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, 1998 Commission File Number: 1-13617 Freeport-McMoRan Sulphur Inc. Incorporated in Delaware 72-1392855 (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 On June 30, 1998, there were issued and outstanding 9,740,603 shares of the registrant's Common Stock, par value $0.01 per share. FREEPORT-McMoRan SULPHUR INC. TABLE OF CONTENTS Page Part I. Financial Information Financial Statements: Condensed Balance Sheets 3 Statements of Operations 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 12 Signature 13 Exhibit Index E-1 2 FREEPORT-McMoRan SULPHUR INC. PART I. FINANCIAL INFORMATION Item 1. Financial Statements. FREEPORT-McMoRan SULPHUR INC. CONDENSED BALANCE SHEETS (Unaudited) June 30, December 31, 1998 1997 -------- ------------ (In Thousands) ASSETS Current assets: Cash and cash equivalents $ 33,790 $ 21,293 Accounts receivable 24,875 33,739 Inventories 23,531 34,421 Prepaid expenses and other 10,142 5,982 -------- -------- Total current assets 92,338 95,435 Property, plant and equipment, net 100,151 109,833 Deferred tax asset 53,856 56,757 Other assets 10,303 11,008 -------- -------- Total assets $256,648 $273,033 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 25,191 $ 25,175 Current portion of reclamation and mine shutdown reserves 16,349 4,656 -------- -------- Total current liabilities 41,540 29,831 Reclamation and mine shutdown reserves 52,141 67,518 Accrued postretirement and pension benefits 10,771 15,594 Other liabilities 46,227 45,693 Stockholders' equity 105,969 114,397 -------- -------- Total liabilities and stockholders' equity $256,648 $273,033 ======== ======== The accompanying notes are an integral part of these financial statements. 3 FREEPORT-McMoRan SULPHUR INC. STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ----------------- ------------------ 1998 1997 1998 1997 ------- ------- -------- -------- (In Thousands, Except Per Share Amounts) Revenues $56,672 $54,355 $113,662 $107,750 Cost of sales: Production and delivery 47,006 43,103 96,032 85,767 Depreciation and amortization 10,993 8,614 12,735 16,889 ------- ------- -------- -------- Total cost of sales 57,999 51,717 108,767 102,656 General and administrative expenses 2,674 1,927 5,374 3,834 ------- ------- -------- -------- Total costs and expenses 60,673 53,644 114,141 106,490 ------- ------- -------- -------- Operating income (loss) (4,001) 711 (479) 1,260 Other income, net 432 - 706 - ------- ------- -------- -------- Net income (loss) before income taxes (3,569) 711 227 1,260 Benefit (provision) for income taxes 1,235 - (79) - ------- ------- -------- -------- Net income (loss) $(2,334) $ 711 $ 148 $ 1,260 ======= ======= ======== ======== Net income (loss) per share of common stock: Basic $(.24) $.07 $.01 $.12 Diluted $(.24) $.07 $.01 $.12 Average common shares outstanding: Basic 9,780 10,347d 9,950 10,347d Diluted 9,780 10,347d 10,031 10,347d PRO FORMA DATA Net income before income taxes reported above $ 711 $ 1,260 Pro forma provision for income taxes (246) (436) ------- ------- Pro forma net income $ 465 $ 824 ======= ======= Pro forma net income per share $.04 $.08 Pro forma average shares outstanding 10,347 10,347 The accompanying notes are an integral part of these financial statements. 4 FREEPORT-McMoRan SULPHUR INC. STATEMENTS OF CASH FLOW (Unaudited) Six Months Ended June 30, -------------------- 1998 1997 ------- ------- (In Thousands) Cash flow from operating activities: Net income $ 148 $ 1,260 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 12,735 16,889 Curtailment gain on Culberson pension and postretirement liabilities (4,148) - Reclamation and mine shutdown expenditures (3,505) (4,822) Utilization of deferred tax asset 79 - Other (307) (880) (Increase) decrease in working capital: Accounts receivable 8,937 2,005 Inventories 10,890 578 Prepaid expenses and other (1,338) 1,309 Accounts payable and accrued liabilities (303) (71) ------- ------- Net cash provided by operating activities 23,188 16,268 ------- ------- Cash flow from investing activities: Capital expenditures (2,288) (2,744) Sale of assets 141 891 ------- ------- Net cash used in investing activities (2,147) (1,853) ------- ------- Cash flow from financing activities: Net distributions to PLP - (15,944) Purchase of FSC common stock (8,847) - Other 303 - ------- ------- Net cash used in financing activities (8,544) (15,944) ------- ------- Net increase (decrease) in cash and cash equivalents 12,497 (1,529) Cash and cash equivalents at beginning of year 21,293 3,116 ------- ------- Cash and cash equivalents at end of period $33,790 $ 1,587 ======= ======= The accompanying notes are an integral part of these financial statements. 