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, 1997
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__
<PAGE> 1
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 7
Report of Independent Public Accountants 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other Information 14
Signature 15
Exhibit Index E-1
<PAGE> 2
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS (Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
<S> ---------- ----------
ASSETS (In Thousands)
Current assets: <C> <C>
Cash and cash equivalents $ 5,202 $ 19,395
Accounts receivable 66,355 70,598
Inventories 159,640 141,158
Prepaid expenses and other 4,635 4,845
---------- ----------
Total current assets 235,832 235,996
Property, plant and equipment, net 890,744 919,237
Other assets 47,793 44,545
---------- ----------
Total assets $1,174,369 $1,199,778
========== ==========
LIABILITIESANDPARTNERS'CAPITAL
Accounts payable and accrued
liabilities $ 143,328 $ 146,939
Long-term debt, less current portion 396,941 403,030
Reclamation and mine shutdown
reserves 96,571 96,135
Accrued postretirement benefits
and other liabilities 193,121 194,026
Partners' capital 344,408 359,648
---------- ----------
Total liabilities and partners'
capital $1,174,369 $1,199,778
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 3
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -----------------------
1997 1996 1997 1996
--------- ---------- ---------- ---------
(In Thousands, Except Per Unit Amounts)
<S> <C> <C> <C> <C>
Revenues $ 228,827 $ 242,688 $ 440,597 $ 499,349
Cost of sales:
Production and
delivery 160,862 172,482 307,381 342,166
Depreciation and
amortization 15,604 8,841 24,080 19,775
---------- ---------- ---------- ----------
Total cost of
sales 176,466 181,323 331,461 361,941
Gain on IMC-Agrico
investment - - - (11,917)
Exploration
expenses - - 6,222 -
General and
administrative
expenses 12,807 13,467 25,252 29,966
---------- ---------- ---------- ----------
Total costs and
expenses 189,273 194,790 362,935 379,990
---------- ---------- ---------- ----------
Operating income 39,554 47,898 77,662 119,359
Interest expense,
net (8,488) (8,570) (16,989) (16,775)
Other income
(expense), net (473) 209 (848) (386)
---------- ---------- ---------- ----------
Net income $ 30,593 $ 39,537 $ 59,825 $ 102,198
========== ========== ========== ==========
Net income per unit $.30 $.38 $.58 $.99
==== ==== ==== ====
Average units
outstanding 103,466 103,466 103,466 103,466
======= ======= ======= =======
Distributions paid
per publicly held
unit $.31 $.61 $.91 $1.235
==== ==== ==== ======
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 4
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOW (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------
1997 1996
---------- ----------
<S> (In Thousands)
Cash flow from operating activities: <C> <C>
Net income $ 59,825 $ 102,198
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 24,080 19,775
Gain on IMC-Agrico investment - (11,917)
Oil and gas exploration expenses 6,222 -
Cash distributions from IMC-Agrico
in excess of interest in capital 22,816 24,897
Reclamation and mine shutdown
expenditures (11,726) (6,476)
(Increase) decrease in working
capital:
Accounts receivable 4,243 2,059
Inventories (18,482) (17,644)
Prepaid expenses and other 211 (914)
Accounts payable and accrued
liabilities 550 (2,838)
Other 2,316 11,385
---------- ----------
Net cash provided by operating
activities 90,055 120,525
---------- ----------
Cash flow from investing activities:
Capital expenditures (23,137) (16,649)
Sale of assets and other - 4,000
---------- ----------
Net cash used in investing
activities (23,137) (12,649)
---------- ----------
Cash flow from financing activities:
Distributions to partners (75,065) (131,402)
Proceeds from debt 80,080 143,591
Repayments of debt (86,126) (283,137)
Proceeds from sale of 7%
Senior Notes - 147,831
---------- ----------
Net cash used in financing
activities (81,111) (123,117)
---------- ----------
Net decrease in cash and cash
equivalents (14,193) (15,241)
Cash and cash equivalents at
beginning of year 19,395 22,508
---------- ----------
Cash and cash equivalents at
end of period $ 5,202 $ 7,267
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 5
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. FTX AGREEMENT TO MERGE
On July 28, 1997, Freeport-McMoRan Inc. (FTX) and IMC Global Inc.
