<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
<TABLE>
<S> <C>
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________TO__________
</TABLE>
COMMISSION FILE NUMBER 1-11028
ARCADIAN PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 62-1500798
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
6750 POPLAR AVENUE, SUITE 600
MEMPHIS, TENNESSEE 38138-7419
(Address of principal executive offices)
(Zip Code)
(901) 758-5200
(Registrant's telephone number, including area code)
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 / /
- --------------------------------------------------------------------------------
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<PAGE> 2
ARCADIAN PARTNERS, L.P.
TABLE OF CONTENTS
FOR
QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Independent Auditors' Report.......................................................... 3
Condensed Consolidated Balance Sheet as of June 30, 1996, and December 31, 1995....... 4
Condensed Consolidated Statements of Operations for --
Six Months Ended June 30, 1996 and 1995............................................. 5
Three Months Ended June 30, 1996 and 1995........................................... 6
Condensed Consolidated Statements of Cash Flows for --
Six Months Ended June 30, 1996 and 1995............................................. 7
Three Months Ended June 30, 1996 and 1995........................................... 8
Notes to Condensed Consolidated Financial Statements.................................. 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS......................................... 12
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.............................................. 15
SIGNATURE............................................................................. 16
</TABLE>
1
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
See next page.
2
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
The Partners
Arcadian Partners, L.P.:
We have reviewed the condensed consolidated balance sheet of Arcadian
Partners, L.P. as of June 30, 1996, and the related condensed consolidated
statements of operations and cash flows for the three and six-month periods
ended June 30, 1996 and 1995, in accordance with standards established by the
American Institute of Certified Public Accountants.
A review of interim financial information consists principally of obtaining
an understanding of the system for the preparation of interim financial
information, applying analytical review procedures to financial data, and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit 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, we are not aware of any material modifications that
should be made to the condensed consolidated 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 consolidated balance sheet of Arcadian Partners, L.P. as of
December 31, 1995, and the related consolidated statements of operations,
partners' capital, and cash flows for the year then ended (not presented
herein); and in our report dated February 9, 1996, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 1995, is fairly presented, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
KPMG PEAT MARWICK LLP
Memphis, Tennessee
August 14, 1996
3
<PAGE> 5
ARCADIAN PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30,
1996 DECEMBER 31,
(UNAUDITED) 1995
($000) ($000)
----------- ------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents.......................................... $ 289,221 $ 195,809
Restricted Reserve Accounts........................................ 47,083 50,450
Accounts Receivable, Net........................................... 103,203 108,910
Inventories........................................................ 103,741 136,623
Other.............................................................. 5,401 6,539
---------- ----------
Total Current Assets..................................... 548,649 498,331
Property, Plant and Equipment, Net................................. 555,842 561,979
Other, Net......................................................... 57,261 61,374
---------- ----------
$1,161,752 $1,121,684
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts Payable and Accrued Liabilities........................... $ 121,631 $ 154,272
Current Portion of Long-Term Debt.................................. 15,000 15,000
---------- ----------
Total Current Liabilities................................ 136,631 169,272
---------- ----------
Long-Term Debt, Less Current Portion............................... 510,000 525,000
Deferred Foreign Income Taxes...................................... 46,062 51,566
Other Long-Term Liabilities........................................ 21,811 20,881
---------- ----------
577,873 597,447
---------- ----------
Partners' Capital.................................................. 447,248 354,965
---------- ----------
$1,161,752 $1,121,684
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 6
ARCADIAN PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------
1996 1995
($000) ($000)
-------- --------
<S> <C> <C>
Net Sales............................................................ $641,682 $691,697
Cost of Sales........................................................ 449,013 487,969
