SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 12, 1995
FREEPORT-McMoRan INC.
Delaware 1-8124 13-3051048
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation or Number)
organization)
1615 Poydras Street, New Orleans, Louisiana 70112
Registrant's telephone number, including area code: (504) 582-4000
Freeport-McMoRan Inc.
Item 2. Acquisition or Disposition of Assets.
------------------------------------
On May 12, Freeport-McMoRan Inc., a Delaware corporation (the
"Company"), pursuant to an agreement dated as of May 2, 1995 (the
"Purchase Agreement") between the Company and Freeport-McMoRan Copper &
Gold Inc., a Delaware corporation and a subsidiary of the Company
("FCX"), on the one hand, and The RTZ Corporation PLC, a company
organized under the laws of England ("RTZ"), RTZ Indonesia Limited, a
company organized under the laws of England and a subsidiary of RTZ
("RTZI") and RTZ America, Inc., a Delaware corporation and a subsidiary
of RTZ ("RTZA"), on the other hand, sold to RTZI 21,531,100 share of
Class A Common Stock of FCX for $20.90 per share for a total purchase
price of $450 million (the "Stock Sale"). The $20.90 per share purchase
price reflects the approximate market price of FCX Class A Common Stock
on the New York Stock Exchange, Inc.
RTZI also received an option, which is subject to certain
conditions set forth in the Purchase Agreement, to acquire from the
Company up to 3,588,517 additional shares of FCX Class A Common Stock at
a purchase price of $20.90 per share. IF RTZI does not exercise such
option, the Company may sell some or all of such FCX Class A Common
Stock to other buyers. In addition, if the Company redeems any of its
6.55% Convertible Subordinated Notes due January 15, 2001, of which
$372,873,000 aggregate principal amount was outstanding as of May 25,
1995, the Company may request RTZI to purchase additional shares of FCX
Class A Common Stock from the Company at a purchase price of $20.90 per
share in order to fund a portion of the redemption amount.
The Purchase Agreement provides that following the completion of
RTZI's purchase of 21,531,100 shares of FCX Class A Common Stock
pursuant to the Purchase Agreement, RTZI and RTZA will have the right to
nominate for submission to FCX's stockholders the number of directors
which is proportionately equal to the aggregate percentage ownership of
RTZI and RTZA of all outstanding shares of FCX Class A Common Stock and
FCX Class B Common Stock, subject to certain limitations. FCX has
agreed to include such individuals nominated by RTZA and RTZI with the
directors recommended by the management of FCX and not to take any
actions which may be inconsistent with, conflict with, or otherwise
hinder, the election of such individuals. FCX will appoint the persons
nominated by RTZA and RTZI as interim directors to take office until the
following stockholders' meeting or consent solicitation for the election
of directors. If the number of directors of FCX is reduced to less than
ten, RTZA and RTZI will have the right to nominate no less than one
director to be elected by holders of Class A Common Stock for submission
to FCX's stockholders, provided that RTZI continues to hold
substantially all of the shares of FCX Class A Common Stock purchased
pursuant to the Purchase Agreement. In the event RTZ and its affiliates
fail to beneficially own, in the aggregate, at least 5% of the then
outstanding shares of FCX Common Stock, the rights and obligations
described in this paragraph shall terminate.
FCX and RTZ have entered into an implementation agreement,
pursuant to which FCX and RTZ agreed to the steps their respective
affiliates will take to implement certain transactions relating to joint
venture arrangements in Indonesia and the sale of a portion of FCX's
Spanish operations to RTZ. Under the proposed joint venture
arrangements, P.T. Freeport Indonesia Company, a subsidiary of FCX ("PT-
FI"), and Eastern Mining Company, Inc., a wholly owned indirect
subsidiary of FCX ("Eastern Mining"), will enter into participation
agreements with subsidiaries of RTZ pursuant to which RTZ's subsidiaries
will invest up to $850 million on exploration and development projects
on lands controlled by PT-FI and Eastern Mining in Indonesia.
