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, 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)
March 31, December 31,
1995 1994
---------- ------------
(In Thousands)
ASSETS
Current assets:
Cash and short-term investments $ 27,426 $ 9,859
Accounts receivable 52,298 58,265
Inventories 108,339 109,677
Prepaid expenses and other 551 1,350
---------- ----------
Total current assets 188,614 179,151
Property, plant and equipment, net 952,259 910,469
Other assets 56,733 57,311
---------- ----------
Total assets $1,197,606 $1,146,931
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 92,418 $ 84,888
Long-term debt, less current portion 342,753 368,637
Reclamation and mine shutdown reserves 116,793 96,445
Accrued postretirement benefits and
other liabilities 197,873 149,301
Partners' capital 447,769 447,660
---------- ----------
Total liabilities and partners' capital $1,197,606 $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
March 31,
----------------------
1995 1994
-------- --------
(In Thousands,
Except Per Unit Amounts)
Revenues $254,265 $182,073
Cost of sales:
Production and delivery 171,950 131,841
Depreciation and amortization 13,941 15,511
-------- --------
Total cost of sales 185,891 147,352
General and administrative expenses 14,059 11,270
-------- --------
Total costs and expenses 199,950 158,622
-------- --------
Operating income 54,315 23,451
Interest expense, net (7,854) (7,315)
Other expense, net (129) (2,723)
-------- --------
Net income $ 46,332 $13,413
======== ========
Net income per unit $.45 $.13
==== ====
Average units outstanding 103,554 103,698
======= =======
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,
----------------------
1995 1994
-------- --------
(In Thousands)
Cash flow from operating activities:
Net income $ 46,332 $ 13,413
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 13,941 15,511
Cash distribution from IMC-Agrico in
excess of interest in capital 12,800 6,388
Reclamation and mine shutdown expenditures (2,121) (5,989)
(Increase) decrease in working capital, net of
effects of acquisition:
Accounts receivable 5,907 (2,850)
Inventories 6,066 7,165
Prepaid expenses and other 798 (919)
Accounts payable and accrued liabilities 7,530 7,218
Other 4,788 3,008
-------- --------
Net cash provided by operating activities 96,041 42,945
-------- --------
Cash flow from investing activities:
Capital expenditures (6,367) (2,941)
Sale of assets - 36,910
Other - 530
-------- --------
Net cash provided by (used in) investing
activities (6,367) 34,499
-------- --------
Cash flow from financing activities:
Distributions to partners (44,162) (36,480)
Repayments of debt, net (25,884) (164,924)
Purchase of Partnership units (2,061) -
Proceeds from 8 3/4% Senior subordinated notes - 146,125
-------- --------
Net cash used in financing activities (72,107) (55,279)
-------- --------
Net increase in cash and short-term investments 17,567 22,165
Cash and short-term investments at
beginning of year 9,859 24,448
-------- --------
Cash and short-term investments at end of period $ 27,426 $ 46,613
======== ========
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 (14,216)
Property, plant and equipment 60,054
Accrued long-term liabilities (51,473)
-------
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. RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the first three months of 1995 and
1994 was 6.2 to 1 and 2.8 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
First Quarter
---------------------
1995 1994
------ ------
(In Millions, Except
Per Unit Amounts)
Revenues $254.3 $182.1
Operating income 54.3 23.5
Net income 46.3 13.4
Net income per unit .45 .13
First-quarter 1995 results for Freeport-McMoRan Resource Partners,
Limited Partnership (FRP) reflect the improvement in the phosphate fertilizer
market which began in early 1994 and has continued into 1995. General and
administrative expenses increased because of a $1.2 million charge for the
reorganization of IMC-Agrico Company's marketing function, whereas the 1994
quarter benefited from a $2.2 million reduction in the estimated cost of
excess office space (originally estimated as part of 1993 restructuring
costs).
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 first-quarter 1995 operating income
of $55.4 million on revenues of $244.7 million compared with operating income
of $20.9 million on revenues of $172.5 million for the 1994 period.
