SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1993
Commission File Number: 1-8124
FREEPORT-MCMORAN INC.
Incorporated in Delaware 13-3051048
(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 September 30, 1993, there were issued and outstanding 141,026,033 shares of
the registrant's Common Stock, par value $1 per share.
The registrant hereby amends its Form 10-Q for the quarter ended September 30,
1993, as set forth in the pages attached hereto and as discussed below.
After discussions with the staff of the Securities and Exchange
Commission (SEC), Freeport-McMoRan Inc. (FTX) reclassified certain expenses
and accruals previously recorded in 1993 as restructuring and valuation of
assets. In response to inquiries, FTX advised the SEC staff that $27.4
million originally reported as restructuring and valuation of assets
represented the cumulative effect of changes in accounting principle resulting
from the adoption of the new accounting policies that FTX considered
preferable. FTX also informed the SEC staff of the components of other
charges included in the amount originally reported as restructuring and
valuation of assets. FTX concluded that the reclassification and the related
supplemental disclosures more accurately reflect the nature of these charges
to 1993 net income in accordance with generally accepted accounting
principles. These reclassifications had no impact on net income or net income
per share.
Freeport-McMoRan Copper & Gold Inc. (FCX), a subsidiary of FTX,
previously reported its investment in Rio Tinto Minera, S.A. (RTM) using the
equity method of accounting because FCX anticipated reducing its interest
below 50% within one year of the initial investment in RTM. FCX is now
considering alternative forms of financing, accordingly, FTX hereby amends its
report on Form 10-Q for the quarter ended September 30, 1993 as attached
hereto to reflect its investment in RTM on a fully consolidated basis.
FREEPORT-McMoRan INC.
TABLE OF CONTENTS
Page
----
Part I. Financial Information
Financial Statements:
Condensed Balance Sheets........................ 4
Statements of Operations........................ 5
Statements of Cash Flow......................... 6
Notes to Financial Statements................... 7
Remarks........................................... 8
Management's Discussion and Analysis
of Financial Condition and
Results of Operations 9
Signature
FREEPORT-McMoRan INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
--------------------
FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED BALANCE SHEETS (Unaudited)
September 30, December 31,
1993 1992
------------- ------------
(in thousands)
ASSETS
Current assets:
Cash and short-term investments................ $ 52,544 $ 381,002
Accounts receivable............................ 250,885 261,401
Inventories.................................... 341,358 302,589
Prepaid expenses and other..................... 28,146 38,515
---------- ----------
Total current assets......................... 672,933 983,507
Property, plant and equipment, net............. 2,688,060 2,276,857
Investment in geothermal assets................ 10,450 114,374
Long-term receivables.......................... 110,463 53,896
Other assets................................... 140,648 118,077
---------- ----------
Total assets................................... $3,622,554 $3,546,711
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities....... $ 365,055 $ 321,377
Long-term debt due within one year............. 35,051 80,146
---------- ----------
Total current liabilities.................... 400,106 401,523
Long-term debt, less current portion........... 1,176,365 1,430,546
Accrued postretirement benefits and pension
costs........................................ 237,670 144,161
Reclamation and mine shutdown reserves......... 102,317 62,360
Other liabilities and deferred credits......... 172,553 87,382
Deferred income taxes.......................... 197,097 196,953
Deferred gain on sale of subsidiary interests.. 49,662 94,861
Minority interests in consolidated
subsidiaries.................................. 1,190,107 782,904
Stockholders' equity........................... 96,677 346,021
---------- ----------
Total liabilities and stockholders' equity..... $3,622,554 $3,546,711
========== ==========
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF OPERATIONS (Unaudited)
