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 June 30, 1995
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 Income 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)
June 30, December 31,
1995 1994
---------- ------------
(In Thousands)
ASSETS
Current assets:
Cash and short-term investments $ 14,461 $ 9,859
Accounts receivable 54,873 58,265
Inventories 105,800 109,677
Prepaid expenses and other 1,911 1,350
---------- ----------
Total current assets 177,045 179,151
Property, plant and equipment, net 937,485 910,469
Other assets 57,681 57,311
---------- ----------
Total assets $1,172,211 $1,146,931
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 98,892 $ 84,888
Long-term debt, less current portion 344,409 368,637
Reclamation and mine shutdown reserves 117,097 96,445
Accrued postretirement benefits and
other liabilities 188,301 149,301
Partners' capital 423,512 447,660
---------- ----------
Total liabilities and partners' capital $1,172,211 $1,146,931
========== ==========
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
STATEMENTS OF INCOME (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1995 1994 1995 1994
-------- -------- -------- --------
(In Thousands, Except Per Unit Amounts)
Revenues $233,203 $185,444 $487,468 $367,517
Cost of sales:
Production and delivery 166,418 135,259 338,368 267,100
Depreciation and
amortization 6,673 9,475 20,614 24,986
-------- -------- -------- --------
Total cost of sales 173,091 144,734 358,982 292,086
General and administrative
expenses 11,156 11,948 25,215 23,218
-------- -------- -------- --------
Total costs and expenses 184,247 156,682 384,197 315,304
-------- -------- -------- --------
Operating income 48,956 28,762 103,271 52,213
Interest expense, net (7,723) (8,551) (15,577) (15,866)
Other income, net (307) 325 (436) (2,398)
-------- -------- -------- --------
Net income $ 40,926 $ 20,536 $ 87,258 $ 33,949
======== ======== ======== ========
Net income per unit $.40 $.20 $.84 $.33
==== ==== ==== ====
Average units outstanding
103,466 103,698 103,509 103,698
======= ======= ======= =======
Distributions paid per
publicly held unit $.615 $.60 $1.215 $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,
----------------------
1995 1994
-------- --------
(In Thousands)
Cash flow from operating activities:
Net income $ 87,258 $ 33,949
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 20,614 24,986
Cash distribution from IMC-Agrico in
excess of interest in capital 21,347 25,457
Reclamation and mine shutdown expenditures (4,928) (7,385)
(Increase) decrease in working capital, net of
effects of acquisition:
Accounts receivable 3,175 2,807
Inventories 9,400 14,318
Prepaid expenses and other (562) 1,278
Accounts payable and accrued liabilities 6,990 3,020
Other 7,772 2,617
-------- --------
Net cash provided by operating activities 151,066 101,047
-------- --------
Cash flow from investing activities:
Capital expenditures (15,484) (11,914)
Sale of assets and other 375 45,265
-------- --------
Net cash provided by (used in) investing
activities (15,109) 33,351
-------- --------
Cash flow from financing activities:
Distributions to partners (109,345) (66,775)
Repayments of debt, net (19,949) (229,107)
Purchase of Partnership units (2,061) -
Proceeds from 8 3/4% Senior subordinated notes - 146,125
-------- --------
Net cash used in financing activities (131,355) (149,757)
-------- --------
Net increase (decrease) in cash and short-term
investments 4,602 (15,359)
Cash and short-term investments at
beginning of year 9,859 24,448
-------- --------
Cash and short-term investments at end of period $ 14,461 $ 9,089
======== ========
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. ACQUISITION
In January 1995, Freeport-McMoRan Resource Partners, Limited Partnership (FRP)
acquired essentially all of the domestic assets of Pennzoil Co.'s sulphur
division. Pennzoil will receive quarterly payments from FRP over 20 years
based on the prevailing price of sulphur. The installment payments may be
terminated earlier by FRP through the exercise of a $65 million call option or
by Pennzoil through a $10 million put option. Neither option may be exercised
prior to 1999. The purchase price allocation follows (in thousands):
Current assets $ 5,635
Current liabilities (9,522)
Property, plant and equipment 60,159
Accrued long-term liabilities (56,272)
-------
Net cash investment $ -
=======
Accrued long-term liabilities include the estimated future installment
payments based on the prevailing sulphur price upon acquisition and estimated
future reclamation and mine shutdown costs.
2. NEW CREDIT FACILITY
In July 1995, Freeport-McMoRan Inc. (FTX) obtained a new credit facility. The
facility provides $400 million of credit, all of which is available to FRP and
$75 million of which is available to FTX as the holding company. The new
variable rate facility matures July 2000 and has covenants and security
requirements which are similar to the previous credit agreement.
3. RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the first six months of 1995 and
1994 was 6 to 1 and 3.1 to 1, respectively. For this calculation, earnings
are income from continuing operations before fixed charges. Fixed charges
include 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 1994 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
Second Quarter Six Months
------------------- --------------------
1995 1994 1995 1994
------ ------ ------ ------
(In Millions, Except Per Unit Amounts)
Revenues $233.2 $185.4 $487.5 $367.5
Operating income 49.0 28.8 103.3 52.2
Net income 40.9 20.5 87.3 33.9
Net income per unit .40 .20 .84 .33
Freeport-McMoRan Resource Partners, Limited Partnership (FRP) benefited
from significantly higher operating results from its agricultural minerals
segment during the 1995 periods, reflecting the strengthening in the phosphate
fertilizer markets which began in mid-1993 and has continued into 1995.
General and administrative expenses during the six-month 1995 period include
a $1.2 million charge for the reorganization of IMC-Agrico Company's marketing
function, whereas the six-month 1994 period benefited from a $2.2 million
reduction in the estimated cost of excess office space. Based upon current
market prices for Freeport-McMoRan Inc. (FTX) common stock, third quarter
general and administrative expenses for FRP are expected to reflect a charge
of approximately $10 million for stock option costs allocated to FRP under the
management services agreement because of the rise in the price of FTX's common
stock subsequent to June 30, 1995. The six-month 1994 period was also
impacted by a $2.9 million charge to other income on the prepayment of certain
notes receivable.
Agricultural Minerals Operations - FRP's agricultural minerals segment, which
includes its fertilizer and phosphate rock operations (conducted through IMC-
Agrico) and its sulphur business, reported second-quarter 1995 operating
income of $48.8 million on revenues of $224.2 million compared with operating
income of $30.4 million on revenues of $176.5 million for the 1994 period.
Operating income for the first six months of 1995 was $104.2 million on
revenues of $468.9 million compared with operating income of $51.4 million on
revenues of $349 million for the year-ago period. Significant items impacting
operating income follow (in millions):
Second Six
Quarter Months
------- ------
Agricultural minerals operating income - 1994 $30.4 $ 51.4
----- ------
Increases (decreases):
Sales volumes 19.7 53.0
Realizations 29.2 68.1
Other (1.2) (1.2)
----- ------
Revenue variance 47.7 119.9
Cost of sales (30.3)* (67.7)*
General and administrative and other 1.0 .6
----- ------
18.4 52.8
----- ------
Agricultural minerals operating income - 1995 $48.8 $104.2
===== ======
* Includes a reduction to depreciation and amortization of $11.3 million and
$6.3 million for the second quarter of 1995 and 1994, respectively, and $16.1
million and $7.2 million for the six-month period of 1995 and 1994,
respectively, caused by FRP's disproportionate interest in IMC-Agrico cash
distributions.
FRP's second-quarter 1995 phosphate fertilizer sales volumes were
slightly higher than those of the year-ago quarter, with IMC-Agrico
experiencing improved export sales for diammonium phosphate (DAP), its
principal fertilizer product. Domestic fertilizer demand was hampered by wet
field conditions which delayed the planting of a significant portion of this
season's crop and prevented certain acreage from being planted. Despite
continued strong export shipments, lower spring domestic demand, coupled with
industry operating rates over 100 percent, caused a modest build-up in
domestic phosphate fertilizer producers' stocks in the second quarter and
contributed to about a 10 percent decline in market prices from their high
point. In response to the weakened market, IMC-Agrico temporarily closed its
Taft, Louisiana facility in May 1995 and resumed production on August 7, 1995,
and accelerated planned maintenance turnarounds at three other fertilizer
facilities. FRP's average DAP realization increased 14 percent from the year-
ago period (virtually unchanged from the previous quarter). FRP's 1995 DAP
realizations include a large first-half 1995 forward sale to China contracted
in November 1994 at then current market prices. Unit production costs
benefited from ongoing cost savings achieved at IMC-Agrico, somewhat offset by
higher raw material costs for ammonia, although down from their market highs,
and increased maintenance costs.
During the second half of 1995, FRP will benefit from a significant
forward sales agreement reached between China and IMC-Agrico. IMC-Agrico is
committed to maintaining a reasonable balance between supply and demand and
will continue to monitor market conditions and make production level
adjustments as necessary.
FRP's second-quarter 1995 phosphate rock sales volumes increased 22
percent from the 1994 period, reflecting increased demand and the addition of
a long-term supply contract in October 1994.
Main Pass sulphur production averaged 6,000 tons per day (TPD) during
the second quarter of 1995, while FRP's Culberson mine, acquired in January
1995 as part of the Pennzoil sulphur asset purchase (Note 1), produced an
average of 2,250 TPD. FRP's increased production capacity, combined with
continued strong demand from the domestic phosphate fertilizer industry,
resulted in a 52 percent increase in sales volumes. FRP also benefited from
the continued strengthening in Tampa, Florida sulphur prices. To the extent
U.S. phosphate fertilizer production remains strong, improved sulphur demand
is expected to continue, although the availability of Canadian sulphur limits
the potential for significant price increases.