(IGL) announced an agreement to merge, with IGL as the surviving
entity. The proposed combination, subject to negotiation of a
definitive agreement and appropriate approvals, will involve the
exchange of FTX common shares for 0.9 common shares of IGL stock plus
a three-year warrant to purchase one-third of a share of IGL common
stock at a price of $44.50 per share. The merger transaction will
also involve the transfer of the Freeport-McMoRan Resource Partners,
Limited Partnership's (FRP) sulphur business, including its 58.3
percent interest in the Main Pass 299 sulphur and oil property,
together with IGL's 25 percent interest which IGL will relinquish to
FRP, to a new entity whose common stock will be distributed to FRP
unitholders, including FTX. FTX will distribute the stock to its
stockholders. The definitive merger agreement is expected to be
completed within approximately 30 days, with completion of the merger
transaction by the end of 1997.
2. OIL AND GAS EXPLORATION INVESTMENT
In March 1997, FRP entered into an agreement with McMoRan Oil & Gas
Co. (MOXY), pursuant to which FRP acquired an interest in seven leases
awarded to MOXY at the OCS Lease Sale 166 held in March 1997 for $5.5
million. In July 1997, FRP and MOXY also agreed to a multi-year
aggregate $200 million oil and gas exploration program (MOXY/FRP
Exploration Program) to explore and develop prospects primarily
offshore in the Gulf of Mexico and onshore in the Gulf Coast area.
FRP and MOXY will fund 60 percent and 40 percent, respectively, of the
exploration costs and all revenues and other costs will be shared
equally.
Additionally, during August 1997, FRP purchased from MCN Energy
Group Inc. (MCN), MCN's 60 percent interest in the MOXY/MCN offshore
exploration program (MOXY/MCN program) which includes two producing
oil and gas fields, an inventory of eight exploration prospects in the
offshore Gulf of Mexico and MOXY's program debt of approximately $12.4
million owed to MCN for a total of $46.4 million, subject to
adjustments. Subject to completion of MOXY's recapitalization
described below, MOXY will acquire the two producing properties from
FRP for $26.0 million, subject to certain adjustments, and repay FRP
for MOXY's debt under the MOXY/MCN program. FRP and MOXY will
contribute their interests in the MOXY/MCN program exploration
properties and their interests in the seven offshore leases discussed
above to the MOXY/FRP Exploration Program.
To provide capital for these transactions, MOXY intends to
undertake a $100 million rights offering pursuant to which MOXY
anticipates issuing approximately 28.6 million shares of common stock.
FRP has agreed to purchase at the $3.50 per share subscription price
all shares that are offered but not purchased by rights holders. Upon
closing of the MOXY rights offering, FRP will receive from MOXY a fee
of $6 million. Additionally, if FRP does not acquire at least 30
percent of MOXY's outstanding common stock in the rights offering, FRP
will have the option to purchase at $3.50 per share up to a 30 percent
ownership interest in MOXY. These transactions are subject to
approval by MOXY's stockholders.
The proposed merger between FTX and IGL, discussed in Note 1,
will have no effect on the proposed oil and gas exploration program
and other transactions between FRP and MOXY.
3. SRI LANKA PROJECT
In March 1997, FRP was reimbursed $2.9 million for previously incurred
expenses as a result of IMC-Agrico's participation in the potential
phosphate mine and upgrading project in Sri Lanka. This project would
be undertaken through a joint venture involving the Government of Sri
Lanka, IMC-Agrico and another party.
4. NORTH BAY JUNOP EXPLORATION CHARGE
In April 1997, FRP's 25 percent owned oil and gas exploration joint
venture with Phillips Petroleum Company and MOXY completed drilling of
its exploratory well on the North Bay Junop prospect, the second of
two high-risk, high-potential prospects which have been drilled within
the joint venture's project area in south Louisiana. The well reached
total depth but did not encounter commercial hydrocarbons in the
primary objective zones, resulting in a first-quarter 1997 charge to
exploration expense of $6.2 million.
<PAGE> 6
5. NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 130 (SFAS 130),
"Reporting Comprehensive Income," and SFAS 131, "Disclosures About
Segments of an Enterprise and Related Information." SFAS 130
establishes standards for the reporting and display of comprehensive
income in the financial statements. Comprehensive income is the total
of net income and all other non-owner changes in equity. SFAS 131
requires that companies disclose segment data based on how management
makes decisions about allocating resources to segments and measuring
their performance. SFAS 130 and 131 are effective for 1998. Adoption
of these standards is expected to result in additional disclosures,
but will not have an effect on FRP's financial position or results of
operations.
6. RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the first six months of
1997 and 1996 was 4.2 to 1 and 6.5 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 1996 Annual Report to
unitholders included 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.
<PAGE> 7
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Freeport-McMoRan Resource
Partners, Limited Partnership:
We have reviewed the accompanying condensed balance sheet of Freeport-
McMoRan Resource Partners, Limited Partnership (the Partnership), a
Delaware Partnership, as of June 30, 1997, and the related statements
of operations for the three-month and six-month periods ended June 30,
1997 and 1996 and the statements of cash flow for the six-month
periods ended June 30, 1997 and 1996. These financial statements are
the responsibility of the General Partner's management. We did not
review the interim financial information of IMC-Agrico Company (the
Joint Venture). The Partnership's share of the Joint Venture
constitutes 50 percent of total assets as of June 30, 1997, and 82
percent of the Partnership's total revenues for the periods ended June
30, 1997 and 1996. Those statements were reviewed by other
accountants whose report covering their review has been furnished to
us.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review and the report of other accountants, we are not
aware of any material modifications that should be made to the
financial statements referred to above for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the balance sheet of Freeport-McMoRan Resource
Partners, Limited Partnership as of December 31, 1996, and the related
statements of operations, cash flow and changes in partners' capital
for the year then ended (not presented herein), and in our report
dated January 21, 1997, based on our audit and the report of other
auditors, we expressed an unqualified opinion on those financial
statements. In our opinion, the information set forth in the
accompanying condensed balance sheet as of December 31, 1996, is
fairly stated, in all material respects, in relation to the balance
sheet from which it has been derived.
ARTHUR ANDERSEN LLP
New Orleans, Louisiana,
July 22, 1997
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
FTX AGREEMENT TO MERGE
On July 28, 1997, Freeport-McMoRan Inc. (FTX) and IMC Global Inc.
(IGL) announced an agreement to merge, with IGL as the surviving
entity. The proposed combination, subject to negotiation of a
definitive agreement and appropriate approvals, will involve the
exchange of FTX common shares for 0.9 common shares of IGL stock plus
a three-year warrant to purchase one-third of a share of IGL common
stock at a price of $44.50 per share. The merger transaction will
also involve the transfer of the Freeport-McMoRan Resource Partners,
Limited Partnership's (FRP) sulphur business, including its 58.3
percent interest in the Main Pass 299 sulphur and oil property,
together with IGL's 25 percent interest which IGL will relinquish to
FRP, to a new entity whose common stock will be distributed to FRP
unitholders, including FTX. FTX will distribute the stock to its
stockholders. The definitive merger agreement is expected to be
completed within approximately 30 days, with completion of the merger
transaction by the end of 1997.
OVERVIEW
FRP, through its subsidiaries and joint venture operations, is one of
the world's leading integrated phosphate fertilizer producers. FRP is
a joint venture partner in IMC-Agrico Company, the world's largest and
one of the lowest cost producers, marketers and distributors of
phosphate fertilizers. IMC-Agrico's business also includes the mining
and sale of phosphate rock and the production, marketing and
distribution of animal feed ingredients. FRP's Main Pass sulphur
mine, offshore Louisiana in the Gulf of Mexico, and its Culberson mine
in Texas also make FRP the largest producer of Frasch sulphur in the
world. Main Pass also contains proved oil reserves that FRP produces
and sells for the Main Pass joint venture.
The combined sulphur, phosphate mining and fertilizer production
operations provide FRP with the competitive advantages of vertical
integration and operating efficiencies and reduce the sensitivity of
FRP's phosphate fertilizer costs to changes in raw material prices.
FRP also believes that the strategic location of IMC-Agrico's
fertilizer operations, both in Florida and on the Mississippi River,
provide it with a competitive advantage over other fertilizer
producers.
Management has been able to move forward on several growth
opportunities during 1997 as follows:
* In March 1997, FRP, a significant consumer of natural gas in its
sulphur and fertilizer operations, entered into an agreement with
McMoRan Oil & Gas Co. (MOXY) pursuant to which FRP acquired an
interest in seven leases awarded to MOXY at the OCS Lease Sale 166
held in March 1997 for $5.5 million. In July 1997, FRP and MOXY also
agreed to a multi-year aggregate $200 million oil and gas exploration
program (MOXY/FRP Exploration Program) to explore and develop
prospects primarily offshore in the Gulf of Mexico and onshore in the
Gulf Coast area. FRP and MOXY will fund 60 percent and 40 percent,
respectively, of the exploration costs and all revenues and other
costs will be shared equally.