Subsidiaries of RTZ will acquire a 40% undivided interest in the
contract of work between PT-FI and the Government of the Republic of
Indonesia (the "Government") dated as of December 30, 1991, excluding
any interest in PT-FI's current mining and milling operations, and a 40%
undivided interest in the contract of work between P.T. Irja Eastern
Minerals Corporation, a subsidiary of Eastern Mining, and the Government
signed in August 1994. FCX and RTZ will exchange management personnel
and establish an Operating Committee, consisting of personnel of FCX and
RTZ, through which the policies established by the FCX Board of
Directors will be implemented.
In addition, the implementation agreement provides that each of
FCX and RTZ will negotiate in good faith with a view toward agreeing as
soon as possible one or more agreements in respect of the acquisition by
RTZ and its subsidiaries of a 25% interest in certain of FCX's Spanish
operations at a price pro rata to FCX's cost of acquisition.
Item 7. Financial Statements and Exhibits.
---------------------------------
(a) Financial statements of business acquired. Not applicable.
(b) Pro forma financial information. The pro forma financial
statements of FTX filed as part of this report are listed in
the Financial Information Table of Contents appearing on
page F-1 hereof.
(c) Exhibits. The exhibits to this report are listed in the
Exhibit Index appearing on page E-1 hereof.
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 INC.
By: /s/ John T. Eads
----------------------------------
John T. Eads
Assistant Vice President &
Controller - Financial Reporting
Date: May 26, 1995
Freeport-McMoRan Inc.
Financial Information
Table of Contents
Freeport-McMoRan Inc.
Unaudited Pro Forma Statement of Income for the Year
Ended December 31, 1994 F-2
Unaudited Pro Forma Statement of Income for the Three
Months Ended March 31, 1995 F-3
Unaudited Pro Forma Condensed Balance Sheet as of
March 31, 1995 F-4
Notes to Pro Forma Financial Statements F-5
Freeport-McMoRan Inc.
Unaudited Pro Forma Statement of Income
Year Ended December 31, 1994
Pro Forma Adjustments
------------------------
FCX Stock
Sale Other Pro Forma
Historical (Note 1) (Note 2) (Note 3)
---------- --------- -------- ----------
(In Thousands, Except Per Share Amounts)
Revenues $1,982,396 $ - $62,070 $2,044,466
Cost of sales:
Production and delivery 1,297,007 - 64,126 1,361,133
Depreciation and amortization 132,713 - 1,741 134,454
---------- ------- ------- ----------
Total cost of sales 1,429,720 - 65,867 1,495,587
Exploration expenses 47,052 - (5,427) 41,625
Gain on insurance settlement (32,602) - - (32,602)
General and administrative 167,390 - 2,581 169,971
---------- ------- ------- ----------
Total costs and expenses 1,611,560 - 63,021 1,674,581
---------- ------- ------- ----------
Operating income 370,836 - (951) 369,885
Interest expense, net (91,834) 24,395 e 9,329 (58,110)
Gain on conversion/distribution
of FCX securities 114,750 - - 114,750
Other expense, net (3,830) - 542 (3,288)
---------- ------- ------- ----------
Income before income taxes and
minority interests 389,922 24,395 8,920 423,237
Provision for income taxes (148,388) (8,538)f (5,076) (162,002)
Minority interests in net income of
consolidated subsidiaries (168,951) (8,204)g 5,582 (171,573)
---------- ------- ------- ----------
Income before extraordinary item 72,583 7,653 9,426 89,662
Extraordinary loss on early
extinguishment of debt, net (9,108) - 9,108 -
---------- ------- ------- ----------
Net income 63,475 7,653 18,534 89,662
Preferred dividends (22,032) - 17,650 (4,382)
---------- ------- ------- ----------
Net income applicable to
common stock $ 41,443 $ 7,653 $36,184 $ 85,280
========== ======= ======= ==========
Net income per primary share:
Before extraordinary item $.37 $.56
Extraordinary loss on early
extinguishment of debt, net (.07) -
---- ----
$.30 $.56
==== ====
Average shares outstanding
(Note 2) 139,223 151,211
======= =======
The accompanying notes are an integral part of these pro forma financial
statements.
Freeport-McMoRan Inc.