5 FREEPORT-McMoRan SULPHUR INC. NOTES TO FINANCIAL STATEMENTS 1. BACKGROUND AND BASIS OF PRESENTATION Background. Freeport-McMoRan Sulphur Inc. (FSC) became an independent, publicly held company as of December 22, 1997, when Phosphate Resource Partners Limited Partnership (PLP), formerly Freeport-McMoRan Resource Partners, Limited Partnership, contributed to FSC its sulphur business, including its 58.3 percent interest in its Main Pass sulphur and oil operations (Main Pass), together with the 25.0 percent interest in Main Pass previously owned by IMC Global Inc. (IGL), a joint venture partner with PLP. PLP distributed 10,346,578 shares of FSC common stock pro rata to its unitholders (the Distribution) in connection with the merger of Freeport-McMoRan Inc. (FTX), the former administrative managing general partner and majority owner of PLP, into IGL (the Merger). FTX distributed the shares of FSC common stock that it received from PLP to FTX stockholders on a pro rata basis in connection with the Merger. Basis of Presentation. FSC operated as an integral part of PLP prior to the Distribution. For periods prior to the Distribution, FSC's financial statements were prepared from the books and records of PLP. FSC's investment in the Main Pass joint venture is reflected using the proportionate consolidation method in accordance with standard industry practice. No interest expense was allocated to FSC as no interest costs were incurred in the past by FSC and no debt previously recorded by PLP was assumed by FSC. Intercompany balances between PLP and FSC related to various general and administrative and similar charges which were settled monthly. PLP is not a taxable entity and historically did not provide income taxes on the results of operations of FSC. Upon formation of FSC as a wholly owned taxable subsidiary of PLP prior to being spun-off to PLP unitholders, a deferred tax asset of $63.8 million was recognized in 1997 to reflect the excess of tax over book basis in the related assets. Unaudited pro forma income taxes for the second- quarter and six-month periods of 1997 are included in the statements of operations as if FSC were a separate taxable entity during those periods. 2. NEW ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share," which simplifies the computation of earnings per share. FSC adopted SFAS 128 in the fourth quarter of 1997. Basic net income per share of common stock for the 1998 periods was calculated by dividing net income applicable to common stock by the weighted-average number of common shares outstanding during the periods. Diluted net income per share of common stock was calculated by dividing net income applicable to common stock by the weighted-average number of common shares outstanding during the period plus the net effect of dilutive stock options. Options to purchase approximately 741,000 shares of common stock at an average exercise price of $11.09 during the second quarter of 1998 were excluded from the calculation as anti-dilutive considering FSC's second-quarter loss. Dilutive stock options representing approximately 81,000 shares were included for the six-month 1998 period. Options to purchase 15,676 shares and 18,676 shares of common stock at average exercise prices of $13.81 per share and $13.77 per share, respectively, were outstanding during the second-quarter and six-month periods of 1998, respectively, but were not included in the computation of diluted net income per share of common stock. These options were excluded because their exercise prices were greater than the average market price of the common stock during the respective periods. Basic and diluted net income per share of common stock for the 1997 periods were calculated by dividing net income for the applicable period by the number of shares distributed on December 22, 1997 (10,346,578 shares). FSC had no options outstanding prior to the fourth quarter of 1997. In June 1998, the FASB issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activity," which establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting. SFAS 133 is effective for fiscal years beginning after June 15, 1999 with earlier application permitted beginning as early as July 1, 1998. 