-------- --------
Gross Profit....................................................... 192,669 203,728
Selling, General and Administrative Expenses......................... 24,393 28,700
-------- --------
Operating Income................................................... 168,276 175,028
Interest Expense, Net................................................ 20,037 25,571
Other, Net........................................................... 709 323
-------- --------
Income Before Income Taxes and Minority Interest..................... 147,530 149,134
Income Tax Provision................................................. 9,608 12,069
-------- --------
Income Before Minority Interest...................................... 137,922 137,065
Minority Interest in Earnings of Partnership......................... (1,094) (1,098)
-------- --------
Net Income........................................................... $136,828 $135,967
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 7
ARCADIAN PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
-----------------------
1996 1995
($000) ($000)
-------- --------
<S> <C> <C>
Net Sales............................................................ $344,310 $350,567
Cost of Sales........................................................ 240,781 236,563
-------- --------
Gross Profit....................................................... 103,529 114,004
Selling, General and Administrative Expenses......................... 13,262 12,849
-------- --------
Operating Income................................................... 90,267 101,155
Interest Expense, Net................................................ 9,046 12,234
Other, Net........................................................... (327) 138
-------- --------
Income Before Income Taxes and Minority Interest..................... 81,548 88,783
Income Tax Provision................................................. 2,960 2,445
-------- --------
Income Before Minority Interest...................................... 78,588 86,338
Minority Interest.................................................... (640) (699)
-------- --------
Net Income........................................................... $ 77,948 $ 85,639
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 8
ARCADIAN PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
1996 1995
($000) ($000)
-------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income.......................................................... $136,828 $ 135,967
Adjustments to Reconcile Net Income to Cash from Operating
Activities:
Depreciation and Amortization.................................... 30,606 31,044
Amortization of Deferred Financing Costs......................... 1,079 1,319
Minority Interest................................................ 1,094 1,098
Deferred Foreign Income Taxes.................................... (5,504) 6,723
Net Change in Operating Assets and Liabilities:
Short-Term Investments......................................... -- 8,751
Accounts Receivable............................................ 5,707 26,714
Inventories.................................................... 32,882 29,436
Other Current Assets........................................... 1,138 (5,871)
Accounts Payable, Accrued Expenses and Other Liabilities....... (32,329) (43,893)
Other, Net..................................................... (3,732) (1,044)
-------- ---------
Cash Provided by (Used for) Operating Activities............ 167,769 190,244
-------- ---------
Cash Flows from Investing Activities:
Purchase of Property, Plant and Equipment, Net...................... (17,277) (8,167)
Rotational Plant Maintenance Costs.................................. (661) (477)
-------- ---------
Cash Provided by (Used for) Investing Activities............ (17,938) (8,644)
-------- ---------
Cash Flows from Financing Activities:
Restricted Reserve Accounts......................................... 3,367 (5,956)
Cash Distributions.................................................. (45,021) (33,095)
Proceeds from (Repayment of) Long-Term Debt, Net.................... (15,000) (63,213)
Transaction and Financing Fees...................................... 235 (1,055)
-------- ---------
Cash Provided by (Used for) Financing Activities............ (56,419) (103,319)
-------- ---------
Increase (Decrease) in Cash and Cash Equivalents...................... 93,412 78,281
Cash and Cash Equivalents at Beginning of Period...................... 195,809 42,738
-------- ---------
Cash and Cash Equivalents at End of Period............................ $289,221 $ 121,019
======== =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE> 9
ARCADIAN PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
---------------------
1996 1995
($000) ($000)
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income........................................................... $ 77,948 $ 85,639
Adjustments to Reconcile Net Income to Cash from Operating
Activities:
Depreciation and Amortization..................................... 15,119 15,451
Amortization of Deferred Financing Costs.......................... 524 786
Minority Interest................................................. 640 699