Additionally, during August 1997, FRP purchased from MCN Energy Group
Inc. (MCN), MCN's 60 percent interest in the MOXY/MCN offshore
exploration program (MOXY/MCN Program) which includes two producing
oil and gas fields, an inventory of eight exploration prospects in the
offshore Gulf of Mexico and MOXY's program debt of approximately $12.4
million owed to MCN for a total of $46.4 million, subject to
adjustments. Subject to completion of MOXY's recapitalization
described below, MOXY will acquire the two producing properties from
FRP for $26.0 million, subject to certain adjustments, and repay FRP
for MOXY's debt under the MOXY/MCN Program. FRP and MOXY will
contribute their interests in the MOXY/MCN Program exploration
properties and their interests in the seven offshore leases discussed
above to the MOXY/FRP Exploration Program.
To provide capital for these transactions, MOXY intends to undertake a
$100 million rights offering pursuant to which MOXY anticipates
issuing approximately 28.6 million shares of common stock. FRP has
agreed to purchase at the $3.50 per share subscription price all
shares that are offered but not purchased by rights holders. Upon
closing of the rights offering, FRP will receive from MOXY a fee of $6
million. Additionally, if FRP does not acquire at least 30 percent of
MOXY's outstanding common stock in the rights offering, FRP will have
the option to purchase at $3.50 per share up to a 30 percent ownership
interest in MOXY. These transactions are subject to approval by
MOXY's stockholders.
<PAGE> 9
The merger between FTX and IGL, discussed above, will have no
effect on the proposed oil and gas exploration program and other
transactions between FRP and MOXY.
* In March 1997, FRP was reimbursed $2.9 million for previously
incurred expenses as a result of IMC-Agrico's participation in the
potential phosphate mine and upgrading project in Sri Lanka. This
project would be undertaken through a joint venture involving the
Government of Sri Lanka, IMC-Agrico and another party. Because of the
strategic location of this project in close proximity to Asian
customers, it would have potentially favorable economic competitive
advantages. Project evaluation continues.
RESULTS OF OPERATIONS
Second Quarter Six Months
------------------------- -----------------------
1997 1996 1997 1996
----------- ----------- ---------- ---------
(In Millions)
Revenues $ 228.8 $ 242.7 $ 440.6 $ 499.3
Operating income 39.1 47.9 77.2 119.4
Net income 30.1 39.5 59.3 102.1
FRP's operating results for the second quarter of 1997 were affected
by lower average realizations on its phosphate fertilizer, phosphate
rock, sulphur and oil sales, as well as reduced sales volumes for
phosphate rock and oil. For the six-month 1997 period, FRP
experienced lower average realizations on its phosphate fertilizer,
phosphate rock and sulphur sales, combined with reduced production and
sales volumes for phosphate fertilizer, phosphate rock and oil. The
six-month 1997 period includes a $6.2 million charge for oil and gas
exploration costs and a $2.9 million credit for reimbursement of
previously incurred expenses as a result of IMC-Agrico's participation
in a potential phosphate mine and upgrading project in Sri Lanka. The
six-month 1996 period included an $11.9 million gain from the increase
in FRP's ownership of IMC-Agrico and charges totaling $3.0 million for
asset valuations at IMC-Agrico.
Depreciation and amortization for the current quarter increased
$6.8 million from the 1996 period amount. This rise is attributable
primarily to a $3.2 million increase related to FRP's disproportionate
interest in the IMC-Agrico cash distributions and $3.7 million in
nonrecurring charges from IMC-Agrico, partially offset by a decline in
unit-of-production depreciation of $1.5 million from Main Pass oil
operations caused by lower volumes. For the six-month 1997 period,
depreciation and amortization rose $4.3 million primarily because of a
$3.4 million increase related to FRP's disproportionate interest in
the IMC-Agrico cash distributions and $3.7 million in nonrecurring
charges from IMC-Agrico, partially offset by a reduction of $3.4
million from Main Pass oil operations.
General and administrative expenses for the six-month 1997 period
declined $4.7 million from the 1996 period. A majority of the
decrease related to lower stock appreciation rights costs charged by
FTX in 1997.