Unaudited Pro Forma Statement of Income
Three Months Ended March 31, 1995
Pro Forma Adjustments
-------------------------
FCX Stock
Sale Other Pro Forma
Historical (Note 1) (Note 2) (Note 3)
---------- --------- -------- ---------
(In Thousands, Except Per Share Amounts)
Revenues $663,285 $ - $ - $663,285
Cost of sales:
Production and delivery 396,704 - - 396,704
Depreciation and amortization 36,642 - - 36,642
-------- -------- -------- --------
Total cost of sales 433,346 - - 433,346
Exploration expenses 8,125 - - 8,125
General and administrative 50,445 - - 50,445
-------- -------- -------- --------
Total costs and expenses 491,916 - - 491,916
-------- -------- -------- --------
Operating income 171,369 - - 171,369
Interest expense, net (25,059) 7,993 e 1,124 (15,942)
Other expense, net (583) - - (583)
-------- -------- -------- --------
Income before income taxes
and minority interests 145,727 7,993 1,124 154,844
Provision for income taxes (50,127) (2,798)f (393) (53,318)
Minority interests in net income
of consolidated subsidiaries (70,740) (4,599)g - (75,339)
-------- -------- -------- --------
Net income 24,860 596 731 26,187
Preferred dividends (5,469) - 4,373 (1,096)
-------- -------- -------- --------
Net income applicable to
common stock $ 19,391 $ 596 $ 5,104 $ 25,091
======== ======== ======== ========
Net income per primary share $.14 $.17
==== ====
Average shares outstanding
(Note 2) 137,326 148,721
======= =======
The accompanying notes are an integral part of these pro forma financial
statements.
Freeport-McMoRan Inc.
Unaudited Pro Forma Condensed Balance Sheet
March 31, 1995
Pro Forma Adjustments
-----------------------
FCX Stock
Sale Other Pro Forma
Historical (Note 1) (Note 2) (Note 3)
---------- --------- ------- ----------
(In Thousands)
Cash and short-term investments $ 57,597 $ - $ - $ 57,597
Accounts receivable 279,601 - - 279,601
Inventories 451,513 - - 451,513
Prepaid expenses and other 18,002 - - 18,002
---------- -------- ------- ----------
Total current assets 806,713 - - 806,713
Property, plant and equipment, net 3,581,421 - - 3,581,421
Other assets 217,901 (67,046)d (4,291) 146,564
---------- -------- ------- ----------
Total assets $4,606,035 $(67,046) $(4,291) $4,534,698
========== ======== ======= ==========
Accounts payable and accrued
liabilities $ 551,560 $ 20,000 d $ - $ 571,560
Current portion of long-term debt
and short-term borrowings 34,916 - - 34,916
---------- -------- ------- ----------
Total current liabilities 586,476 20,000 - 606,476
Long-term debt, less current
portion 1,830,212 (450,000)a - 1,380,212
Reclamation and mine shutdown
reserves 140,837 - - 140,837
Accrued postretirement benefits
and other liabilities 482,840 - - 482,840
Deferred income taxes 306,432 65,963 d (1,502) 370,893
Minority interests in consolidated
subsidiaries 1,515,781 43,062 b - 1,558,843
Stockholders' equity (deficit) (256,543) 253,929 c (2,789) (5,403)
---------- -------- ------- ----------
Total liabilities and
stockholders' equity $4,606,035 $(67,046) $(4,291) $4,534,698
========== ======== ======= ==========
The accompanying notes are an integral part of these pro forma financial
statements.
Freeport-McMoRan Inc.
Notes to Pro Forma Financial Statements
The accompanying Unaudited Pro Forma Statements of Income have been
prepared assuming the transactions discussed below occurred on January 1,
1994, whereas the Unaudited Pro Forma Condensed Balance Sheet assumes the
transactions occurred on March 31, 1995. The pro forma financial statements
are not necessarily indicative of the actual results that would have been
achieved nor are they indicative of future results.
1. FCX STOCK SALE
On May 12, 1995, Freeport-McMoRan Inc. (FTX) sold 21.5 million shares of
Freeport-McMoRan Copper & Gold Inc. (FCX), its copper and gold
subsidiary, for $450 million to a subsidiary of The RTZ Corporation PLC
(RTZ) in accordance with the previously announced definitive agreements.