Significant items impacting operating income follow (in millions):
Agricultural minerals operating income - 1994 $ 20.9
------
Increases (decreases):
Sales volumes 33.2
Realizations 38.9
Other .1
------
Revenue variance 72.2
Cost of sales (37.4)*
General and administrative and other (.3)
------
34.5
------
Agricultural minerals operating income - 1995 $ 55.4
======
* First-quarter 1995 and 1994 include a reduction to depreciation and
amortization of $4.8 million and $0.9 million, respectively, caused by
FRP's disproportionate interest in IMC-Agrico cash distributions.
FRP's phosphate fertilizer sales volumes were 13 percent higher when
compared to the year-ago quarter, as IMC-Agrico had significantly improved
export sales for diammonium phosphate (DAP), its principal fertilizer product.
Increased industrywide export sales activity, together with strong domestic
fertilizer requirements, caused domestic producer inventories to decline over
10 percent from year-ago levels despite industrywide operating rates at 100
percent. These factors resulted in a continued strengthening of DAP prices
into 1995, with FRP's average DAP realization increasing 21 percent from the
year-ago period (8 percent from the previous quarter). FRP's first-quarter
1995 DAP realizations include a portion of 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.
DAP realizations declined slightly during April but still remain strong.
Near-term sales levels and prices will depend on development of the domestic
planting season and the level of demand in export markets. 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 first-quarter 1995 phosphate rock sales volumes increased 33
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 nearly 6,100 tons per day (TPD)
during the first quarter of 1995, compared with 5,600 TPD during the 1994
quarter. Additionally, FRP's Culberson mine, acquired in January 1995 as part
of the Pennzoil sulphur asset purchase (Note 1), produced an average of 2,200
TPD during the 1995 quarter. FRP's increased production capacity, combined
with continued strong demand from the domestic phosphate fertilizer industry,
resulted in a 48 percent increase in sales volumes. FRP also benefited from
the continued strengthening in Tampa, Florida sulphur prices, with prices
presently about $25 per long ton over year-ago levels. To the extent U.S.
phosphate fertilizer production remains strong, improved sulphur demand is
expected to continue, although the availability of Canadian sulphur impacts
the potential for significant price increases.
First Quarter
---------------------
1995 1994
--------- ---------
Phosphate fertilizers - primarily DAP
Sales (short tons)a 899,900 794,100
Average realized priceb
All phosphate fertilizers $163.80 $134.68
DAP 169.18 139.76
Phosphate rock
Sales (short tons)a 1,338,700 1,006,500
Average realized priceb $21.12 $21.71
Sulphur
Sales (long tons)c 760,600 515,500
a. Reflects FRP's 46.5 percent share of the IMC-Agrico assets for the year
ended June 30, 1994, while FRP received 58.6 percent of the cash flow
generated during such period. FRP's share of the IMC-Agrico assets for
the year ended June 30, 1995 is 45.1 percent, while it will receive 55
percent of the cash flow.
b. Represents average realization f.o.b. plant/mine.
c. Includes 178,900 tons and 187,100 tons for the first quarter of 1995 and
1994, respectively, which represent internal consumption that are not
included in sales for accounting purposes.
Oil Operation -
First Quarter
--------------------
1995 1994
------- -------
Sales (barrels) 620,800 823,200
Average realized price $15.36 $11.65
Operating income (in millions) $1.1 $1.0
Main Pass oil production was below the year-ago quarter level, as
expected. Net production for 1995 is estimated to total approximately 2.4
million barrels, as the benefits of a 1994 redevelopment program are expected
to partially offset declining reservoir production. FRP's first-quarter 1995
average oil realization was higher than the depressed 1994 period amount.
CAPITAL RESOURCES AND LIQUIDITY
Net cash provided by operating activities during the first three months of
1995 increased to $96 million, compared with $42.9 million in the 1994 period,
caused primarily by the improvement in FRP's earnings. Net cash used in
investing activities was $6.4 million in 1995, consisting entirely of capital
expenditures, compared with $34.5 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 $72.1 million, compared with $55.3 million in the 1994
quarter. In early 1994, FRP issued $150 million of 8 3/4% Senior Subordinated
Notes, using the proceeds to reduce other indebtedness. FRP received $37
million of the IMC-Agrico first-quarter 1995 distribution before quarter end
contributing to the 1995 debt reduction.