Agricultural Minerals Operations - FRP's agricultural minerals
operations, which include its fertilizer and phosphate rock operations
(conducted through IMC-Agrico) and its sulphur business, reported
second-quarter 1997 operating income of $42.2 million on revenues of
$221.1 million compared with operating income of $50.1 million on
revenues of $233.0 million for the 1996 period. Operating income for
the first six months of 1997 was $84.7 million on revenues of $424.3
million compared with operating income of $126.3 million on revenues
of $480.2 million for the year-ago period. Significant items
impacting operating income follow (in millions):
<PAGE> 10
Second Six
Quarter Months
---------- ----------
Agricultural minerals operating
income -1996 $ 50.1 $ 126.3
---------- ----------
Increases (decreases):
Sales volumes .4 (18.4)
Realizations (12.6) (37.0)
Other .3 (.5)
---------- ----------
Revenue variance (11.9) (55.9)
Cost of sales a 3.9 24.9
Gain on IMC-Agrico investment - (11.9)
General and administrative .1 1.3
---------- ----------
(7.9) (41.6)
---------- ----------
Agricultural minerals operating
income -1997 $ 42.2 $ 84.7
========== ==========
a. Includes a reduction to depreciation of $5.3 million and $8.5
million for the second quarter of 1997 and 1996, respectively, and
$12.4 million and $15.8 million for the six-month period of 1997 and
1996, respectively, caused by FRP's disproportionate interest in IMC-
Agrico cash distributions. These adjustments to depreciation will end
after the third quarter of 1997, when FRP receives its final
disproportionate cash distribution from IMC-Agrico. The six-month
1996 period also includes $3.0 million of asset valuation charges from
IMC-Agrico.
FRP's second-quarter 1997 phosphate fertilizer sales volumes
increased by 3 percent from the year-ago quarter, as North American
demand was very strong and export shipments remained brisk with IMC-
Agrico shipping significant tonnage to China under its 1997/1998 sales
agreement. Average sales prices for phosphate fertilizers for the
quarter were slightly lower than the prior-year period and the
previous quarter. IMC-Agrico resumed full production at its New
Wales, Florida facility in April 1997 in response to strengthened
demand associated with the domestic spring season and new sales to the
international market. Unit production costs for diammonium phosphate
(DAP), IMC-Agrico's principal fertilizer product, declined slightly
from the year-ago quarter primarily as a result of reduced sulphur,
ammonia and processing costs. Near-term unit production costs are
expected to benefit as the full effect of a decline in ammonia prices
which occurred over the past six months is realized.
With very low phosphate fertilizer producer inventories, the
near-term market outlook appears favorable. Even with current
expectations of good crop yields in North America, world grain stocks
should remain at historically low levels. Long-term projected demand
growth, especially in the developing countries of Asia and Latin
America, is expected to require additional supplies of fertilizer
beyond the current production capability of existing facilities.
Additionally, FRP believes higher prices and operating margins are
required before new major phosphate projects are initiated. However,
weather and government policies will continue to cause annual
fluctuations in the overall agricultural and fertilizer supply and
demand situation.
FRP's second-quarter and six-month 1997 phosphate rock sales
volumes declined 25 percent and 20 percent, respectively, over year-
ago levels, as IMC-Agrico continues to limit third-party sales in
order to maximize the long-term value of its reserves through internal
use. This strategy is expected to result in lower sales volumes of
phosphate rock for 1997. Reduced sales volumes and lower realizations
contributed to decreased earnings from phosphate rock operations.
FRP's Main Pass and Culberson sulphur mines continue to operate
at reduced rates in order to match market requirements. FRP's sulphur
realizations for the second quarter of 1997 strengthened, rising 3
percent from the first quarter of 1997, but were 6 percent lower than
the year-ago period. Sulphur sales volumes for the second quarter of
1997 rose 11 percent from the 1996 period, primarily caused by
increased sales to IMC-Agrico. FRP's future sulphur sales
realizations and volumes will continue to depend on the level of
demand from the domestic phosphate fertilizer industry and the
availability of competing supplies from recovered sources. Since
FRP's sulphur consumption approximates its production, a change in the
market price of sulphur does not have a significant effect on
earnings. FRP continues to evaluate its sulphur business strategy in
light of the current sulphur market, including the possibility of
reducing its overall production levels.