The related pro forma balance sheet adjustments follow:
a) Reflects the sales proceeds as a reduction to long-term bank debt.
b) Represents the book value of the additional minority interest.
c) Reflects the estimated after-tax gain from the sale. A gain is
recognized because the sales proceeds exceed FTX's book basis in the
FCX shares sold. This gain is not included in the pro forma
statement of income in accordance with Securities and Exchange
Commission requirements concerning pro forma financial statements;
however, the gain will be reflected in FTX's statement of income for
the three months ended June 30, 1995.
d) Reflects the estimated income tax affect arising from the sale ($20
million of cash taxes shown in accounts payable).
The related pro forma statement of income adjustments follow:
e) Primarily reflects the interest savings generated from adjustment 1a.
f) Reflects the tax impact of adjustment 1e, using statutory income tax
rates.
g) Reflects the additional minority interest ownership in FCX's
earnings.
2. OTHER TRANSACTIONS
FTX has completed (or is in the process of completing) the following
other financial transactions:
a) Debt and Preferred Stock Restructuring
- In early 1994, FTX defeased its 10 7/8% Subordinated Debentures
(10 7/8% Debentures), recognizing an extraordinary after-tax loss
of $9.1 million.
- In April 1995, FTX exchanged 4 million shares of its $4.375
Convertible Exchangeable Preferred Stock ($4.375 Preferred Stock)
for approximately 11.4 million FTX common shares in accordance
with an exchange offer. The exchange offer allowed each share of
$4.375 Preferred Stock to convert to 2.85 shares of FTX common
stock, versus the current conversion rate of 2.35 shares. As a
result of the increased conversion rate, FTX will recognize an
approximate $35 million noncash charge (to be reflected as
additional preferred dividends) in its statement of income for the
three months ended June 30, 1995. In accordance with Securities
and Exchange Commission requirements concerning pro forma
financial statements, this charge is not included in the pro forma
statement of income.
- In May 1995, FTX called for the June 1995 redemption of its Zero
Coupon Convertible Subordinated Debentures Due 2006 (ABC
Debentures). The redemption price is equal to the book value of
the ABC Debentures.
The pro forma statement of income adjustments for these transactions
include:
- A reduction in interest expense caused by replacing fixed-rate
note borrowings with lower variable-rate borrowings under FTX's
bank credit facility.
- The income tax effect of these transactions at statutory income
tax rates.
- The elimination of the extraordinary loss associated with the
defeasance of the 10 7/8% Debentures, discussed above.
- The reduction in preferred stock dividends reflecting fewer $4.375
Preferred Stock shares outstanding, with a related increase to
FTX's average common shares outstanding.
The pro forma balance sheet adjustments for these transactions relate
to the write-off of deferred charges associated with the ABC
Debentures.
b) MOXY Dividend - In May 1994, FTX distributed the common shares of
McMoRan Oil & Gas Co. (MOXY), a wholly owned subsidiary, to FTX's
common stockholders. The pro forma statement of income adjustments
include the elimination of the historical results attributable to the
MOXY oil and gas operations during the 1994 period prior to this
distribution. No pro forma adjustment for this transaction is
required for the first-quarter 1995 financial statements.
c) Sulphur Assets - In January 1995, Freeport-McMoRan Resource Partners,
Limited Partnership (FRP), a 51.4 percent owned subsidiary of FTX,
acquired essentially all of the domestic assets of Pennzoil Co.'s
sulphur division. The pro forma statement of income adjustments for
1994 represent the historical results of operations attributable to
the acquired assets, using FRP's purchase price for depreciation and
amortization. No pro forma adjustment for this transaction is
required for the first-quarter 1995 financial statements.
