SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1994
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___
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
TABLE OF CONTENTS
Page
Part I. Financial Information
Financial Statements:
Condensed Balance Sheets 3
Statements of Operations 4
Statements of Cash Flow 5
Notes to Financial Statements 6
Remarks 6
Management's Discussion and Analysis
of Financial Condition and
Results of Operations 7
Part II. Other Information 10
Signature 11
Exhibit Index E-1
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
---------------------
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS (Unaudited)
March 31, December 31,
1994 1993
---------- ------------
(In Thousands)
ASSETS
Current assets:
Cash and short-term investments $ 46,613 $ 24,448
Accounts receivable 67,424 62,902
Inventories 124,909 133,405
Prepaid expenses and other 2,964 2,143
---------- ----------
Total current assets 241,910 222,898
Property, plant and equipment, net 947,349 970,960
Other assets 65,549 103,015
---------- ----------
Total assets $1,254,808 $1,296,873
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued liabilities $ 85,923 $ 78,443
Current portion of long-term debt 465 465
---------- ----------
Total current liabilities 86,388 78,908
Long-term debt, less current portion 473,132 488,102
Reclamation and mine shutdown reserves 92,806 97,333
Accrued postretirement benefits and
other liabilities 133,145 140,126
Partners' capital 469,337 492,404
---------- ----------
Total liabilities and partners' capital $1,254,808 $1,296,873
========== ==========
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended
March 31,
-------------------------
1994 1993
-------- --------
(In Thousands,
Except Per Unit Amounts)
Revenues $182,073 $162,423
Cost of sales:
Production and delivery 132,302 140,005
Depreciation and amortization 15,511 20,386
-------- --------
Total cost of sales 147,813 160,391
Exploration expenses - 704
Provision for restructuring charges - 3,198
Loss on valuation and sale of assets, net - 40,000
General and administrative expenses 11,270 17,657
-------- --------
Total costs and expenses 159,083 221,950
-------- --------
Operating income (loss) 22,990 (59,527)
Interest expense, net (7,315) -
Other income, net (2,262) (1,390)
-------- --------
Income (loss) before changes in
accounting principle 13,413 (60,917)
Cumulative effect of changes in
accounting principle - (23,700)
-------- --------
Net income (loss) $ 13,413 $(84,617)
======== ========
Net income (loss) per unit:
Before changes in accounting principle $.13 $(.59)
Cumulative effect of changes in
accounting principle - (.23)
---- -----
$.13 $(.82)
==== =====
Average units outstanding 103,698 103,698
======= =======
Distributions per publicly held unit $.60 $.60
==== ====
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOW (Unaudited)
Three Months Ended
March 31,
-------------------
1994 1993
-------- --------
(In Thousands)
Cash flow from operating activities:
Net income (loss) $ 13,413 $(84,617)
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 15,511 20,386
Loss on valuation and sale of assets, net - 40,000
Cash received from IMC-Agrico Company in
excess of capital interest 6,388 -
(Increase) decrease in working capital:
Accounts receivable (2,850) 780
Inventories 7,165 (7,732)
Prepaid expenses and other (919) (2,127)
Accounts payable and accrued liabilities 7,218 (14,097)
Reclamation and mine shutdown expenditures (5,989) (3,266)
Other 3,008 1,431
-------- --------
Net cash provided by (used in) operating
activities 42,945 (25,542)
-------- --------
Cash flow from investing activities:
Capital expenditures:
Main Pass (291) (18,929)
Agricultural minerals (2,650) (5,763)
Proceeds from geothermal notes receivable 36,910 -
Other 530 716
-------- --------
Net cash provided by (used in) investing
activities 34,499 (23,976)
-------- --------
Cash flow from financing activities:
Distributions to partners (36,480) (30,294)
Proceeds from 8 3/4% Senior Subordinated Notes 146,125 -
Proceeds from debt 24,377 136,114
Repayment of debt (189,301) (60,370)
-------- --------
Net cash provided by (used in) financing
activities (55,279) 45,450
-------- --------
Net increase (decrease) in cash and short-term
investments 22,165 (4,068)
Cash and short-term investments at
beginning of year 24,448 7,099
-------- --------
Cash and short-term investments at end of period $ 46,613 $ 3,031
======== ========
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. 8 3/4% SENIOR SUBORDINATED NOTE OFFERING
In February 1994, Freeport-McMoRan Resource Partners, Limited Partnership
(FRP) sold publicly $150 million of 8 3/4% Senior Subordinated Notes due 2004.
Net proceeds were used to reduce other indebtedness.
2. INTEREST COSTS
Interest expense excludes capitalized interest of $5.4 million in the first
quarter of 1993.
3. RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the first three months of 1994 was
2.8 to 1 compared with a shortfall of $66.5 million for the 1993 period. For
this calculation, earnings are income from continuing operations before fixed
charges. Fixed charges are interest and that portion of rent deemed
representative of interest.
_____________________
Remarks
The information furnished herein should be read in conjunction with FRP's
financial statements contained in its 1993 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.