<PAGE> 11
Second Quarter Six Months
------------------------- -----------------------
1997 1996 1997 1996
----------- ---------- ---------- ---------
Phosphate
fertilizers
-primarily DAP
Sales (short tons) 833,400 809,900 1,532,900 1,599,900
Average realized
price a
All phosphate
fertilizers $171.77 $174.96 $172.93 $185.88
DAP 175.99 178.37 177.04 192.05
Phosphate rock
Sales
(short tons) 558,300 740,700 1,191,500 1,492,500
Average realized
price a $22.70 $27.27 $23.20 $26.77
Sulphur
Sales
(long tons) b 738,900 665,700 1,476,900 1,403,800
a. Represents average realization f.o.b. plant/mine.
b. Includes internal consumption of 200,600 tons and 169,000 tons
for the second quarter of 1997 and 1996, respectively, and 398,300
tons and 355,000 tons for the six-month period of 1997 and 1996,
respectively.
Oil Operations - Main Pass oil operations achieved the following:
Second Quarter Six Months
------------------------ -----------------------
1997 1996 1997 1996
---------- ---------- ---------- ---------
Sales (barrels) 443,700 502,300 867,500 1,044,500
Average realized
price $17.52 $19.26 $18.78 $18.32
Operating income
(in millions) $1.5 $2.5 $4.2 $4.7
Main Pass operating income for the 1997 period reflects lower
average realizations and reduced production levels. Net production
for 1997 is expected to decline slightly from 1996 levels, as
increased drilling activities at Main Pass are expected to generate
production sufficient to partially offset declining reservoir
production.
In April 1997, FRP's 25 percent owned oil and gas exploration
joint venture with Phillips Petroleum Company and MOXY completed
drilling of an exploratory well on the North Bay Junop prospect. The
well reached total depth but did not encounter commercial hydrocarbons
in the primary objective zones, resulting in a $6.2 million charge to
first-quarter 1997 exploration expense. The well was completed in a
shallower zone with approximately 25 feet of net gas pay. The well
was flow tested at a rate of 5.3 Mmcf of gas and 93 barrels of
condensate per day. Because of the complexity of the salt dome
geology and potentially limited reservoir size, production performance
will be required to determine the reserve volumes associated with this
completion. Other leads within the project area which have been
identified by 3-D seismic survey continue to be evaluated.
As noted earlier, FRP intends to significantly expand its oil and
gas activities through a multi-year aggregate $200 million exploration
program, and potentially significant equity investment, with MOXY.
Pending formation of the MOXY/FRP Exploration Program, FRP's
exploration activities will take place through its recently purchased
interest in the MOXY/MCN Program, which has three prospects scheduled
to initiate exploratory drilling activities during the third quarter
of 1997.
CAPITAL RESOURCES AND LIQUIDITY
As discussed earlier, FTX has announced its intent to merge with IGL,
with IGL as the surviving entity. As part of the merger, FRP's
operations would also be significantly changed. As a result, this
merger would fundamentally change both FTX's and FRP's structure,
capital resources, etc.
On July 22, 1997, FRP declared a distribution of 33 cents per
unit. This cash distribution represents the second distribution
following the end of the public unitholders' preference period in
early 1997. FRP's distributable cash is now shared ratably by FRP's
public unitholders and FTX, except that FTX will be entitled to
receive unpaid cash distributions from previous quarters ($431.3
million unpaid at July 22, 1997) from one-half of the quarterly
distributable cash after the payment of 60 cents per unit to all FRP
unitholders.
FRP's future distributions will depend on the distributions
received from IMC-Agrico, on the cash flow generated from FRP's
sulphur and Main Pass oil operations, the cash requirements of its
expanding oil and gas exploration activities (discussed earlier), and
on the level of and methods of financing its capital expenditure
needs, including reclamation and growth projects. FRP's distributable
cash in July 1997
<PAGE> 12
included $43.7 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). Effective July 1, 1997, FRP's
Current Interest in IMC-Agrico declined from 54.35 percent to 41.45
percent, where FRP's Current Interest is scheduled to remain.
Net cash provided by operating activities during the first six
months of 1997 was $90.1 million, compared with $120.5 million in the
1996 period, primarily reflecting lower earnings. Capital
expenditures for the 1997 period were up from the year-ago level, and
are currently estimated to approximate $80 million for 1997. FRP
believes that its short-term cash requirements will be met from
internally generated funds and borrowings under its credit facility
($258.0 million of additional borrowings available at July 25, 1997).