A summary of the pro forma statement of income adjustments associated
with the "other transactions" follows:
Three Months
Ended March 31,
Year Ended December 31, 1994 1995
--------------------------------------------------------- ---------------
Debt and Debt and
Preferred Preferred
Stock MOXY Sulphur Stock
Restructuring Dividend Assets Total Restructuring
------------- -------- ------- ------- -------------
(In Thousands)
Revenues $ - $ (418) $62,488 $62,070 $ -
Cost of sales:
Production and delivery - (684) 64,810 64,126 -
Depreciation and amortization - (1,895) 3,636 1,741 -
------- ------ ------- ------- --------
Total cost of sales - (2,579) 68,446 65,867 -
Exploration expenses - (5,427) - (5,427) -
General and administrative - (3,466) 6,047 2,581 -
------- ------- ------- ------- --------
Total costs and expenses - (11,472) 74,493 63,021 -
------- ------- ------- ------- --------
Operating income - 11,054 (12,005) (951) -
Interest expense, net 10,051 (722) - 9,329 1,124
Other expense, net - - 542 542 -
------- ------- ------- ------- --------
Income before income taxes and
minority interests 10,051 10,332 (11,463) 8,920 1,124
Provision for income taxes (3,518) (3,616) 2,058 (5,076) (393)
Minority interests - - 5,582 5,582 -
------- ------- ------- ------- --------
Income before extraordinary
item 6,533 6,716 (3,823) 9,426 731
Extraordinary loss 9,108 - - 9,108 -
------- ------- ------- ------- --------
Net income 15,641 6,716 (3,823) 18,534 731
Preferred dividends 17,650 - - 17,650 4,373
------- ------- ------- ------- --------
Net income applicable to
common stock $33,291 $ 6,716 $(3,823) $36,184 $ 5,104
======= ======= ======= ======= ========
Change in average share
outstanding 11,988 - - 11,988 11,395
======= ======= ======= ======= ========
3. FUTURE TRANSACTIONS
FTX anticipates several future financial transactions, certain terms of
which are currently not finalized. Additionally, these transactions are
interrelated, with the outcome of one transaction impacting the subsequent
transactions. As a result, these transactions have not been reflected in
the accompanying pro forma financial statements. However, upon
completion of these transactions, FTX will file pro forma financial
statements reflecting the transactions in a Form 8-K with the Securities
and Exchange Commission.
- 6.55% Note Redemption - As of March 31, 1995, FTX had 6.55%
Convertible Subordinated Notes (6.55% Notes) outstanding at a face
value of $373 million and a book value of $319.9 million. These
6.55% Notes are currently convertible into 49.24 FTX common shares
per $1,000 face value. Although FTX currently intends to redeem
these 6.55% Notes in the near future, an FTX common stock
conversion rate to be offered as an alternative to redemption is
not known at this time.
- FCX Stock Option - In addition to the $450 million of FCX stock
already sold by FTX to RTZ (Note 1), RTZ also received an option
(which is subject to certain conditions set forth in the Purchase
Agreement) to acquire from FTX up to approximately 3.5 million
additional shares of FCX stock at a purchase price of $20.90 per
share. If RTZ does not exercise such option, FTX may sell some or
all of such FCX stock to other buyers. In addition, if FTX redeems
any of its 6.55% Notes, FTX may request RTZ to purchase additional
shares of FCX stock from FTX at a purchase price of $20.90 per
share in order to fund a portion of the redemption amount.
- FCX Distribution - FTX is undertaking a plan to separate its two
principal businesses, copper/gold and agricultural minerals, into
two independent financial and operating entities. To accomplish
this plan, FTX would make a pro-rata distribution of its common
stock ownership in FCX to FTX common stockholders. As a result of
this distribution, which is expected to be completed by mid-1995,
FTX would no longer own any interest in FCX.
Exhibit Index
-------------
Sequentially
Number Exhibit Numbered Page
- ------ ------- -------------
2.1 AGREEMENT, dated as of May 2, 1995,
by and between Freeport-McMoRan Inc.,
a Delaware corporation ("FTX"), and
Freeport-McMoRan Copper & Gold Inc.,
a Delaware corporation ("FCX"), on
the one hand, and The RTZ Corporation
PLC, a company organized under the
laws of England ("RTZ"), RTZ Indonesia
Limited, a company organized under the
laws of England (the "RTZI") and a
subsidiary of RTZ, and RTZ America,
Inc., a Delaware corporation ("RTZA")
and a subsidiary of RTZ, on the other
hand.