Deferred Foreign Income Taxes..................................... (3,580) 581
Net Change in Operating Assets and Liabilities:
Accounts Receivable............................................. 11 36,799
Inventories..................................................... 26,110 9,953
Other Current Assets............................................ (352) (5,509)
Accounts Payable, Accrued Expenses and Other Liabilities........ (32,928) (35,447)
Other, Net...................................................... (2,390) (205)
-------- --------
Cash Provided by (Used for) Operating Activities............. 81,102 108,747
-------- --------
Cash Flows from Investing Activities:
Purchase of Property, Plant and Equipment, Net....................... (12,684) (7,142)
Rotational Plant Maintenance Costs................................... (461) (75)
-------- --------
Cash Provided by (Used for) Investing Activities............. (13,145) (7,217)
-------- --------
Cash Flows from Financing Activities:
Restricted Reserve Accounts.......................................... 6,250 (3,172)
Cash Distributions................................................... (28,500) (16,498)
Proceeds from (Repayment of) Debt, Net............................... (15,000) (2,206)
Financing Fees....................................................... -- (1,055)
-------- --------
Cash Provided by (Used for) Financing Activities............. (37,250) (22,931)
-------- --------
Increase (Decrease) in Cash and Cash Equivalents....................... 30,707 78,599
Cash and Cash Equivalents at Beginning of Period....................... 258,514 42,420
-------- --------
Cash and Cash Equivalents at End of Period............................. $289,221 $121,019
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
8
<PAGE> 10
ARCADIAN PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Arcadian
Partners, L.P. ("Partners") and its subsidiaries (collectively "Partnership")
are unaudited and have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Partnership's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995.
In the opinion of Arcadian Corporation ("Corporation"), the general partner
of the Partnership, the accompanying condensed consolidated financial statements
contain all adjustments (consisting of only normal, recurring adjustments)
necessary to present fairly the financial position, results of operations, and
cash flows of the Partnership as of the dates and for the periods presented.
Because of the seasonal nature of the Partnership's business, the results
of operations for the periods presented are not necessarily indicative of the
results of operations for a full fiscal year.
The accompanying condensed consolidated financial statements of the
Partnership include the results of operations of Partners and its subsidiaries,
including Arcadian Fertilizer, L.P. ("Fertilizer"), on a consolidated basis. All
intercompany balances and transactions have been eliminated in consolidation.
2. SUPPLEMENTAL CASH FLOW INFORMATION
The Partnership considers highly liquid investments with an original
maturity of three months or less to be cash equivalents, except for those which
are part of the restricted reserve accounts. The following is supplemental cash
flow information:
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1996 1995 1996 1995
($000) ($000) ($000) ($000)
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest Paid............................ $23,334 $28,910 $23,315 $23,284
Income Taxes Paid........................ 10,653 2,030 6,137 1,782
</TABLE>
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
1996 DECEMBER 31,
(UNAUDITED) 1995
($000) ($000)
----------- ------------
<S> <C> <C>
Finished Products........................................... $ 48,230 $ 70,459
Raw Materials and Supplies.................................. 55,511 66,164
-------- --------
$103,741 $136,623
======== ========
</TABLE>
9
<PAGE> 11
ARCADIAN PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
4. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
1996 DECEMBER 31,
(UNAUDITED) 1995
($000) ($000)
----------- ------------
<S> <C> <C>
First Mortgage Notes........................................ $ 185,000 $200,000
Senior Notes................................................ 340,000 340,000
Revolving Credit Facility................................... -- --
-------- --------
525,000 540,000
Less Current Portion of Long Term Debt...................... 15,000 15,000
-------- --------
$ 510,000 $525,000
======== ========
</TABLE>
At June 30, 1996, there was no outstanding balance on the Partnership's
$100 million revolving credit facility, and the amount available for borrowing
in the form of loans and letters of credit, after considering outstanding and
committed letters of credit of $38 million, was $62 million.
5. RESTRICTED RESERVE ACCOUNTS
At June 30, 1996, restricted reserve accounts of $47 million were comprised
primarily of a $21 million Cash Collateral Account maintained by Fertilizer for
the benefit of the holders of the First Mortgage Notes and a $20 million Debt
Service Reserve Account maintained by Partners for the benefit of the holders of
the 10 3/4% Series B Senior Notes due 2005 ("Senior Notes").
