $.8 $5.1 $0 $4.5
Since completion of development drilling in mid-April, oil production
volumes increased to and remained steady at approximately 24,000 barrels of
oil per day, exceeding expectations. FRP estimates that its share of oil
production will approximate 3.4 million barrels for 1993. Production for 1994
is expected to approximate that of 1993, with the anticipated drilling of
additional wells offsetting a production decline in existing wells. At
September 30, 1993, FRP's investment in its Main Pass oil facilities ($109.2
million) approximated the future net cash flows expected to be received. Low
future prices, increases in costs, or negative reserve revisions could result
in a charge to future earnings.
CAPITAL RESOURCES AND LIQUIDITY
Net cash used by operating activities during the first nine months of 1993 was
$28.6 million compared with $87.2 million net cash provided during the 1992
period, due primarily to lower income from operations. Net cash used in
investing activities was $9.2 million compared with $182.5 million for the
1992 period, reflecting the reduced level of capital expenditures (following
completion of Main Pass development expenditures and the cost efficiency
program during 1992) and the proceeds from asset sales. Net cash provided by
financing activities was $39.1 million compared with $101.5 million for the
year-ago period, reflecting the deferral of distributions on units owned by
FTX since early-1992 and net borrowings of $130 million. The 1992 period had
a net reduction of borrowings totaling $208.7 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 revolver. As of October 15, 1993, $460
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. At September 30, 1993,
FTX had deferred past distributions totaling $181.6 million, which 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. Additionally,
distributable cash for the third quarter of 1993 was such that all of the
funds necessary to pay the distribution of 60 cents per public unit to be paid
November 15, 1993 will be borrowed under the New Credit Agreement, with FTX
deferring its entire $31.9 million. FRP has announced that beginning with the
cash distribution for the fourth quarter of 1993 (scheduled for payment in
February 1994), it no longer intends to supplement distributable cash with
borrowings. FRP's ability to continue to distribute cash to its public
unitholders is dependent on the cash distributions received from IMC-Agrico
Company, which will primarily be determined by prices of its commodities and
the cost reductions achieved by its combined operations, and the future cash
flow of FRP's sulphur and oil operations. As a result, future distributions
from FRP, reflecting the preference discussed above, will be impacted by the
cyclical nature of its fertilizer business. Due to the current depressed
fertilizer market, FRP will not receive a cash distribution from IMC-Agrico
Company for the third-quarter 1993 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