6 FSC is currently assessing the impact that adoption of SFAS 133 would have on its current accounting for the financial contracts discussed below and on its financial statements, if any, and has not yet determined the timing or method of adoption of SFAS 133; however, it could impact earnings and other comprehensive income. 3. FINANCIAL CONTRACTS FSC has entered into financial contracts to manage certain risks resulting from fluctuations in the price of natural gas, which comprises a significant portion of its production costs, by creating offsetting exposures. FSC views all of its financial contracts as hedges for its future purchases of natural gas consumed in its operations. Gains or losses on the contracts are recognized with the hedged transaction. Also, gains or losses are recognized if the hedged transaction is no longer expected to occur or if deferral criteria are not met. FSC monitors its credit risk on an ongoing basis and considers this risk to be minimal because its contracts are with a financially strong counterparty. 4. SUBSEQUENT EVENT On August 3, 1998, McMoRan Oil & Gas Co. (MOXY) and FSC announced that they had signed a definitive agreement to combine their operations. In the proposed transaction, a new holding company, McMoRan Exploration Co. (McMoRan), would issue approximately 6.1 million McMoRan common shares in exchange for all of FSC's common shares and approximately 8.6 million McMoRan common shares in exchange for all of MOXY's common shares. FSC shareholders would receive 0.625 McMoRan shares for each common share of FSC outstanding and MOXY shareholders would receive 0.20 McMoRan shares for each common share of MOXY outstanding. Immediately following the transaction, McMoRan would have approximately 14.7 million common shares outstanding that would be owned approximately 58.5 percent by MOXY's existing common shareholders and approximately 41.5 percent by FSC's existing common shareholders. McMoRan's Board of Directors and executive management will include current members of the Board of Directors and executive management of both MOXY and FSC. The transaction would be tax-free with respect to both MOXY and FSC shareholders and will be reported on the basis of purchase accounting, reflecting MOXY as the acquiring entity. The completion of the merger transaction is subject to approval by MOXY and FSC shareholders and applicable regulatory approvals. ---------------------- Remarks The information furnished herein should be read in conjunction with FSC's financial statements contained in its 1997 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. 7 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To The Board of Directors and Stockholders of Freeport-McMoRan Sulphur Inc.: We have reviewed the accompanying condensed balance sheet of Freeport-McMoRan Sulphur Inc. (a Delaware corporation) as of June 30, 1998, and the related statements of operations for the three and six-month periods ended June 30, 1998 and 1997, and the statements of cash flow for the six-month periods ended June 30, 1998 and 1997 for Freeport-McMoRan Sulphur Inc. and its predecessor. These financial statements are the responsibility of the Company's management. 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, 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 Sulphur Inc. as of December 31, 1997, and the related statements of operations, stockholders' equity and cash flow for the year then ended (not presented herein), and, in our report dated January 20, 1998, 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, 1997, 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 21, 1998 (except with respect to Note 4, as to which the date is August 3, 1998) 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. OVERVIEW As discussed in Note 1, Freeport-McMoRan Sulphur Inc. (FSC) became an independent, publicly held company as of December 22, 1997 and prior to that date operated as an integral part of Phosphate Resource Partners Limited Partnership (PLP). FSC's 1998 financial results reflect the operating results of the assets previously owned by PLP and the 25.0 percent