6. COMMITMENTS AND CONTINGENCIES
OPERATING LEASE COMMITMENT
In March 1996, Fertilizer entered into a lease agreement with an
unaffiliated entity ("Second Lessor") with respect to an ammonia plant to be
constructed at the Trinidad plant site ("Second Trinidad Plant Lease"). Upon
completion of construction, the Second Lessor will lease the plant to
Fertilizer. The annual lease payments under the Second Trinidad Plant Lease are
expected to be approximately $21 million. The initial seven-year lease term is
renewable for an additional five-year term, subject to certain conditions. If
the Second Trinidad Plant Lease is not renewed or is otherwise terminated,
Fertilizer may be required to make a residual termination payment equal to 85%
of the estimated $285 million total cost of the project. In addition, the
Corporation has an option to purchase the plant during the term of the Second
Trinidad Plant Lease for a price approximating its fair market value at the date
of exercise. The plant is expected to be operational in 1998.
10
<PAGE> 12
ARCADIAN PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
LAKE CHARLES PLANT
In connection with a 1992 incident at its Lake Charles plant, the
Partnership is contesting penalties proposed by the United States Occupational
Safety and Health Administration ("OSHA") totaling $4 million. The OSHA legal
proceeding to date has generally been favorable to the Partnership. While
management and legal counsel believe that any civil penalty ultimately paid by
the Partnership will be substantially less than the remaining $4 million penalty
proposed by OSHA, they cannot predict with certainty the outcome of this
proceeding. The Partnership also is defending civil litigation relating to the
Lake Charles incident which include personal injury, property damage, employee
relations, and other claims. Management believes that these matters either are
without merit or are satisfactorily covered by insurance, and that there will be
no material adverse effect to the Partnership upon the resolution of these
matters.
PORT AUTHORITY OF NEW YORK AND NEW JERSEY
On March 13, 1996, the Partnership, two other nitrogen producers, and up to
30 unidentified parties were named as defendants in a lawsuit filed by the
subrogating insurers of the Port Authority of New York and New Jersey ("Port
Authority") in a New Jersey state court. The Port Authority's insurers are
seeking to recover damages allegedly incurred as a result of the explosion at
the World Trade Center in New York City on February 26, 1993. The Port
Authority's insurers allege in their complaint that the two other named
defendants and one or more unidentified parties (as manufacturers of ammonium
nitrate), the Partnership and one or more unidentified parties (as producers of
urea), and one or more unidentified makers of nitric acid are liable under
various tort theories for unspecified property damages, business interruption
losses, lost rent and other damages allegedly incurred by the Port Authority as
a result of the World Trade Center explosion. The Partnership and the other
defendants have removed the case to federal court in New Jersey. Pending the
resolution of a dispute involving the role of the insurers' counsel, the court
has stayed any further proceedings in the suit. The Partnership is unaware of
any basis for liability and intends to vigorously defend against the Port
Authority's insurers' allegations.
7. SUBSEQUENT EVENTS
PROPOSED BUSINESS COMBINATION
On August 5, 1996, the Corporation and Freeport-McMoRan Inc. ("FTX") signed
a non-binding letter of intent for the combination of their businesses into a
newly formed company ("Newco"). FTX, through its 51.5%-owned affiliate,
Freeport-McMoRan Resource Partners, Limited Partnership ("FRP"), is one of the
world's leading integrated phosphate fertilizer producers. The potential
combination is subject to a number of conditions, including the negotiation and
execution of a definitive agreement, completion of due diligence, approval by
the Boards of Directors of the Corporation and FTX, approval by the shareholders
of the Corporation and FTX, and approval under the Hart-Scott-Rodino Anti-Trust
Improvements Act. Completion of the combination is also subject to such rights
as IMC Global Inc. may have to participate in the transaction under its
partnership agreement with FRP governing the IMC-Agrico Company joint venture.