Third Quarter Nine Months
---------------------- -----------------------------
1993 1992 1993 1992
-------- -------- ---------- ----------
(in thousands, except per share amounts)
Revenues.................................. $402,353 $367,340 $1,124,992 $1,242,263
Cost of sales:
Production and delivery................... 276,135 216,533 834,958 726,398
Depreciation and amortization............. 43,110 47,009 141,203 160,484
-------- -------- ---------- ----------
Total cost of sales................... 319,245 263,542 976,161 886,882
Exploration expenses...................... 19,672 6,175 47,990 28,012
Provision for restructuring charges....... - - 67,145 -
(Gain) loss on valuation and sale of
assets, net............................. (70,191) - 14,859 -
General and administrative expenses....... 36,059 44,776 127,176 135,736
-------- -------- ---------- ----------
Total costs and expenses.............. 304,785 314,493 1,233,331 1,050,630
-------- -------- ---------- ----------
Operating income (loss)................... 97,568 52,847 (108,339) 191,633
Interest expense, net..................... (22,034) (10,682) (53,237) (41,657)
Gain on sale of FCX Class A shares........ - 100,934 - 100,934
Gain on conversion of FCX notes........... (2,861) 19,562 30,435 19,562
Other income, net......................... 3,767 4,238 6,802 1,646
-------- -------- ---------- ----------
Income (loss) before income taxes and
minority interests...................... 76,440 166,899 (124,339) 272,118
(Provision) credit for income taxes....... (33,784) (20,706) (1,906) (52,532)
Minority interests in net (income)
loss of consolidated subsidiaries....... (10,282) (17,435) 57,805 (56,584)
-------- -------- ---------- ----------
Income (loss) before changes in
accounting principle.................... 32,374 128,758 (68,440) 163,002
Cumulative effect of changes in
accounting principle, net............... - - (20,717) -
-------- -------- ---------- ----------
Net income (loss)......................... 32,374 128,758 (89,157) 163,002
Preferred dividends....................... (5,588) (5,621) (16,782) (13,065)
-------- -------- ---------- ----------
Net income (loss)
applicable to common stock.............. $ 26,786 $123,137 $ (105,939) $ 149,937
======== ======== ========== ==========
Net income per share:
Primary-before changes
in accounting principle............... $.19 $.86 $(.60) $1.03
Cumulative effect of changes
in accounting principle............... - - (.15) -
---- ---- ----- -----
$.19 $.86 $(.75) $1.03
==== ==== ===== =====
Fully diluted-before changes
in accounting principle............... $.19 $.76 $(.60) $1.02
Cumulative effect of changes
in accounting principle............... - - (.15) -
---- ---- ----- -----
$.19 $.76 $(.75) $1.02
==== ==== ===== =====
Average common and common
equivalent shares outstanding:
Primary............................. 142,265 143,778 142,076 145,423
======= ======= ======= =======
Fully diluted....................... 142,265 180,267 142,076 171,828
======= ======= ======= =======
Dividends per common share $.3125 $.3125 $.9375 $.9375
====== ====== ====== ======
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOW (Unaudited)
Nine Months Ended
September 30,
--------------------
1993 1992
--------- ---------
(in thousands)
Cash flow from operating activities:
Net income (loss)........................................ $(89,157) $163,002
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Cumulative effect of changes in accounting principle... 20,717 -
Depreciation and amortization.......................... 147,592 162,902
Other noncash charges to income........................ 33,194 -
Provision for restructuring charges, net of payments... 23,980 -
Loss on valuation and sale of assets, net.............. 14,859 -
Oil and gas exploration expenses....................... 19,699 16,869
Recognition of unearned revenues in income............. (10,772) (7,544)
Amortization of debt discount and financing costs...... 31,159 36,664
Gain on sale of FCX Class A shares..................... - (100,934)
Gain on conversion of FCX notes........................ (30,435) (19,562)
Deferred income taxes.................................. (26,658) 9,176
Minority interests' share of net income (loss)......... (57,804) 56,584
(Increase) decrease in working capital, net of effect..