------------------------------------
RESULTS OF OPERATIONS
First Quarter
------------------
1994 1993
------ ------
(In Millions,
Except Per Unit Amounts)
Revenues $182.1 $162.4
Operating income (loss) 23.0 (59.5)a
Net income (loss) 13.4 (84.6)a,b
Net income (loss) per unit .13 (.82)a,b
a. Includes charges totaling $43.2 million ($.42 per unit) consisting of
$3.2 million ($.03 per unit) for personnel costs relating to a reduction
in staff engaged in administrative services on behalf of Freeport-McMoRan
Resource Partners, Limited Partnership (FRP) by Freeport-McMoRan Inc.
(FTX), the general partner of FRP, and $40.0 million ($.39 per unit)
related to the sale of geothermal assets.
b. Includes a $23.7 million charge ($.23 per unit) for the cumulative effect
of changes in accounting principle.
First-quarter 1994 results, excluding the items footnoted above,
benefited from increased revenues primarily due to higher phosphate fertilizer
market prices and improved phosphate fertilizer, sulphur, and oil sales
volumes. The reduction in general and administrative expenses reflects the
benefits from formation of the IMC-Agrico Company joint venture and other
restructuring activities undertaken in 1993, and a $2.2 million reduction
resulting from a change in the estimated cost relating to excess office space.
The initial estimated cost was recorded in the second quarter of 1993 as part
of the restructuring of FTX's administrative organization. Interest expense
increased due to the Main Pass sulphur project becoming operational for
accounting purposes in July 1993; previously, development related interest
costs were capitalized.
Agricultural Minerals Operations
- --------------------------------
FRP's agricultural minerals segment, which includes its fertilizer and
phosphate rock operations (conducted through its ownership in the IMC-Agrico
Company joint venture) and its sulphur business, reported first-quarter 1994
earnings of $21.2 million on revenues of $172.5 million compared with a loss
of $14.9 million on revenues of $155.7 million for the 1993 period.
Significant items impacting the agricultural minerals segment earnings are as
follows (in millions):
Agricultural minerals earnings - 1993 $(14.9)
----
Increases (decreases):
Sales volumes 16.6
Realizations .6
Other (.4)
----
Revenue variance 16.8
Cost of sales 12.8
General and administrative and other 6.5
----
36.1
----
Agricultural minerals earnings - 1994 $ 21.2
====
FRP's proportionate share of the IMC-Agrico Company first-quarter 1994
sales volumes for diammonium phosphate (DAP), its principal fertilizer
product, increased 8 percent from FRP's sales during the 1993 period. FRP's
average DAP realization rose significantly from the 1993 quarter reflecting a
further recovery in phosphate fertilizer markets throughout the current
quarter. Increased export purchases, which began in late 1993, continued into
1994. Additionally, first-quarter 1994 industrywide domestic phosphate
fertilizer purchases rose over 1993 period levels. Unit production costs
declined from the 1993 quarter, in spite of sharply higher ammonia prices,
reflecting continued production efficiencies from the joint venture and
reduced raw material costs for sulphur and internally produced phosphate rock.
The near-term outlook is for continued strong export and domestic market
demand. Key export customers continue to be active in the marketplace and
domestic sales activity picked up sharply in late March. As a result of the
increased international phosphate fertilizer demand and an anticipated second-
quarter 1994 drop in producer inventories, IMC-Agrico Company is scheduled to
resume production at its Nichols, Florida plant in May, bringing IMC-Agrico
Company's phosphate fertilizer production to essentially full capacity. IMC-
Agrico Company will continue to monitor market conditions and operate its
facilities accordingly.
FRP's proportionate share of the larger IMC-Agrico Company phosphate rock
operation caused first-quarter 1994 sales volumes to increase 15 percent from
the 1993 period.
First Quarter
----------------------
1994 1993
-------- --------
Phosphate fertilizers (short tons)a
Diammonium phosphate
Sales:
Florida 216,600
Louisiana 271,700
Other 46,000
------- -------
Total sales 534,300 495,300
Average realized price:b
Florida $134.50
Louisiana 143.85
Monoammonium phosphate
Sales:
Granular 86,700 122,800
Powdered 42,800 -
Average realized price:b
Granular $153.39
Powdered 120.58
Granular triple superphosphate
Sales 130,400 177,700
Average realized priceb $106.04
Phosphate rock (short tons)a
Sales 1,006,500 874,600
Average realized priceb $21.71
Sulphur (long tons)
Salesc 515,500 464,800
a. Beginning July 1, 1993, reflects FRP's 46.5 percent share of the assets
of IMC-Agrico Company during the year ended June 30, 1994. FRP is
entitled to 58.6 percent of the cash flow generated by IMC-Agrico
Company during such period. Certain information prior to formation of
IMC-Agrico Company was not recorded on a basis consistent with that
currently being presented and therefore is not available.
b. Represents average realization f.o.b. plant/mine.
c. Includes 187,100 tons and 344,500 tons for the first quarters of 1994
and 1993, respectively, which represent internal consumption and Main
Pass start-up sales that are not included in sales for accounting
purposes.