The Corporation and FTX intend to complete the definitive agreement within 30
days after the date of the letter of intent.
Although it is not a condition to the proposed combination, it is also
intended that FRP will be offered an opportunity to participate in a transaction
that would convert the publicly held limited partnership units of FRP into
capital stock of Newco at a conversion rate to be agreed upon by FTX, FRP and
the Corporation. The proposed transaction with FRP would be subject to approval
by a special committee of the Board of Directors of FTX representing the
interests of the public unitholders of FRP and to approval by such unitholders.
11
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Because of the seasonal nature of the Partnership's business, the results
of operations for the periods presented are not necessarily indicative of the
results for a full fiscal year.
SIX MONTHS ENDED JUNE 30, 1996, COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
For the six months ended June 30, 1996, the Partnership generated net
income of $137 million, compared to net income of $136 million, for the same
period last year. Operating income decreased $7 million for the six months ended
June 30, 1996, from the prior year period.
For the six months ended June 30, 1996, compared to the same period last
year, net sales decreased $50 million or 7%, of which 3% was related to
decreased selling prices, and 4% was related to decreased sales volumes. Unusual
weather conditions that caused an extended planting season resulted in lower
ammonia and urea selling prices, the effects of which were partially offset by
an increase in the selling prices of nitrogen solutions. Lower sales volumes
reflect reduced sales of low margin purchased product for resale.
Gross profit decreased $11 million primarily as a result of the decreased
selling prices and sales volumes noted above. Gross profit as a percentage of
net sales remained flat at 30% for the six months ended June 30, 1995, and June
30, 1996, due in part to the reduced sales of low margin purchased product for
resale noted above. The per unit natural gas cost included in cost of sales
decreased approximately 1% from 1995.
Selling, general and administrative expenses as a percentage of net sales
remained flat at 4% for the six months ended June 30, 1996 and 1995.
Net interest expense decreased 22% to $20 million in the six months ended
June 30, 1996, compared to $26 million in the same period in 1995, reflecting
the improvements in the Partnership's net debt.
THREE MONTHS ENDED JUNE 30, 1996, COMPARED TO THREE MONTHS ENDED JUNE 30, 1995
For the three months ended June 30, 1996, the Partnership generated net
income of $78 million compared to net income of $86 million for the same period
last year. Operating income decreased $11 million for the three months ended
June 30, 1996, from the prior year period.
For the three months ended June 30, 1996, compared to the same period last
year, net sales decreased $6 million or 2%, of which 8% was related to decreased
selling prices, offset by a 6% increase in sales volume. Unusual weather
conditions that caused an extended planting season resulted in lower ammonia and
urea selling prices, the effects of which were partially offset by an increase
in the selling prices of nitrogen solutions. Higher sales volumes reflect
increased sales tonnage of ammonia and urea.
Gross profit decreased $10 million primarily as a result of the decreased
selling prices noted above. Gross profit as a percentage of net sales decreased
from 33% in the second quarter of 1995 to 30% in the second quarter of 1996
partially as a result of the lower ammonia and urea selling prices noted above.
The per unit natural gas cost included in cost of sales decreased approximately
5% from 1995.
Selling, general and administrative expenses as a percentage of net sales
remained flat at 4% for the three months ended June 30, 1996 and 1995.
Net interest expense decreased 26% to $9 million in the second quarter of
1996 compared to $12 million for the same period in 1995, reflecting the
improvements in the Partnership's net debt.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
Net cash provided by operating activities was $168 million and $190 million
for the six months ended June 30, 1996 and 1995, and $81 million and $109
million for the three months ended June 30, 1996 and 1995,
12
<PAGE> 14
respectively. At June 30, 1996 and 1995, working capital, net of restricted
reserve accounts, was $365 million and $241 million, respectively.