of acquisitions and dispositions:
Accounts receivable.................................. 30,560 (63,203)
Inventories.......................................... (1,139) (13,426)
Prepaid expenses and other........................... (12,730) (29,387)
Accounts payable and accrued liabilities............. (82,708) (60,424)
Reclamation and mine shutdown expenditures............. (8,283) (9,009)
Other.................................................. 8,776 (431)
-------- --------
Net cash provided by operating activities................ 10,850 141,277
-------- --------
Cash flow from investing activities:
Capital expenditures:
Metals................................................. (310,718) (234,525)
Main Pass.............................................. (36,872) (98,908)
Agricultural minerals.................................. (16,107) (76,309)
Oil and gas............................................ (31,318) (39,789)
Other.................................................. (21,644) (48,940)
Acquisition of Rio Tinto Minera, S.A., net of cash
acquired............................................... (1,354) -
Proceeds from sale of:
Oil and gas assets..................................... 95,250 -
Geothermal assets...................................... 23,000 -
Other.................................................. 18,733 -
Other.................................................... (358) 5,553
-------- --------
Net cash used in investing activities.................... (281,388) (492,918)
-------- --------
Cash flow from financing activities:
Proceeds from issuance of:
Convertible Exchangeable Preferred Stock............. - 245,700
FRP depositary units................................. - 425,996
FCX Class A shares................................... - 174,142
FCX Special Preference Stock......................... - 217,867
FCX Step-Up Preferred Stock.......................... 340,700 -
FCX Redeemable Gold Denominated Preferred Stock...... 220,390 -
Proceeds from sale of PT-FI common shares................ - 212,485
Purchase of Freeport-McMoRan Inc. common shares.......... (4,498) (72,250)
Purchase of FCX Class A shares........................... (13,521) (5,805)
Distributions paid to minority interests:
FCX.................................................... (50,579) (28,879)
FRP.................................................... (90,884) (79,158)
Distribution to FM Properties Inc........................ - (28,019)
Proceeds from debt....................................... 384,977 565,393
Repayment of debt........................................ (697,855) (747,312)
Cash dividends paid:
Common stock........................................... (132,190) (135,443)
Preferred stock........................................ (16,796) (11,262)
Other.................................................... 2,336 3,319
-------- --------
Net cash provided by (used in) financing activities...... (57,920) 736,774
-------- --------
Net increase (decrease) in cash and short-term
investments............................................ (328,458) 385,133
Cash and short-term investments at beginning of year..... 381,002 89,603
-------- --------
Cash and short-term investments at end of period......... $ 52,544 $474,736
======== ========
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. RESTRUCTURING AND VALUATION CHARGES
RESTRUCTURING CHARGES. During the first half of 1993, Freeport-McMoRan Inc.
(FTX) recognized expense of $67.1 million for the restructuring of its
administrative organization (including personnel related costs, the cost to
downsize its computing and management information systems (MIS) structure, and
a write-off of excess facilities and other miscellaneous assets), principally
resulting from formation of the joint venture between Freeport-McMoRan
Resource Partners, Limited Partnership (FRP) and IMC Fertilizer, Inc. (IMC)
discussed below. See Management's Discussion and Analysis of Financial
Condition and Results of Operations for information about a reclassification
of restructuring charges from those previously reported resulting from views
expressed by the Securities and Exchange Commission staff.
ASSET SALES/RECOVERABILITY. In July 1993, FTX sold its ownership interest in
a nonproducing oil and gas property for $95 million in cash, recognizing a
third quarter gain of $69.1 million. During the second quarter, FTX
recognized expense of $45.1 million for the recoverability of certain assets,
of which a significant portion related to FRP's investment in its non-Main
Pass sulphur assets because of persistent weak market conditions. FRP has
accrued future reclamation and mine shutdown costs related to these assets
totaling $52.8 million. In April 1993, FRP sold its remaining interests in
producing geothermal properties for $63.5 million, consisting of $23 million
in cash and interest-bearing notes totaling $40.5 million (included in other
assets), recognizing a $31 million charge to expense. FRP also recorded a $9
million charge to expense for impairment of its undeveloped geothermal
properties.
2. IMC-AGRICO COMPANY
FRP and IMC formed a joint venture (IMC-Agrico Company), effective July 1,
1993, for their respective phosphate fertilizer businesses, including
phosphate rock and uranium. FRP's "Current Interest", reflecting cash to be
distributed from ongoing operations, initially is 58.6% and its "Capital
Interest", reflecting the purchase or sale of long-term assets or any required
capital contributions to IMC-Agrico Company is 46.5% initially. These
ownership percentages decline in annual increments ultimately to 40.6% for the
fiscal year ending June 30, 1998 and remain constant thereafter. FRP
proportionately consolidates its interest in IMC-Agrico Company.
3. INVESTMENT IN RIO TINTO MINERA, S.A. (RTM)
In March 1993, Freeport-McMoRan Copper & Gold Inc. (FCX) acquired a 65%
interest in the Spanish company RTM, the metal/mining subsidiary of Ercros,
S.A., for approximately $52 million (excluding transaction costs), of which
$31.3 million will be paid over the next two years. The acquisition was
accounted for under the purchase method, and accordingly, the operating
results of RTM have been included in the consolidated operating results since
the date of acquisition.
4. PREFERRED STOCK OFFERINGS
In July 1993, FCX sold publicly 14 million depositary shares representing its
Step-Up Convertible Preferred Stock. Each depositary share is entitled to a
cumulative annual cash dividend payment of $1.25 through August 1, 1996 and
thereafter $1.75 (payable quarterly), has a $25 liquidation preference, and is
convertible at the option of the holder into 0.813 shares of FCX Class A
common stock. Beginning in 1996, the depositary shares are redeemable, solely
at FCX's option, under certain circumstances.