CAUTIONARY STATEMENT
Management's discussion and analysis contains forward-looking
statements including, without limitation, statements regarding sales
and production volumes, capital expenditures and product markets.
Important factors that might cause future results to differ from these
projections include, without limitation, economic and business
conditions, product market conditions, agricultural conditions and
other factors, many of which are beyond the control of the Company.
Further information regarding these and other factors are described in
more detail under the heading "Cautionary Statement" in FRP's Form 10-
K for the year ended December 31, 1996.
-------------------------------
The results of operations reported and summarized above are not
necessarily indicative of future operating results.
<PAGE> 13
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.
<PAGE> 14
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. Parmelee
-------------------------
Nancy D. Parmelee
Vice President and Controller
(Authorized signatory and
Principal Accounting Officer)
Date: August 14, 1997
<PAGE> 15
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
EXHIBIT INDEX
-------------
Exhibit
Number
- -----
3.1 Amended and Restated Agreement of Limited Partnership of FRP
dated as of May 29, 1987 (the "FRP Partnership Agreement") among FTX,
Freeport Phosphate Rock Company and Geysers Geothermal Company, as
general partners, and Freeport Minerals Company ("FMC"), as general
partner and attorney-in-fact for the limited partners, of FRP.
Incorporated by reference to Exhibit B to the Prospectus dated May 29,
1987 included in FRP's Registration Statement on Form S-1, as amended,
as initially filed with the Commission on May 29, 1987 (Registration
No. 33-13513).
3.2 Amendment to the FRP Partnership Agreement dated as of December
16, 1988 effected by FMC, as Administrative Managing General Partner,
and FTX, as General Partner of FRP. Incorporated by reference to
Exhibit 3.2 to the Annual Report on Form 10-K of FRP for the fiscal
year ended December 31, 1994.
3.3 Amendment to the FRP Partnership Agreement dated as of March 29,
1990 effected by FMC, as Administrative Managing General Partner, and
FTX, as Managing General Partner, of FRP. Incorporated by reference
to Exhibit 19.2 to the Quarterly Report on Form 10-Q of FRP for the
quarter ended March 31, 1990 (the "FRP 1990 First Quarter Form 10-Q").
3.4 Amendment to the FRP Partnership Agreement dated as of April 6,
1990 effected by FTX, as Administrative Managing General Partner of
FRP. Incorporated by reference to Exhibit 19.3 to the FRP 1990 First
Quarter Form 10-Q.
3.5 Amendment to the FRP Partnership Agreement dated as of January
27, 1992 between FTX, as Administrative Managing General Partner, and
FMRP, as Managing General Partner, of FRP. Incorporated by reference
to Exhibit 3.3 to the Annual Report on Form 10-K of FRP for the fiscal
year ended December 31, 1991 (the "FRP 1991 Form 10-K").
3.6 Amendment to the FRP Partnership Agreement dated as of October
14, 1992 between FTX, as Administrative Managing General partner, and
FMRP, as Managing General Partner, of FRP. Incorporated by reference
to Exhibit 3.4 to the Annual Report on Form 10-K of FRP for the fiscal
year ended December 31, 1992 (the "FRP 1992 Form 10-K").
3.7 Amended and Restated Certificate of Limited Partnership of FRP
dated June 12, 1986 (the "FRP Partnership Certificate"). Incorporated
by reference to Exhibit 3.3 to FRP's Registration Statement on Form
S-1, as amended, as initially filed with the Commission on June 20,
1986 (Registration No. 33-5561).
3.8 Certificate of Amendment to the FRP Partnership Certificate dated
as of January 12, 1989. Incorporated by reference to Exhibit 3.6 to
the Annual Report on Form 10-K for the fiscal year ended December 31,
1993 (the "FRP 1993 Form 10-K").
<PAGE> 16
EXHIBIT INDEX
- -------------
3.9 Certificate of Amendment to the FRP Partnership Certificate dated
as of December 29, 1989. Incorporated by reference to Exhibit 19.1 to
the FRP 1990 First Quarter Form 10-Q.
3.10 Certificate of Amendment to the FRP Partnership Certificate
dated as of April 12, 1990. Incorporated by reference to Exhibit 19.4
to the FRP 1990 First Quarter Form 10-Q.