interest in the Main Pass sulphur and oil joint venture (Main Pass) acquired from IMC Global Inc. (IGL). FSC's 1997 financial results reflect only the operating results of the assets previously owned by PLP. FSC's sulphur business consists of the sale of sulphur, the marketing of logistics services, and the operation of a sulphur mine and a logistics system consisting of sulphur transportation and terminaling assets. FSC's sulphur operations include the Main Pass mine located offshore Louisiana in the Gulf of Mexico, five sulphur terminals located across the Gulf Coast, and marine and rail transportation assets. The oil operations consist of FSC's interest in the Main Pass operations, where crude oil is produced in conjunction with FSC's sulphur mining operations. On June 30, 1998, FSC announced plans to permanently discontinue sulphur production at its Culberson sulphur mine because sulphur prices had fallen to a level at which it was no longer economically feasible to operate the mine. As a result, FSC recorded net charges totaling $6.0 million ($3.9 million to net income or $0.40 per share) in the second quarter of 1998, including charges of $9.5 million ($6.2 million to net income) to depreciation and amortization expense for a writedown of the Culberson mine assets and $0.6 million ($0.4 million to net income) to production costs for other closure-related costs, partially offset by a $4.1 million benefit ($2.7 million to net income) to production costs for a related reduction in pension and postretirement benefit liabilities. Production at the mine is expected to cease in August 1998. FSC will continue to meet its customers' sulphur requirements in the long term from production at its Main Pass mine and from third party purchases of recovered sulphur and, in the short term, by liquefying solid inventories held at its Port Sulphur, Louisiana terminal. RESULTS OF OPERATIONS Summary comparative results for the second-quarter and six-month periods follow (dollar amounts in thousands, except realizations): Second Quarter Six Months ---------------- -------------------- 1998(a) 1997(b) 1998(a) 1997(b) ------- ------- --------- --------- Revenues: Sulphur $50,887 $46,563 $ 101,680 $ 91,422 Oil 5,785 7,792 11,982 16,328 ------- ------- --------- --------- Total revenues $56,672 $54,355 $ 113,662 $ 107,750 ======= ======= ========= ========= Operating income (loss): Sulphur $(6,463) $ (781) $ (5,956) $ (2,965) Oil 2,462 1,492 5,477 4,225 ------- ------- --------- --------- Total operating income (loss) $(4,001) $ 711 $ (479) $ 1,260 ======= ======= ========= ========= Sulphur sales (long tons) 844,200 738,900 1,678,000 1,476,900 Sulphur average realized price per long ton $59.71 $61.23 $59.98 $60.29 Oil sales (barrels) 451,400 443,700 907,600 867,500 Oil average realized price per barrel $12.21 $17.52 $12.88 $18.78 a. Includes net charges to sulphur operating income totaling $6.0 million for the Culberson mine shutdown. b. Results for 1997 represent the operating results of the assets previously owned by PLP that were transferred to FSC on December 22, 1997. These results do not include the 25.0 percent interest in Main Pass previously owned by IGL prior to December 22, 1997 when it was contributed to FSC. Sulphur operations reported operating losses of $6.5 million in the second quarter of 1998 and $6.0 million in the six-month 1998 period compared with operating losses of $0.8 million for the 1997 quarter and $2.9 million for the 1997 six-month period. The 1998 periods include net charges of $6.0 million for the Culberson shutdown discussed above. 9 Average sulphur realized prices for the 1998 periods were lower than the 1997 periods, while sulphur sales volumes rose because of FSC's additional 25.0 percent interest acquired from IGL and an increase in recovered sulphur purchases. FSC has a long-term supply contract with IMC-Agrico Company (a joint venture partnership between IGL and PLP) which extends as long as IMC-Agrico Company's operations have a requirement for sulphur. As a percentage of total FSC sulphur sales, sales to IMC-Agrico Company totaled 73 percent in the 1998 periods and 63 percent in the 1997 periods. Overall average sulphur unit production costs, excluding the $3.5 million net benefit related to the Culberson shutdown, were slightly higher in the 1998 periods primarily because of lower