In August 1993, FCX sold publicly 6 million depositary shares
representing its Gold Denominated Preferred Stock. Each depositary share is
entitled to a cumulative quarterly cash dividend equal to the value of
0.000875 ounces of gold and is subject to mandatory cash redemption in August
2003 for the value of 0.1 ounces of gold.
5. INTEREST COSTS
Interest expense excludes capitalized interest of $10.2 million and $20.3
million in the third quarter of 1993 and 1992, respectively, and $48.2 million
and $63.3 million in the first nine months of 1993 and 1992, respectively.
6. RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the first nine months of 1993
resulted in a shortfall of $203.2 million compared with a ratio of 2.8 to 1
for the 1992 period. For this calculation, earnings are income from
continuing operations (including the restructuring and valuation charges
discussed above) before income taxes, minority interests, and fixed charges.
Fixed charges are interest, that portion of rent deemed representative of
interest, and the preferred stock dividend requirements of majority-owned
subsidiaries.
7. CHANGES IN ACCOUNTING PRINCIPLE
Effective January 1, 1993, FTX adopted the following changes to accounting
policies:
Periodic Scheduled Maintenance Costs - Costs related to periodic scheduled
- - ------------------------------------
maintenance (turnarounds) were previously capitalized when incurred and
amortized generally over six months to two years. Effective January 1, 1993,
the method of accounting was changed to expense these costs when incurred.
Deferred Charges - The accounting for deferred charges was changed to provide
- - ----------------
for deferral of only those costs that directly relate to the acquisition,
construction, and development of assets and to the issuance of debt and
related instruments. Previously, certain other costs that benefitted future
periods were amortized over the periods benefitted.
Management Information Systems - Costs of MIS equipment and software that have
- - ------------------------------
a material impact on periodic measurement of net income are capitalized and
amortized over their estimated productive lives. Other MIS costs, including
equipment and purchased software that involve relatively immaterial amounts
(currently individual expenditures of less than $.5 million) and short
estimated productive lives (currently less than three years) are charged to
expense when incurred. Previously, most expenditures for MIS equipment and
purchased software were capitalized. The accounting for MIS costs was changed
to recognize the rapid rate of technology change in MIS which results in short
productive lives of equipment and software and a need for continuing
investments.
The changes in accounting policy were adopted to improve the measurement
of operating results by reporting cash expenditures as expenses when incurred
unless they are directly related to long-lived asset additions. In addition,
the administrative costs of accounting for assets will be reduced by not
capitalizing and amortizing relatively insignificant expenditures that do not
have a material effect on measuring periodic net income.
__________________
Remarks
The information furnished herein should be read in conjunction with FTX's
financial statements contained in its 1992 Annual Report to stockholders and
incorporated by reference in its Annual Report on Form 10-K.
The information furnished herein reflects all adjustments which are, in the
opinion of management, necessary for a fair statement of the results for the
periods. All such adjustments are, in the opinion of management, of a normal
recurring nature.
Item 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations.
------------------------------------
FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES
EARNINGS BY SOURCES
Three Months Ended September 30,
------------------------------------------------
1993 1992
--------------------- ----------------------
(in thousands)
Metals a
FCX-operations........ $67,655 $63,770
-exploration....... (9,321) $58,334 (1,872) $61,898
------- -------
Agricultural minerals
FRP-operations........ (12,522) (1,098)
-exploration....... (710) (13,232) (1,691) (2,789)
------- -------
Energy
Oil and gas:
FRP................. 789 5,136
FTX................. (8,672)b (7,883) (5,437) (301)
------ -------
Other income, net....... (6,075) (1,723)
------- -------
Income from segment
operations c.......... $31,144 $57,085
======= =======
Nine Months Ended September 30,
-------------------------------------------------
1993 1992
--------------------- ----------------------
(in thousands)
Metals a
FCX-operations........ $112,858 $214,192
-exploration....... (25,037) $87,821 (6,274) $207,918
-------- --------
Agricultural minerals
FRP-operations........ (48,534) 29,114
-exploration....... (2,051) (50,585) (3,502) 25,612
-------- --------
Energy
Oil and gas:
FRP................. 19 4,505
FTX................. (28,544)b (28,525) (30,926) (26,421)
-------- --------
Other income, net....... (28,244) (13,830)
-------- --------
Income from segment
operations c....... $(19,533) $193,279
======== ========
a. Includes earnings of $2.1 million and a loss of $2.2 million attributable
to RTM for the three-month period and nine-month periods ended September
30, 1993, respectively.
b. Excludes $69.1 million gain from the sale of the East Cameron 331/332
property in July 1993.
c. Operating income (loss) plus other income, less provision for
restructuring charges and loss on valuation and sale of assets from the
Statements of Operations.
FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS
After discussions with the staff of the Securities and Exchange Commission
(SEC), Freeport-McMoRan Inc. (FTX) is reclassifying certain expenses and
accruals previously recorded in 1993 as restructuring and valuation of assets.
In response to inquiries, FTX advised the SEC staff that $27.4 million
originally reported as restructuring and valuation of assets represented the
cumulative effect of changes in accounting principle resulting from the
adoption of the new accounting policies that FTX considered preferable, as
described in Note 7 to the financial statements. FTX also informed the SEC
staff of the components of other charges included in the amount originally
reported as restructuring and valuation of assets. FTX concluded that the
reclassification and the related supplemental disclosures more accurately
reflect the nature of these charges to 1993 net income in accordance with
generally accepted accounting principles. These reclassifications had no
impact on net income or net income per share.
FTX reported third-quarter 1993 net income applicable to common stock of
$26.8 million ($.19 per share) compared with $123.1 million ($.86 per primary
share) for the 1992 period. Third-quarter 1993 net income includes $46.1
million ($.32 per share) essentially representing the gain from the sale of an
oil and gas property (Note 1), whereas the 1992 period includes gains totaling
$120.5 million ($.84 per primary share) on the sale/issuance of FCX Class A
common stock. For the nine months ended September 30, 1993, which included a
noncash charge of $20.7 million ($.15 per share), after taxes and minority
interests, to reflect the changes in accounting principle (Note 7), FTX
reported a net loss of $105.9 million ($.75 per share) compared with earnings
of $149.9 million ($1.03 per primary share) for the year-ago period. The
nine-month period of 1993 was negatively impacted by net charges totaling
$45.7 million ($.32 per share), consisting of administrative restructuring
costs, adjustments to general and administrative expenses and production and
delivery costs discussed below, the loss on the sale of the Freeport-McMoRan
Resource Partners, Limited Partnership (FRP) producing geothermal assets, the
charge to expense for the recoverability of certain assets (Note 1), and the
changes in accounting principle net of the oil and gas property sale gain
noted above, and a gain from the issuance of FCX Class A common stock. The
1992 period includes the gains from the sale/issuance of FCX Class A common
stock mentioned above. FTX's operating results reflect lower earnings from
all three of its business segments, generally caused by lower product
realizations. FTX's effective tax rate for operations (excluding credits for
the nine-month period of 1993 attributable to the non-operational items)
during the 1993 periods is greater than during the 1992 periods due to the
higher portion of income from FTX's metals operations in Indonesia, where the
effective tax rate is higher.
FTX recognized a loss of $9.3 million and $83 million, before income
taxes, for the third-quarter and nine-month periods of 1993, respectively,
which represents its proportionate share of FRP's net loss. This included
recognition of $15.5 million and $45.2 million, respectively, of the gain
deferred by FTX in connection with the public sale of FRP units in February
1992. The remaining deferred gain ($49.7 million as of September 30, 1993)
will be recognized in future periods when FRP public unitholders receive a
disproportionate share of distributions pursuant to their preference rights.
The deferred gain will be recognized by FTX in future periods so that FTX will
include in its operating results its proportionate share of FRP's operating
results. Subsequent to the recognition of the balance of the deferred gain,
if FRP's public unitholders receive in any quarter a disproportionate share of
distributions pursuant to their preference rights, FTX will recognize a
smaller share of any FRP net income, or a larger share of any FRP net loss,
than that which would be recognized based on FTX's ownership interest in FRP.
If in future quarters FTX receives no distributions and FRP's public
unitholders were to receive the $.60 minimum preference distribution, the
deferred gain would be fully recognized in the second quarter of 1994.
RESTRUCTURING ACTIVITIES. During the second quarter of 1993, FTX undertook a
restructuring of its administrative organization. This restructuring
represented a major step by FTX to lower its costs of operating and
administering its businesses in response to weak market prices of the
commodities produced by its operating units. As part of this restructuring,
FTX significantly reduced the number of employees engaged in administrative
functions, changed its management information systems (MIS) environment to
achieve efficiencies, reduced its needs for office space, outsourced a number
of administrative functions, and implemented other actions to lower costs. As
a result of this restructuring process, the level of FTX's administrative cost
has been reduced substantially over what it would have been otherwise, which
benefit will continue in the future. However, the restructuring process
entailed incurring certain one-time costs by FTX.