4.1 Deposit Agreement dated as of June 27, 1986 (the "Deposit
Agreement") among FRP, The Chase Manhattan Bank, N.A. ("Chase") and
Freeport Minerals Company ("Freeport Minerals"), as attorney-in-fact
of those limited partners and assignees holding depositary receipts
for units of limited partnership interest in FRP ("Depositary
Receipts"). Incorporated by reference to Exhibit 28.4 to the Current
Report on Form 8-K of FTX dated July 11, 1986.
4.2 Resignation dated December 26, 1991 of Chase as Depositary under
the Deposit Agreement and appointment dated December 27, 1991 of
Mellon Bank, N.A. ("Mellon") as successor Depositary, effective
January 1, 1992. Incorporated by reference to Exhibit 4.5 to the FRP
1991 Form 10-K.
4.3 Service Agreement dated as of January 1, 1992 between FRP and
Mellon pursuant to which Mellon serves as Depositary under the Deposit
Agreement and Custodian under the Custodial Agreement. Incorporated
by reference to Exhibit 4.6 to the FRP 1991 Form 10-K.
4.4 Amendment to the Deposit Agreement dated as of November 18, 1992
between FRP and Mellon. Incorporated by reference to Exhibit 4.4 to
the FRP 1992 Form 10-K.
4.5 Form of Depositary Receipt. Incorporated by reference to Exhibit
4.5 to the FRP 1992 Form 10-K.
4.6 Custodial Agreement regarding the FRP Depositary unit
Reinvestment Plan among FTX, FRP and Chase, effective as of April 1,
1987 (the "Custodial Agreement"). Incorporated by reference to
Exhibit 19.1 to the Quarterly Report on Form 10-Q of FRP for the
quarter ended June 30, 1987.
4.7 FRP Depositary Unit Reinvestment Plan. Incorporated by reference
to Exhibit 4.4 to the FRP 1991 Form 10-K.
4.8 Second Amended and Restated Credit Agreement dated as of November
14, 1996 (the "FTX/FRP Credit Agreement") among FTX, FRP, the various
financial institutions that are parties thereto (the "Banks"), The
Chase Manhattan Bank (successor by merger to Chemical Bank) and The
Chase Manhattan Bank (National Association), as Administrative Agent,
FRP Collateral Agent, FTX Collateral Agent and Documentary Agent.
Incorporated by reference to Exhibit 4.8 to the Annual Report on Form
10-K of FRP for the fiscal year ended December 31, 1996.
4.9 Subordinated Indenture as of October 26, 1990 (the "Subordinated
Indenture") between FRP and Manufacturers Hanover Trust Company
("MHTC") as Trustee. Incorporated by reference to Exhibit 4.11 to the
FRP 1993 Form 10-K.
<PAGE> 17
EXHIBIT INDEX
- -------------
4.10 First Supplemental Indenture dated as of February 15, 1994
between FRP and Chemical Bank, as Successor to MHTC, as Trustee, to
the Subordinated Indenture providing for the issuance of $150,000,000
of aggregate principal amount of 8 3/4% Senior Subordinated Notes due
2004. Incorporated by reference to Exhibit 4.12 to the FRP 1993 Form
10-K.
4.11 Form of Senior Indenture (the "Senior Indenture") from FRP
to Chemical Bank, as Trustee. Incorporated by reference to Exhibit
4.1 to the Current Report on Form 8-K of FRP dated February 13, 1996.
4.12 Form of Supplemental Indenture dated February 14, 1996 from
FRP to Chemical Bank, as Trustee, to the Senior Indenture providing
for the issuance of $150,000,000 aggregate principal amount of 7%
Senior Notes due 2008. Incorporated by reference to Exhibit 4.1 to
the Current Report on Form 8-K dated February 16, 1996 of FRP.
15.1 Letter dated July 22, 1997 from Arthur Andersen LLP
regarding unaudited interim financial statements.
27.1 Financial Data Schedule
Exhibit 15.1
July 22, 1997
Freeport-McMoRan Resource Partners, Limited Partnership
1615 Poydras Street
New Orleans, LA 70112
Gentlemen:
We are aware that Freeport-McMoRan Resource Partners, Limited
Partnership has incorporated by reference in its Registration
Statement (File No. 33-37441) its Form 10-Q for the quarter ended
June 30, 1997, which includes our report dated July 22, 1997 covering
the unaudited interim financial information contained therein.
Pursuant to Regulation C of the Securities Act of 1993 (the Act), this
report is not considered a part of the registration statements
prepared or certified by our firm or a report prepared or certified by
our firm within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
Arthur Andersen LLP
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