Investing Activities
Net cash used for investing activities of $18 million and $9 million for
the six months ended June 30, 1996 and 1995, and $13 million and $7 million for
the three months ended June 30, 1996 and 1995, respectively, reflects primarily
capital expenditures.
Financing Activities
Net cash used for financing activities was $56 million and $103 million for
the six months ended June 30, 1996 and 1995, and $37 million and $23 million for
the three months ended June 30, 1996 and 1995, respectively. The six months
ended June 30, 1995, amount reflected a $61 million reduction in the outstanding
balance under the revolving credit facility.
At June 30, 1996, there was no outstanding balance on the revolving credit
facility, and the amount available for borrowing in the form of loans and
letters of credit, after considering outstanding and committed letters of credit
of $38 million, was $62 million.
In February, May, and June 1996, the Partnership made cash distributions to
the Corporation totaling $17 million, $16 million and $12 million, respectively.
Management believes that its present working capital position, combined
with projected cash flows from operations and available borrowing capacity, will
be sufficient to meet the Partnership's remaining 1996 and anticipated 1997 cash
requirements for operating needs and projected capital expenditures.
From 1997 through 2000, the Partnership's principal long-term liquidity
requirements will focus on maturities of long-term debt. Excluding the revolving
credit facility, maturities of long-term debt will range from $15 million to $18
million in 1997 through 2000. Cash from operations is expected to be sufficient
for the payment of all such maturities of long-term debt.
The Partnership's 10 3/4% Series B Senior Notes due 2005, its First
Mortgage Notes, and the revolving credit facility contain provisions restricting
distributions on the equity interests of Arcadian Partners L.P., Arcadian
Fertilizer, L.P., and certain other subsidiaries in the event that certain
financial covenants are not met. Management believes that such subsidiaries will
continue to meet all such financial covenants for the foreseeable future.
Operating Lease Commitment
In March 1996, Fertilizer entered into a lease agreement with an
unaffiliated entity ("Second Lessor") with respect to an ammonia plant to be
constructed at the Trinidad plant site ("Second Trinidad Plant Lease"). Upon
completion of construction, the Second Lessor will lease the plant to
Fertilizer. The annual lease payments under the Second Trinidad Plant Lease are
expected to be approximately $21 million. The initial seven-year lease term is
renewable for an additional five-year term, subject to certain conditions. If
the Second Trinidad Plant Lease is not renewed or is otherwise terminated,
Fertilizer may be required to make a residual termination payment equal to 85%
of the estimated $285 million total cost of the project. In addition, the
Corporation has an option to purchase the plant during the term of the Second
Trinidad Plant Lease for a price approximating its fair market value at the date
of exercise. The plant is expected to be operational in 1998.
13
<PAGE> 15
Lake Charles Plant
In connection with a 1992 incident at its Lake Charles plant, the
Partnership is contesting penalties proposed by the United States Occupational
Safety and Health Administration ("OSHA") totaling $4 million. The OSHA legal
proceeding to date has generally been favorable to the Partnership. While
management and legal counsel believe that any civil penalty ultimately paid by
the Partnership will be substantially less than the remaining $4 million penalty
proposed by OSHA, they cannot predict with certainty the outcome of this
proceeding. The Partnership also is defending civil litigation relating to the
Lake Charles incident which include personal injury, property damage, employee
relations, and other claims. Management believes that these matters either are
without merit or are satisfactorily covered by insurance, and that there will be
no material adverse effect to the Partnership upon the resolution of these
matters.