First-quarter 1994 sulphur production increased 16 percent over the 1993
period level, with Main Pass operations averaging 5,600 tons per day
(exceeding full design operating rates of 5,500 tons per day or approximately
2 million tons per year). Current efforts to optimize earnings and cash flow
include maximizing Main Pass production within the current cost structure. It
is expected that production can be sustained near the 6,000 tons per day level
in the immediate future. Furthermore, the increase in Main Pass production
rates helped to decrease its unit production costs. Due to the increased
production from Main Pass, FRP ceased operating the marginally profitable
Caminada mine in January 1994. The shutdown of Caminada will have no material
impact on FRP's reported earnings. Sales volumes for the first quarter of
1994 improved 11 percent over the 1993 period levels, primarily caused by
higher operating rates in the phosphate fertilizer industry. Sulphur
realizations for the 1994 quarter were significantly reduced, reflecting the
decline in prices which occurred throughout 1993; although the improved
phosphate fertilizer operating rates, coupled with reduced imports from Canada
and Mexico, resulted in a slight improvement in Tampa, Florida sulphur prices
early in the second quarter of 1994. However, Canadian producers continue to
increase their inventories and in the near-term FRP does not anticipate a
major increase in sulphur prices.
Oil Operation
- -------------
First Quarter
-------------------
1994 1993
-------- --------
Sales (barrels) 823,200 433,500
Average realized price $11.65 $15.55
Earnings (in millions) $1.0 $(1.7)
Oil production for the Main Pass joint venture (in which FRP owns a 58.3
percent interest) averaged 18,800 barrels per day during the first quarter of
1994, whereas first-quarter 1993 production was limited during development
drilling to alleviate water encroachment. Joint venture production for 1994
is expected to approximate 3 million barrels if water encroachment follows
current trends. FRP anticipates drilling additional wells at an estimated
cost to FRP of approximately $4 million. First-quarter 1994 oil realizations
continue to reflect the significant decline in prices which occurred in late
1993. Prices have since improved to above $13.00 per barrel. As a result of
the decline in oil prices, in the fourth quarter of 1993 FRP recognized a
write-down of its Main Pass oil investment. At March 31, 1994, FRP's
investment in its Main Pass oil facilities ($40.6 million) approximated the
future net cash flows expected to be received. Future price declines,
increases in costs, or negative reserve revisions could result in a charge to
future earnings.
CAPITAL RESOURCES AND LIQUIDITY
Net cash provided by operation activities during the first three months of
1994 was $42.9 million compared with $25.5 million used for the 1993 period,
due primarily to increased income from operations and working capital changes.
Net cash provided by investing activities was $34.5 million compared with
$24.0 million used for the 1993 period, reflecting the early receipt of
proceeds from the geothermal notes receivable (reflected in other assets) and
lower capital expenditures. Net cash used in financing activities was $55.3
million compared with $45.5 million provided during the 1993 period, with the
1994 period reflecting a $18.8 million net reduction of borrowings whereas the
1993 period reflects a $75.7 million net increase in borrowings. Included in
the first-quarter 1994 financing activity was the issuance of $150 million of
8 3/4% Senior Subordinated Notes due 2004 (Note 1).
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. On April 19, 1994, FRP
declared a distribution of 60 cents per publicly held unit ($30.3 million),
payable May 15, 1994, bringing the total unpaid distribution to FTX to $271.1
million. Unpaid distributions due FTX will be recoverable from part of the
excess of future quarterly FRP distributions over 60 cents per unit for all
units. The April 1994 distributable cash included $40.2 million received from
IMC-Agrico Company for its first-quarter 1994 distribution (excluding $14.3
million from working capital reductions) and $2.5 million from the receipt of
the geothermal notes receivable. FRP's future distributions will be dependent
on the distributions received from IMC-Agrico Company, which will primarily be
determined by prices and sales volumes of its commodities and cost reductions
achieved by its combined operations, and the future cash flow 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 ($425.0 million available as of April 22, 1994).
_______________________________
The results of operations reported and summarized above are not necessarily
indicative of future operating results.
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a)The exhibits to this report are listed in the Exhibit Index
appearing on page E-1 hereof.
(b)During the quarter for which this report is filed, the registrant
filed one Current Report on Form 8-K, dated February 7, 1994 (reporting
information under Item 5 and Item 7).
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: April 26, 1994
EXHIBIT INDEX
-------------
Sequentially
Numbered
Number Description Page
- ------ ----------- ------------
4.1 Subordinated Indenture as of October 26, 1990 between
FRP and Manufacturers Hanover Trust Company ("MHTC")
as the Trustee, relating to $150,000,000 principal
amount of 8 3/4% Senior Subordinated Notes due 2004 of
FRP (the "Subordinated Indenture"). Incorporated by
reference to Exhibit 4.11 to the Annual Report on Form
10-K of FRP for the fiscal year ended December 31,
1993 (the "FRP 1993 Form 10-K").
4.2 First Supplemental Indenture dated as of February 15,
1994 between FRP and Chemical Bank, as Successor to
MHTC, as Trustee, to the Subordinated Indenture.
Incorporated by reference to Exhibit 4.12 to the FRP
1993 Form 10-K.
E-1