production and higher drilling costs at Main Pass. Increased drilling activity during the first half of 1998, coupled with increasing water levels, is expected to increase second-half 1998 production and improve unit costs for Main Pass sulphur operations. Culberson operations are expected to have a minimal impact on third-quarter 1998 net income as the facilities shut down. Depreciation and amortization expense in the 1998 periods includes $9.5 million to write off the Culberson mine assets. Unit depreciation rates were significantly lower in 1998 following a third-quarter 1997 write-down of asset values based on an impairment assessment of sulphur assets resulting in a $4.2 million decrease in second-quarter 1998 depreciation costs compared with second-quarter 1997 and an $8.0 million decrease in the first six months of 1998 compared with the 1997 period. In April 1998, FSC entered into contracts to purchase 450,000 million british thermal units (mmbtu's) of natural gas per month (approximately 75 percent of FSC's expected Main Pass natural gas purchases)for $2.175 per mmbtu through December 1998. Pursuant to the terms of the contracts, the supplier has the option to put 450,000 mmbtu's per month to FSC at a price of $2.175 per mmbtu during 1999. As of June 30, 1998, these contracts had a fair value of approximately $0.9 million. Main Pass operating income from oil operations totaled $2.5 million in the second quarter of 1998 and $5.5 million for the six-month 1998 period compared with $1.5 million in the second quarter of 1997 and $4.2 million in the six-month 1997 period. Higher sales volumes in the 1998 periods reflect FSC's additional 25.0 percent interest acquired from IGL, partially offset by a natural production decline. Gross oil production averaged 6,900 barrels per day in the second quarter of 1998 and 9,700 barrels per day in the second quarter of 1997. The benefits of higher sales volumes were more than offset by an approximate 30 percent decline in average realized prices compared with the 1997 periods. Quarterly oil sales volumes are expected to decline as the reserves continue to deplete over a period expected to extend through the year 2002. Revised unit depreciation rates in 1998 resulted in a $2.6 million decrease in second-quarter 1998 depreciation expense compared with the 1997 quarter and a $4.9 million decrease in six-month 1998 depreciation expense compared with the 1997 six-month period. FSC's share of 1998 oil sales is expected to approximate 1.7 million barrels, compared with 1.6 million barrels in 1997. The original oil and gas lease holder of the oil reserves at Main Pass owns a royalty equal to 25 percent of revenues (less transportation costs) from oil production, limited to 50 percent of net profit, after 36 million barrels of oil have been produced at Main Pass. FSC exceeded 36 million barrels of cumulative oil production in June 1998 and, as a result, will now be required to pay royalties to the original lease holder at the rate of 50 percent of net profit from Main Pass oil production. General and administrative expenses were higher in the 1998 periods compared with the 1997 periods primarily because of FSC's increased interest in Main Pass and certain employee benefit costs. OUTLOOK In response to a weak sulphur market, FSC curtailed production at its Culberson mine in early 1998 and announced on June 30, 1998 that it planned to permanently cease operations at the mine. The closure of the Culberson mine is expected to improve near-term sulphur market fundamentals, and FSC is seeking an increase in third-quarter 1998 sulphur contract prices compared with prices realized in the first half of 1998, although the major sulphur consumers are strongly resisting any price increase. Negotiations are currently ongoing and no assurance can given that a price increase will be realized. CAPITAL RESOURCES AND LIQUIDITY Net cash provided by operating activities totaled $23.2 million for the first six months of 1998, compared with $16.3 million for the first six months of 1997. A reduction in sulphur inventories was the primary reason for higher net cash provided by operating activities in the 1998 period compared with the 1997 period. Capital expenditures, which primarily relate to maintaining current levels of production, totaled $2.3 million for the six- month 1998 period