Port Authority of New York and New Jersey
On March 13, 1996, the Partnership, two other nitrogen producers, and up to
30 unidentified parties were named as defendants in a lawsuit filed by the
subrogating insurers of the Port Authority of New York and New Jersey ("Port
Authority") in a New Jersey state court. The Port Authority's insurers are
seeking to recover damages allegedly incurred as a result of the explosion at
the World Trade Center in New York City on February 26, 1993. The Port
Authority's insurers allege in their complaint that the two other named
defendants and one or more unidentified parties (as manufacturers of ammonium
nitrate), the Partnership and one or more unidentified parties (as producers of
urea), and one or more unidentified makers of nitric acid are liable under
various tort theories for unspecified property damages, business interruption
losses, lost rent and other damages allegedly incurred by the Port Authority as
a result of the World Trade Center explosion. The Partnership and the other
defendants have removed the case to federal court in New Jersey. Pending the
resolution of a dispute involving the role of the insurers' counsel, the court
has stayed any further proceedings in the suit. The Partnership is unaware of
any basis for liability and intends to vigorously defend against the Port
Authority's insurers' allegations.
Proposed Business Combination
On August 5, 1996, the Corporation and Freeport-McMoRan Inc. ("FTX") signed
a non-binding letter of intent for the combination of their businesses into a
newly formed company ("Newco"). FTX, through its 51.5%-owned affiliate,
Freeport-McMoRan Resource Partners, Limited Partnership ("FRP"), is one of the
world's leading integrated phosphate fertilizer producers. The potential
combination is subject to a number of conditions, including the negotiation and
execution of a definitive agreement, completion of due diligence, approval by
the Boards of Directors of the Corporation and FTX, approval by the shareholders
of the Corporation and FTX, and approval under the Hart-Scott-Rodino Anti-Trust
Improvements Act. Completion of the combination is also subject to such rights
as IMC Global Inc. may have to participate in the transaction under its
partnership agreement with FRP governing the IMC-Agrico Company joint venture.
The Corporation and FTX intend to complete the definitive agreement within 30
days after the date of the letter of intent.
Although it is not a condition to the proposed combination, it is also
intended that FRP will be offered an opportunity to participate in a transaction
that would convert the publicly held limited partnership units of FRP into
capital stock of Newco at a conversion rate to be agreed upon by FTX, FRP and
the Corporation. The proposed transaction with FRP would be subject to approval
by a special committee of the Board of Directors of FTX representing the
interests of the public unitholders of FRP and to approval by such unitholders.
14
<PAGE> 16
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following materials are filed as exhibits to this report:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------------- ---------------------------------------------------------------------------
<C> <S> <C>
27 -- Financial Data Schedule
</TABLE>
(b) Current Reports on Form 8-K
Partners did not file any Current Report on Form 8-K during the quarter
ended June 30, 1996.
15
<PAGE> 17
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on August 14, 1996.
ARCADIAN PARTNERS, L.P.
By: Arcadian Corporation
General Partner
By: /s/ A. L. WILLIAMS
---------------------------------
A. L. Williams
Vice President -- Finance and
Chief Financial Officer
16
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------------------- ------------------------------------------------------------------------
<C> <S>
27 -- Financial Data Schedule
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from financial
statements of Arcadian Partner's, L.P. included in Form 10-Q for the quarterly
period ended June 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 336,304<F1>
<SECURITIES> 0
<RECEIVABLES> 104,814
<ALLOWANCES> 1,611
<INVENTORY> 103,741
<CURRENT-ASSETS> 548,649
<PP&E> 774,675
<DEPRECIATION> 218,833
<TOTAL-ASSETS> 1,161,752
<CURRENT-LIABILITIES> 136,631
<BONDS> 510,000
<COMMON> 0
0
0
<OTHER-SE> 447,248
<TOTAL-LIABILITY-AND-EQUITY> 1,161,752
<SALES> 641,682
<TOTAL-REVENUES> 641,682
<CGS> 449,013
<TOTAL-COSTS> 449,013
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 302
<INTEREST-EXPENSE> 20,037
<INCOME-PRETAX> 147,530
<INCOME-TAX> 9,608
<INCOME-CONTINUING> 136,828
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 136,828
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>CASH INCLUDES $47 MILLION OF RESTRICTED RESERVES.
</FN>
</TABLE>
