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, 1996
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,
1996 1995
---------- ----------
(In Thousands)
ASSETS
Current assets:
Cash and short-term investments $ 23,907 $ 22,508
Accounts receivable 71,532 81,101
Inventories 134,399 119,010
Prepaid expenses and other 1,953 3,692
---------- ----------
Total current assets 231,791 226,311
Property, plant and equipment, net 937,062 949,131
Other assets 50,948 53,663
---------- ----------
Total assets $1,219,801 $1,229,105
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued
liabilities $ 125,868 $ 127,020
Long-term debt, less current
portion 390,501 384,241
Reclamation and mine shutdown
reserves 105,555 112,788
Accrued postretirement benefits
and other liabilities 198,003 200,590
Partners' capital 399,874 404,466
---------- ----------
Total liabilities and
partners' capital $1,219,801 $1,229,105
========== ==========
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,
-----------------------
1996 1995
---------- ----------
(In Thousands, Except
Per Unit Amounts)
Revenues $ 256,661 $ 254,265
Cost of sales:
Production and delivery 169,684 171,950
Depreciation and amortization 10,934 13,941
---------- ----------
Total cost of sales 180,618 185,891
Gain on IMC-Agrico investment (11,917) -
General and administrative
expenses 16,499 14,059
---------- ----------
Total costs and expenses 185,200 199,950
---------- ----------
Operating income 71,461 54,315
Interest expense, net (8,205) (7,854)
Other income (expense), net (595) (129)
---------- ----------
Net income $ 62,661 $ 46,332
========== ==========
Net income per unit $.61 $.45
==== ====
Average units outstanding 103,466 103,554
======= =======
Distributions paid per
publicly held unit $.625 $.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,
------------------------
1996 1995
---------- ----------
(In Thousands)
Cash flow from operating activities:
Net income $ 62,661 $ 46,332
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 10,934 13,941
Gain on IMC-Agrico investment (11,917) -
Cash distribution from
IMC-Agrico in excess of
interest in capital 11,777 12,800
Reclamation and mine shutdown
expenditures (2,411) (2,121)
(Increase) decrease in working
capital, net of effect of
acquisitions:
Accounts receivable 9,530 5,907
Inventories (15,389) 6,066
Prepaid expenses and other 1,739 798
Accounts payable and
accrued liabilities (2,509) 7,530
Other 3,647 4,788
---------- ----------
Net cash provided by
operating activities 68,062 96,041
---------- ----------
Cash flow from investing activities:
Capital expenditures (7,501) (6,367)
Sale of assets 4,000 -
---------- ----------
Net cash used in
investing activities (3,501) (6,367)
---------- ----------
Cash flow from financing activities:
Distributions to partners (67,253) (44,162)
Repayments of debt, net (143,740) (25,884)
Proceeds from sale of 7%
Senior Notes 147,831 -
Purchase of Partnership units - (2,061)
---------- ----------
Net cash used in
financing activities (63,162) (72,107)
---------- ----------
Net increase in cash and
short-term investments 1,399 17,567
Cash and short-term investments
at beginning of year 22,508 9,859
---------- ----------
Cash and short-term investments
at end of period $ 23,907 $ 27,426
========== ==========
The accompanying notes are an integral part of these financial
statements.
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. LONG-TERM DEBT
In February 1996, Freeport-McMoRan Resource Partners, Limited
Partnership (FRP) sold $150 million of its 7% Senior Notes due 2008.
Net proceeds of $147.8 million were used to reduce bank indebtedness.
Following the sale of the 7% Senior Notes, the committed amount under
FRP's credit facility was reduced from $400 million to $300 million.
As of March 31, 1996, $240 million was available under the credit
facility.
2. INVESTMENT IN IMC-AGRICO COMPANY
In March 1996, FRP and its joint venture partner in IMC-Agrico
increased FRP's ownership in IMC-Agrico by 0.85 percent. As a result,
FRP recognized a gain of $11.9 million resulting from the increased
share of IMC-Agrico's net assets.
3. RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the first three months of
1996 and 1995 was 7.8 to 1 and 6.2 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 1995 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
--------------------
1996 1995
------- -------
(In Millions, Except
Per Unit Amounts)
Revenues $ 256.7 $ 254.3
Operating income 71.5 54.3
Net income 62.7 46.3
Net income per unit .61 .45
Freeport-McMoRan Resource Partners, Limited Partnership (FRP)
operating results for the first quarter of 1996 benefited from higher
earnings at both its agricultural minerals and oil operations. The
improvement in earnings was caused by an increase in average phosphate
fertilizer and oil realizations from their 1995 period levels.
Additionally, FRP recognized an $11.9 million gain resulting from the
increase in FRP's ownership of IMC-Agrico Company (Note 2). Partially
offsetting these positive factors were lower sales volumes for each of
FRP's products and charges totaling $3.0 million representing
miscellaneous asset valuations at IMC-Agrico.