FTX's restructuring costs totaled $67.1 million, consisting of the
following: $30.3 million for personnel related costs; $15.0 million relating
to excess office space and furniture and fixtures resulting from the staff
reduction; $8.2 million relating to the cost to downsize its computing and MIS
structure; $4.8 million of deferred charges relating to FTX's and PT-FI's
credit facilities which were substantially revised in June 1993; and $8.8
million related to costs directly associated with the formation of IMC-Agrico
Company, discussed below.
In connection with the restructuring project, FTX changed its accounting
systems and undertook a detailed review of its accounting records and
valuation of various assets and liabilities. As a result of this process, FTX
recorded charges totaling $60.7 million, comprised of the following: (a) $26.2
million of production and delivery costs consisting of $10.4 million for
revised estimates of prior year costs; $6.3 million for revised estimates of
environmental liabilities; $5.0 for materials and supplies inventory
obsolescence; and $4.5 million of adjustments in converting accounting
systems, (b) $18.7 million of depreciation and amortization costs consisting
of $11.5 million for estimated future abandonment and reclamation costs and
$7.2 million for the write-down of miscellaneous properties, and (c) $15.8
million of general and administrative expenses consisting of $9.4 million to
downsize FTX's computing and MIS structure and $6.4 million for the write-off
of miscellaneous assets.
Metals Operations
FTX's metals operations are conducted through its affiliate Freeport-McMoRan
Copper & Gold Inc. (FCX) and FCX's operating units P.T. Freeport Indonesia
Company (PT-FI) and Rio Tinto Minera, S.A. (RTM). Third-quarter 1993 metals
segment earnings were $58.3 million on revenues of $261.5 million compared
with earnings of $61.9 million on revenues of $157.1 million for the 1992
period. For the nine months ended September 30, 1993, earnings totaled $87.8
million on revenues of $610.1 million compared with earnings of $207.9 million
on revenues of $505.5 million for the year-ago period.
Significant items impacting the metals segment earnings are as follows:
Third Quarter Nine Months
------------- -----------
(in millions)
Metals segment earnings - 1992........... $61.9 $207.9
----- ------
Increase (decrease)
RTM revenues........................... 103.8 201.5
Elimination of intercompany sales...... (13.1) (26.7)
Price realization:
Copper............................... (20.7) (65.2)
Gold................................. 5.2 5.9
Sales volumes:
Copper............................... 16.1 (20.0)
Gold................................. 4.0 (6.9)
Treatment charges...................... 1.0 25.7
Adjustments to prior period............ 7.0 (12.7)
concentrate sales
Other ................................. 1.1 3.0
----- ------
Net revenue variance................. 104.4 104.6
Cost of sales.......................... (96.8) (192.6)*
Exploration expenses and other......... (11.2) (32.1)*
----- ------
(3.6) (120.1)
----- ------
Metals segment earnings - 1993........... $58.3 $ 87.8
===== ======
* Includes $10.0 million in cost of sales and $6.3 million in general and
administrative expenses resulting from the restructuring project discussed
above.
Revenues in the 1993 periods were negatively impacted by a 13% decrease
in copper price realizations, taking into account PT-FI's $.90 per pound price
protection program, offset by a 9% and 4% increase in third quarter and nine
month gold price realizations, respectively. Copper sales volumes in the
current quarter were 12% higher than in the 1992 period, but nine-month
volumes in 1993 were 5% below comparable 1992 levels reflecting both the
impact of the ore pass collapse during the second quarter of 1993 and the high
level of sales in 1992. Gold sales volumes for the third quarter were 7%
higher than the 1992 period, while the nine-month period reflects a 4%
decrease in gold sales volumes as a result of the ore pass blockage discussed
below. Revenues benefited from a decline in treatment charges from the 1992
periods, when FCX had more spot market sales of its copper/gold concentrate,
which carried higher treatment charge costs than long-term contracts.
Treatment charges vary with the price of copper, and consequently were reduced
because of lower copper prices. Adjustments to prior period concentrate sales
includes adjustments for changes in prices and weights on all metals for all
prior period open sales as well as the related impact on treatment charges.