and $2.7 million for the six-month 1997 period. Capital expenditures for 1998 are expected to total approximately $6.0 million, slightly higher than for 1997 because of the addition of IGL's former 25.0 percent interest and additional drilling activities scheduled in 1998 to maintain required levels of water treatment capacity for sulphur mining operations at Main Pass. 10 In May 1998 FSC's Board of Directors expanded the open market share purchase program from a total of 1.0 million shares of its common stock to up to 1.6 million shares. The timing of the purchases is dependent upon many factors, including the price of FSC's common stock, FSC's operating results, cash flows and financial position, and general economic and market conditions. FSC purchased 125,700 shares in the second quarter of 1998 for $1.8 million (an average of $14.09 per share). Through June 30, 1998, FSC has purchased 646,100 shares for $8.8 million (an average of $13.69 per share) under its share purchase program. Based on current projections, management believes that FSC will generate sufficient cash flow from operations to fund its ongoing working capital requirements, reclamation costs and projected capital expenditures for the foreseeable future. Additionally, in December 1997 FSC established a $100 million revolving credit facility to further enhance its liquidity and financial flexibility. No amounts were outstanding under this facility as of July 21, 1998. As of June 30, 1998, FSC held cash balances totaling $33.8 million which are available to fund working capital requirements, reclamation costs, projected capital expenditures and other growth opportunities which FSC may pursue in the future. On August 3, 1998, FSC and McMoRan Oil & Gas Co. (MOXY) announced they had signed a definitive agreement to combine their operations (see Note 4). FSC's merger with MOXY is expected to be completed during the fourth quarter of 1998, subject to approval by shareholders of FSC and MOXY and applicable regulatory agencies. CAUTIONARY STATEMENT Management's discussion and analysis of financial condition and results of operations contains forward-looking statements, including without limitation, FSC's reserve expectations, operating costs, demand for sulphur, the availability of financing, the ability to satisfy future cash obligations and environmental costs. Important factors that may cause future results to differ from these projections include the reliance on IMC-Agrico Company as a continuing customer, the seasonality and volatility of sulphur markets, competition and environmental issues as described in more detail under the heading "Cautionary Statements" in FSC's Form 10-K for the year ended December 31, 1997. -------------------- The results of operations reported and summarized above are not necessarily indicative of future operating results. 11 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. (a) The Annual Meeting of Stockholders of Freeport-McMoRan Sulphur Inc. (FSC) was held on May 12, 1998 (the Annual Meeting). Proxies were solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. (b) At the Annual Meeting, J. Terrell Brown and Rene L. Latiolais were elected to serve until the 2001 annual meeting of stockholders. In addition to the directors elected at the Annual Meeting, the terms of the following directors continued after the Annual Meeting: Richard C. Adkerson, Thomas D. Clark, Jr., James R. Moffett, B.M. Rankin, Jr. and Robert M. Wohleber. (c) At the Annual Meeting, holders of shares of FSC's Common Stock elected two directors with the number of votes cast for or withheld from each nominee as follows: Name For Withheld - ----------------- --------- -------- J. Terrell Brown 8,963,452 143,211 Rene L. Latiolais 8,972,767 133,896 With respect to the election of directors, there were no abstentions or broker non-votes. At the Annual Meeting, the stockholders also voted on and approved a proposal to ratify the appointment of Arthur Andersen LLP to act as the independent public accountants to audit the financial statements of FSC and its subsidiaries for the year 1998. Holders of 9,014,582 shares voted for, holders of 59,035 shares voted against and holders of 33,046 shares abstained from voting on, such proposal. There were no broker non-votes with respect to such proposal. At the Annual Meeting, the stockholders also voted on and approved FSC's 1997 Stock Option Plan. Holders of 8,216,237 shares voted for, holders of 768,508 shares voted against and holders of 121,918 shares abstained from voting on, such proposal. There were no broker non-votes with respect to such proposal. Item 6. Exhibits and Reports on Form 8-K. (a) The exhibits to this report are listed in the Exhibit Index beginning on Page E-1 hereof. (b) During the quarter for which this report is filed, the registrant filed one Current Report on Form 8- K dated June 30, 1998 reporting information under Item 5. 