Depreciation and amortization for the 1996 quarter decreased $3.0
million from the 1995 period amount, primarily attributable to a $2.3
million decline related to FRP's disproportionate interest in the IMC-
Agrico joint venture cash distributions and a $1.1 million reduction
from Main Pass oil operations caused by the decline in sales volumes
between periods. These decreases were partially offset by
depreciation totaling $0.6 million associated with the Mallinckrodt
animal feed ingredients operations purchased in October 1995.
First-quarter 1996 general and administrative expenses rose $2.4
million from the 1995 quarter amount. Costs of stock appreciation
rights, caused by the increase in the Freeport-McMoRan Inc. (FTX)
common stock price during the periods, totaled $2.0 million in the
1996 quarter versus $1.2 million in the 1995 quarter. The 1996
quarter also includes the Mallinckrodt operations, whereas the 1995
period included a $1.2 million charge for the reorganization of IMC-
Agrico's marketing function.
Agricultural Minerals Operations - FRP's agricultural minerals
operations, which includes its fertilizer and phosphate rock
operations (conducted through IMC-Agrico) and its sulphur business,
reported first-quarter 1996 operating income of $76.2 million on
revenues of $247.2 million compared with operating income of $55.4
million on revenues of $244.7 million for the 1995 period.
Significant items impacting operating income are as follows (in
millions):
Agricultural minerals operating income -1995 $ 55.4
------
Increases (decreases):
Sales volumes (37.3)
Realizations 43.1
Other (3.3)
------
Revenue variance 2.5
Cost of sales 4.4a
Gain on IMC-Agrico investment 11.9
General and administrative 2.0
------
20.8
------
Agricultural minerals operating income -1996 $ 76.2
======
a. Includes a reduction to depreciation of $7.1 million and $4.8
million for the first quarter of 1996 and 1995, respectively, caused
by FRP's disproportionate interest in IMC-Agrico cash distributions.
First-quarter 1996 also includes $3.0 million of asset valuation
charges from IMC-Agrico.
FRP's first-quarter 1996 phosphate fertilizer sales volumes were
12 percent lower than those in the 1995 period, as IMC-Agrico
experienced reduced demand for diammonium phosphate (DAP), its
principal fertilizer product. Although IMC-Agrico's export sales
continued strong because of its 1996 sales agreement with China,
domestic sales declined as dealers, whose inventories were sufficient
for the start of the cooler than normal spring season, delayed
purchases. This decline in demand prompted IMC-Agrico to temporarily
idle its Taft, Louisiana phosphate fertilizer facility in mid-March
and reduce DAP production at its New Wales, Florida facility in mid-
April to manage its increasing product inventory. Although fertilizer
prices weakened late in the first quarter of 1996, FRP's average DAP
realization for the current quarter increased 22 percent from year-ago
levels resulting in improved cash margins. The price improvement was
primarily the result of the tight supply/demand situation experienced
during late 1995 that moved prices higher into early 1996.
Additionally, because of a change in contract terms, FRP's 1996 DAP
sales included large volumes to China at market-related prices at the
time of shipment, whereas contracted sales to China in 1995 were made
at prices which ultimately were below market at the time of shipment.
FRP's phosphate fertilizer unit production costs were higher than in
the 1995 period, primarily reflecting increased costs for phosphate
rock.
Near-term sales volumes are expected to be seasonally strong as
U.S. farmers begin planting. Record high grain prices combined with
higher planted acreage should yield above normal product movement to
the field during the second quarter. Fertilizer prices for the
balance of the year will depend on developments during the growing
season and the level of demand in export markets. The long-term
fundamental market outlook remains favorable considering record low
global grain stocks and higher commodity prices. As a result, global
phosphate fertilizer demand is expected to continue to increase.
FRP's current quarter phosphate rock sales volumes declined 44
percent primarily reflecting the previously reported October 1995
expiration of a contract providing annual sales of 1.5 million tons
net to FRP. Because the expired contract was priced on a cost-plus
formula that resulted in below market realizations, the impact to
earnings was not significant and caused a 24 percent increase in
first-quarter 1996 average realizations. Also contributing to the
reduction in sales volumes were lower sales in the export market.
Phosphate rock sales volumes are expected to decline further,
beginning in the second half of 1996, as IMC-Agrico does not intend to
renew certain long-term sales contracts as they expire in order to
maximize the value of its phosphate rock reserves through internal
use.
FRP's first-quarter 1996 sulphur sales volumes declined slightly
from the 1995 quarter level, which benefited from reduced domestic
recovered sulphur production. FRP's sulphur realizations rose
slightly from the year-ago period. FRP reduced its sulphur production
in mid-March by approximately 0.2 million tons annually in response to
prospects for lower domestic sulphur demand from phosphate fertilizer
producers. FRP's future sulphur sales volumes and realizations will
continue to depend on the level of demand from the domestic phosphate
fertilizer industry and the supply of recovered sulphur.