Second Quarter Six Months
--------------------- ----------------------
1995 1994 1995 1994
--------- --------- --------- ---------
Phosphate fertilizers - primarily DAP
Sales (short tons)a 760,400 734,700 1,660,300 1,528,800
Average realized priceb
All phosphate fertilizers $163.53 $144.30 $163.68 $139.30
DAP 169.01 148.43 169.10 144.03
Phosphate rock
Sales (short tons)a 1,221,500 1,004,100 2,560,200 2,010,600
Average realized priceb $23.18 $23.24 $22.10 $22.47
Sulphur
Sales (long tons)c 772,700 508,100 1,533,300 1,023,600
a. Reflects FRP's 45.1 percent and 46.5 percent share of the IMC-Agrico
assets for the years ended June 30, 1995 and 1994, respectively, while
FRP received 55 percent and 58.6 percent of the cash flow generated
during such periods. FRP's share of the IMC-Agrico assets for the year
ended June 30, 1996 is 43.6 percent, while it will receive 53.1 percent
of the cash flow.
b. Represents average realization f.o.b. plant/mine.
c. Includes 189,700 tons and 187,700 tons for the second quarter of 1995
and 1994, respectively, and 368,600 tons and 374,800 tons for the six-
month periods of 1995 and 1994, respectively, which represent internal
consumption that are not included in sales for accounting purposes.
Oil Operation -
Second Quarter Six Months
------------------- ----------------------
1995 1994 1995 1994
------- ------- --------- ---------
Sales (barrels) 541,000 611,900 1,161,800 1,435,100
Average realized price $16.71 $14.52 $15.99 $12.88
Operating income (in millions) $1.4 $1.0 $2.5 $2.0
Main Pass oil production was below the year-ago quarter level, as
expected. Net production for 1995 is estimated to total approximately 2.3
million barrels, as the benefits of a 1994 redevelopment program are expected
to partially offset declining reservoir production.
CAPITAL RESOURCES AND LIQUIDITY
Net cash provided by operating activities during the first six months of 1995
increased to $151.1 million, compared with $101 million in the 1994 period,
caused primarily by the improvement in FRP's earnings. Net cash used in
investing activities was $15.1 million in 1995, consisting of capital
expenditures, compared with $33.4 million generated during the 1994 period as
a result of asset sales. Total capital expenditures for 1995 are expected to
approximate $40 million. Net cash used in financing activities during the
1995 period totaled $131.4 million, compared with $149.8 million in the 1994
period. In early 1994, FRP issued $150 million of 8 3/4% Senior Subordinated
Notes, using the proceeds to reduce other indebtedness.
Publicly owned FRP units have cumulative rights to receive quarterly
distributions of 60 cents per unit through the distribution for the quarter
ending December 31, 1996 (the Preference Period) before any distributions may
be made to FTX. On July 21, 1995, FRP declared a distribution of 60 cents per
publicly held unit ($30.2 million) and 27 cents per FTX-owned unit ($14.6
million), payable August 15, 1995, bringing the total unpaid distribution due
FTX to $368.8 million. Unpaid distributions due FTX will be recoverable from
one-half of the excess of future quarterly FRP distributions over 60 cents per
unit for all units. The July 1995 distributable cash included $38.1 million
from IMC-Agrico. FRP's future distributions will be dependent on the
distributions received from IMC-Agrico and future cash flow from FRP's sulphur
and oil operations.
On July 5, 1995, FTX completed a plan to separate its two principal
businesses, copper/gold and agricultural minerals, into two independent
financial and operating entities. In connection with this restructuring plan,
the existing FTX revolving credit agreement in which FRP participated was
replaced with a new facility for FRP and FTX which will provide greater access
to credit markets and reduce financing costs (Notes 2). FRP believes that its
short-term cash requirements will be met from internally generated funds and
borrowings under this new credit facility ($216 million available as of
July 31, 1995).
-------------------------------
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) No reports on Form 8-K were filed by the registrant during the
quarter for which this report is filed.
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: August 11, 1995
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
EXHIBIT INDEX
-------------
Sequentially
Numbered
Number Description Page
- ------ ----------- ------------
27.1 Freeport-McMoRan Resource Partners, Limited
Partnership Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 14,461
<SECURITIES> 0
<RECEIVABLES> 38,622
<ALLOWANCES> 0
<INVENTORY> 105,800
<CURRENT-ASSETS> 177,045
<PP&E> 1,804,570
<DEPRECIATION> 867,085
<TOTAL-ASSETS> 1,172,211
<CURRENT-LIABILITIES> 98,892
<BONDS> 344,409
<COMMON> 423,512
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,172,211
<SALES> 487,468
<TOTAL-REVENUES> 487,468
<CGS> 358,982
<TOTAL-COSTS> 358,982
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,577
<INCOME-PRETAX> 87,258
<INCOME-TAX> 0
<INCOME-CONTINUING> 87,258
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87,258
<EPS-PRIMARY> .84
<EPS-DILUTED> 0
</TABLE>