12 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 hereunto duly authorized. FREEPORT-McMoRan SULPHUR INC. By:/s/C. Donald Whitmire, Jr. ------------------------------ C. Donald Whitmire, Jr. Vice President and Controller-Financial Reporting (authorized signatory and Principal Accounting Officer) Date: August 11, 1998 13 Freeport-McMoRan Sulphur Inc. EXHIBIT INDEX Number Description - ------ ------------------------------------------------------ 2.1 Contribution and Distribution Agreement by and among Freeport-McMoRan Inc. (the Company), Freeport-McMoRan Inc. (FTX) and Freeport-McMoRan Resource Partners, Limited Partnership (FRP), dated as of August 26, 1997(1) 2.2 Assignment and Assumption Agreement by and between IMC Global Inc. (IGL) and FRP dated as of December 22, 1997(2) 3.1 Certificate of Incorporation of the Company(1) 3.2 By-laws of the Company(1) 4.1 Form of the Company's Common Stock certificate(1) 4.2 Stockholder Protection Rights Agreement between Freeport-McMoRan Sulphur Inc. and Mellon Securities Trust Company, as Rights Agent(3) 10.1 Employee Benefits Agreement by and between FTX and the Company(2) 10.2 Asset Sale Agreement for Main Pass Block 299 between FRP and Chevron USA, Inc. dated as of May 2, 1990(1) 10.3 Main Pass 299 Sulphur and Salt Lease, effective May 1, 1988(1) 10.4 Joint Operating Agreement by and between FRP, IMC- Fertilizer, Inc. and Felmont Oil Corporation, dated June 5, 1990(1) 10.5 Joint Operating Agreement by and between FRP, IMC- Fertilizer, Inc. and Felmont Oil Corporation, dated May 1, 1988(1) 10.6 Agreement to Coordinate Operating Agreements by and between FRP, IMC-Fertilizer and Felmont Oil Corporation, dated May 1, 1988(1) 10.7 Asset Purchase Agreement between FRP and Pennzoil Company dated as of October 22, 1994 (the Asset Purchase Agreement)(1) 10.8 Amendment No. 1 to the Asset Purchase Agreement dated as of January 3, 1995(1) 10.9 Agreement for Sulphur Supply, as amended, dated as of July 1, 1993 among FRP, IMC Fertilizerand IMC-Agrico Company (the Sulphur Supply Agreement)(1)(4) 10.10 Side letter with IGL regarding the Sulphur Supply Agreement(1) 10.11 Processing and Marketing Agreement between the Freeport Sulphur Company (a division of FRP) and Felmont Oil Corporation dated June 19, 1990 (the Processing Agreement)(1) 10.12 Amendment Number 1 to the Processing Agreement(1) 10.13 Amendment Number 2 to the Processing Agreement(1) 10.14 Services Agreement dated as of December 23, 1997 between the Company and FM Services Company (FMS)(2) E-1 10.15 Credit Agreement dated as of December 12, 1997 among the Company, as borrower, the financial institutions party thereto, the Chase Manhattan Bank, as administrative agent and documentary agent, and Hibernia National Bank, as co- agent(2) Executive Compensation Plans and Arrangements (Exhibits 10.16 through 10.19) 10.16 1997 Stock Option Plan for Non-Employee Directors(1) 10.17 Company Adjusted Stock Award Plan(1) 10.18 Freeport Sulphur 1997 Stock Option Plan(1) 10.19 Letter Agreement dated December 22, 1997 between FMS and Rene L. Latiolais(2) 15.1 Letter dated July 21, 1998 from Arthur Andersen LLP regarding unaudited interim financial statements. 27.1 Financial Data Schedule - ---------------------- (1) Incorporated by reference from the Company's Registration Statement on Form S-1 (Registration No. 333-40375) filed with the Securities and Exchange Commission on November 17, 1997. (2) Incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1997. (3) Incorporated by reference from the Company's Current Report on Form 8-K dated December 16, 1997. (4) Portions of this Exhibit have been omitted pursuant to a confidentiality request filed with the Securities and Exchange Commission in connection with the filing of the Registration Statement on Form S-1. E-2