Current quarter adjustments ($1.9 million) were minimized because of the price
protection program compared to the 1992 period when falling prices resulted in
a negative adjustment ($8.9 million). Open copper sales at the beginning of
1993 were recorded at an average price of $1.04, but subsequently were
adjusted downward as copper prices have fallen during the year, negatively
impacting 1993 revenues.
During the third quarter of 1993, copper prices dropped to their lowest
levels since 1987, reflecting lower demand caused by the continuing global
recession, and remain below $.75 per pound. PT-FI has in place a price
protection program that eliminates exposure to copper price declines below an
average $.90 per pound for estimated copper sales priced during 1993 and 1994.
At September 30, 1993, 139.9 million pounds of copper remained to be
contractually priced during future quotational periods. As a result of
PT-FI's price protection program, these pounds are recorded at an average
price of $.90 per pound. FCX has obtained sales commitments from its
purchasers for virtually all of its estimated 1994 production which is to be
priced at the then current market price under the terms of the contracts.
In June 1993, one of PT-FI's four mill level ore passes collapsed,
resulting in a partial blockage of the ore pass and a restriction at an
adjacent pass. The blockage's primary effect was to limit mill throughput to
approximately 40,700 metric tons of ore per day (MTPD) for approximately eight
weeks. The ore pass collapse has been overcome and production reached 66,000
MTPD in early August and is currently averaging approximately 70,000 MTPD.
The impact of the collapse was minimized by using an ore stockpile adjacent to
the mill and the installation of conveyors to alternative ore pass systems.
The copper recovery rate for the nine-month period of 1993 was adversely
affected because the ore milled from the stockpile contained higher than
normal oxidized copper, which yields lower copper recoveries. Ore grades for
1993 are projected to average 1.56% copper and 1.40 grams of gold per ton.
Annual 1993 sales are estimated to be approximately 640 million recoverable
pounds of copper and 745,000 recoverable ounces of gold. Copper and gold
sales volumes for 1994 are expected to be at least equal to the estimated 1993
volumes.
PT-FI Operating Results: Third Quarter Nine Months
-------------------- --------------------
1993 1992 1993 1992
-------- -------- -------- --------
Ore milled (metric
tons per day)............ 59,700 57,000 59,200 56,800
Copper grade (%)........... 1.68 1.63 1.53 1.61
Gold grade (grams
per metric ton).......... 1.51 1.58 1.21 1.32
Recovery rate (%)
Copper................... 87.9 87.9 87.2 88.6
Gold..................... 75.9 71.9 75.5 73.4
Copper (000s of
recoverable pounds)
Production............... 172,400 160,100 456,500 463,800
Sales.................... 165,600 147,700 443,700 465,700
Average realized pricea.. $.90 $1.04 $.91 $1.05
Gold (recoverable ounces)
Production............... 194,900 184,200 458,600 459,600
Sales.................... 172,900 162,200 440,400 460,000
Average realized price... $373.72 $341.40 $354.15 $341.31
Gross profit per
pound of copper:
Average realized price..... 90.0cents 103.7cents 90.8cents 104.8cents
---- ----- ---- -----
Production costs:
Site production and
deliver................. 44.6 45.3 49.2 45.6
Gold and silver credits.. (40.6) (38.6) (35.7) (34.5)
Treatment charges........ 23.9 27.5 23.7 28.1
Royalty on payable metal. 1.3 3.2 1.6 2.5
---- ---- ---- ----
Cash production costs.. 29.2 37.4 38.8 41.7
Depreciation and
amortization........... 8.7 7.4 8.7 7.4
---- ---- ---- ----
Total production costs. 37.9 44.8 47.5 49.1
---- ---- ---- ----
Revenue adjustments b...... (2.2) (5.2) (3.2) (.1)
---- ---- ---- ----
Gross profit per pound..... 49.9cents 53.7cents 40.1cents 55.6cents
==== ==== ==== ====
a. FCX recognized $15.3 million and $27.3 million of revenues (excluding
$2.7 million and $8 million, respectively, in amortized cost) in the
third-quarter and nine-month periods of 1993, respectively, as a result
of the price protection program discussed above. Excluding amounts
recognized under this program, the realization for the third-quarter and
nine-month periods of 1993 would have been $.80 and $.85 per pound,
respectively. Excludes the adjustments discussed in Note b.
b. Reflects adjustments primarily for prior period concentrate sales (net of
related amounts recognized under the price protection program) and
amortization of the cost of the price protection program.