FRP had agreed in principle to acquire Fertiberia, S.L., the restructured
nitrogen and phosphate fertilizer business of Ercros, S.A., a Spanish
conglomerate. Since September 1993, FRP managed this company with the goal of
establishing Fertiberia as a financially viable concern. In April 1995,
Ercros announced that it was pursuing an offer from Spanish private interests
to acquire the majority of FESA, a subsidiary of Ercros, which includes
Fertiberia and certain other assets and substantial liabilities. FRP is
unwilling to improve the terms for its acquisition of Fertiberia. As a
result, FRP terminated its efforts to acquire Fertiberia. This development
will have no effect on FRP's distributable cash capabilities since any cash
flow which may have been generated by Fertiberia was to have been reinvested
for the foreseeable future.
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 April 18, 1995, FRP declared a distribution of 61.5 cents
per publicly held unit ($30.9 million) and 64.5 cents per FTX-owned unit
($34.3 million), payable May 15, 1995, reducing the unpaid distribution to FTX
by $1.6 million. The remaining $351.5 million of unpaid distributions to FTX
will be recoverable from one-half of the excess of future quarterly FRP
distributions over 60 cents per unit for all units. The April 1995
distributable cash included $63.1 million from IMC-Agrico. As discussed
earlier, IMC-Agrico's first-quarter 1995 operations enjoyed significantly
higher sales volumes and realizations. 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.
FRP believes that its short-term cash requirements will be met from
internally generated funds and borrowings under its existing credit facilities
($310 million available under the FRP credit facility as of March 31, 1995).
FTX is pursuing a plan to separate its two principal businesses, copper/gold
and agricultural minerals, into two independent financial and operating
entities. The plan is contingent on a number of factors and will require a
series of steps to implement over several months. In connection with this
restructuring plan, the existing FTX revolving credit agreement in which FRP
participates is being replaced with a new facility for FRP and FTX which will
provide greater access to credit markets and reduce financing costs.
-------------------------------
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 January 18, 1995,
reporting information under Item 2 and Item 7, and one Form 8-K/A dated
February 23, 1995, reporting information under Item 7 and including the
following financial statements:
Pennzoil Assets Acquired
Balance Sheets as of December 31, 1993 (Audited) and
September 30, 1994 (Unaudited)
Statements of Operations and Divisional Equity for the
Year Ended December 31, 1993 (Audited) and for the
Nine Months Ended September 30, 1994 (Unaudited)
Statements of Cash Flows for the Year Ended
December 31, 1993 (Audited) and for the Nine Months
Ended September 30, 1994 (Unaudited)
Notes to Financial Statements
Freeport-McMoRan Resource Partners, Limited Partnership
Unaudited Pro Forma Statement of Operations for the Year
Ended December 31, 1993
Unaudited Pro Forma Statement of Operations for the Nine
Months Ended September 30, 1994
Unaudited Pro Forma Condensed Balance Sheet as of
September 30, 1994
Notes to Pro Forma Financial Statements
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 25, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 27,426
<SECURITIES> 0
<RECEIVABLES> 36,812
<ALLOWANCES> 0
<INVENTORY> 108,339
<CURRENT-ASSETS> 188,614
<PP&E> 1,803,744
<DEPRECIATION> 851,485
<TOTAL-ASSETS> 1,197,606
<CURRENT-LIABILITIES> 92,418
<BONDS> 342,753
<COMMON> 447,769
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,197,606
<SALES> 254,265
<TOTAL-REVENUES> 254,265
<CGS> 185,891
<TOTAL-COSTS> 185,891
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,854
<INCOME-PRETAX> 46,332
<INCOME-TAX> 0
<INCOME-CONTINUING> 46,332
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,332
<EPS-PRIMARY> .45
<EPS-DILUTED> 0
</TABLE>