First Quarter
------------------------------
1996 1995
--------- ----------
Phosphate fertilizers -primarily DAP
Sales (short tons) a 790,000 899,900
Average realized price b
All phosphate fertilizers $197.08 $163.80
DAP 205.56 169.18
Phosphate rock
Sales (short tons) a 751,800 1,338,700
Average realized price b $26.28 $21.12
Sulphur
Sales (long tons) c 738,100 760,600
a. Reflects FRP's 43.6 percent and 45.1 percent share of the IMC-
Agrico assets for the years ended June 30, 1996 and 1995,
respectively.
b. Represents average realization f.o.b. plant/mine.
c. Includes internal consumption totaling 186,000 tons and 178,900
tons for the first quarter of 1996 and 1995, respectively.
Oil Operation -
First Quarter
-----------------------
1996 1995
-------- --------
Sales (barrels) 542,200 620,800
Average realized price $17.45 $15.36
Operating income
(in millions) $2.2 $1.1
Main Pass oil production declined from the 1995 period, although
improving slightly from the previous quarter. Net production for 1996
is expected to be slightly lower than 1995 levels. Main Pass
operating income benefited from a $2.09 per barrel increase in average
realizations caused by a similar rise in world market prices.
CAPITAL RESOURCES AND LIQUIDITY
Net cash provided by operating activities during the first three
months of 1996 declined to $68.1 million, compared with $96.0 million
in the 1995 period, primarily caused by the increase in product
inventories discussed earlier. Net cash used in investing activities
was $3.5 million compared with $6.4 million in the 1995 quarter.
Based on current estimates, capital expenditures for 1996 will
approximate $40 million. Net cash used in 1996 financing activities
totaled $63.2 million versus $72.1 million in the 1995 period.
Distributions to partners rose in 1996, reflecting the continued
public unitholder distributions and an increased level of
distributions paid to FTX. In early 1996, FRP issued $150 million of
7% Senior Notes, using the proceeds to reduce bank indebtedness,
thereby lengthening the maturity and fixing the interest rate on a
significant portion of FRP's remaining bank debt. FRP believes that
its short-term cash requirements will be met from internally generated
funds and borrowings under its credit facility ($225 million of
additional borrowings available at April 19, 1996).
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 before any distributions may
be made to FTX. On April 19, 1996, FRP declared a distribution of 61
cents per publicly held unit ($30.6 million) and 63 cents per FTX-
owned unit ($33.6 million), payable May 15, 1996, reducing the unpaid
distributions to FTX by $1.0 million. The remaining $378.9 million of
unpaid distributions to FTX are recoverable from one-half of any
excess of future quarterly FRP distributions over 60 cents per unit
for all units. FRP's future distributions will be dependent on the
distributions received from IMC-Agrico and cash flow from FRP's
sulphur and oil operations.
Distributable cash in April 1996 included $69.3 million from IMC-
Agrico. Future distributions from IMC-Agrico will depend primarily on
the phosphate fertilizer market, discussed earlier, and FRP's share of
IMC-Agrico cash distributions (Current Interest). In March 1996, FRP
and its joint venture partner in IMC-Agrico amended the IMC-Agrico
Partnership Agreement to (1) increase FRP's ownership in IMC-Agrico by
0.85 percent, (2) alter the management structure of the joint venture
and (3) modify certain product pricing arrangements between IMC-Agrico
and other of the joint venture partner's business units. As a result,
FRP's Current Interest is presently 53.95 percent through June 30,
1996, changing to 54.35 percent for the twelve months ended June 30,
1997 and declining to 41.45 percent thereafter. The partnership
agreement changes were made in recognition of changes in IMC-Agrico's
business and in connection with a merger transaction between the joint
venture partner and another company.
-------------------------------
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: April 26, 1996
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
EXHIBIT INDEX
-------------
Sequentially
Numbered
Number Description Page
- ------ ----------- ----
27.1 Financial Data Schedule
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<ARTICLE> 5
<CIK> 0000793421
<NAME> FREEPORT-MCMORAN RESOURCE PARTNERS LIMITED PARTNERSHIP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 23,907
<SECURITIES> 0
<RECEIVABLES> 52,087
<ALLOWANCES> 0
<INVENTORY> 134,399
<CURRENT-ASSETS> 231,791
<PP&E> 1,828,851
<DEPRECIATION> 891,789
<TOTAL-ASSETS> 1,219,801
<CURRENT-LIABILITIES> 125,868
<BONDS> 390,501
0
0
<COMMON> 399,874
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,219,801
<SALES> 256,661
<TOTAL-REVENUES> 256,661
<CGS> 180,618
<TOTAL-COSTS> 180,618
<OTHER-EXPENSES> (11,917)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,205
<INCOME-PRETAX> 62,661
<INCOME-TAX> 0
<INCOME-CONTINUING> 62,661
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 62,661
<EPS-PRIMARY> .61
<EPS-DILUTED> 0
</TABLE>