Unit site production and delivery costs for the current quarter were
slightly lower than the 1992 period. Unit site production and delivery costs,
excluding $10.0 million of charges related to the restructuring project,
increased 3.6 cents per pound for the nine months of 1993 primarily as a
result of costs incurred in connection with the ore pass collapse (including a
$2.5 million insurance deductible), lower production volumes and lower copper
recovery rates. Unit cash production costs benefited from lower treatment
charges and from higher gold and silver credits. These credits are expected
to increase significantly in the fourth quarter of 1993 when production from
the Grasberg ore body is expected to yield abnormally high gold grades. The
1993 depreciation rate increased to 8.3 cents per recoverable pound because of
the 66,000 MTPD expansion. FCX is also amortizing approximately $.6 million a
quarter for the cost in excess of book value relating to the December 1992
purchase of 49% of the publicly traded Indonesian entity that owns a 10%
interest in PT-FI.
Exploration expenses, currently budgeted at approximately $30 million for
1993, have increased as FCX aggressively explores the 24,700 acre original
contract of work area, the contiguous 6.5 million acre exploration area, and
the adjacent 2.5 million acre area covered by the exploration permit granted
in April 1993.
AGRICULTURAL MINERALS OPERATIONS
FTX's agricultural minerals activities consist of FRP's fertilizer, phosphate
rock, and sulphur businesses. FRP and IMC Fertilizer Inc. (IMC)
formed a joint venture (IMC-Agrico Company), effective July 1, 1993, for their
respective phosphate fertilizer businesses, including phosphate rock and
uranium. IMC-Agrico Company is governed by a policy committee having equal
representation from each company and is managed by IMC. Combined annual
savings of at least $95 million in production, marketing, and general and
administrative costs are expected to result from this transaction, the full
effect beginning in the second year of operations.
As a result of the joint venture, FRP is engaged in the phosphate rock
mining, fertilizer production, and uranium oxide extraction business only
through IMC-Agrico Company. FRP will continue to operate its sulphur and oil
businesses. FRP has varying sharing ratios in IMC-Agrico Company, as
discussed in Note 2 to the financial statements, which were based on the
projected contributions of FRP and IMC to the cash flow of the joint venture
and on an equal sharing of the anticipated savings.
FRP proportionately consolidates its interest in IMC-Agrico Company.
Accordingly, FRP recognizes its proportionate interest in the combined assets
contributed by FRP and IMC to the joint venture. As a result, operating
results reported by FRP subsequent to the formation of IMC-Agrico Company vary
significantly in certain respects from those previously reported. Phosphate
fertilizer realizations and unit production costs are fundamentally changed as
the majority of the FRP contributed fertilizer production facilities are
located on the Mississippi River, whereas the IMC contributed fertilizer
production facilities are located in Florida. Fertilizer produced on the
Mississippi River commands a higher sales price in the domestic market because
of its proximity to markets; however, raw material transportation costs at the
Florida facilities are lower for phosphate rock, partially offset by increased
sulphur transportation costs. As discussed below, IMC-Agrico Company has
significantly curtailed its fertilizer production in response to weak market
conditions. The curtailment was effected principally by reducing production
at the Mississippi River facilities previously owned by FRP.
FRP's agricultural minerals segment reported a third-quarter 1993 loss of
$13.2 million on revenues of $121.7 million compared with a loss of $2.8
million on revenues of $176.2 million for the 1992 period. For the first nine
months of 1993, a loss of $50.6 million was generated on revenues of $464.2
million compared with earnings of $25.6 million on revenues of $611 million
for the year-ago period.
Significant items impacting FRP's agricultural minerals segment earnings
are as follows:
Third Quarter Nine Months
------------- -----------
(in millions)
Agricultural minerals earnings - 1992..... $( 2.8) $ 25.6
------ ------
Major increases (decreases)
Sales volumes - DAP and sulphur......... (23.4) (32.4)
Realizations - DAP and sulphur.......... (13.6) (64.7)
Other product volumes and realizations.. (17.5) (49.7)
------ ------
Net revenue variance.................. (54.5) (146.8)
Cost of sales........................... 31.0 49.9*
General and administrative and other.... 13.1 20.7*
------ ------
(10.4) (76.2)
------ ------
Agricultural minerals earnings - 1993..... $(13.2) $(50.6)
====== ======
* Includes $17.5 million in cost of sales and $7.3 million in general and
administrative expenses resulting from the restructuring project
discussed above.
Weak industrywide demand and changes due to FRP's proportionate share of
IMC-Agrico Company resulted in FRP's third-quarter 1993 sales volumes for
diammonium phosphate (DAP), its principal fertilizer product, declining 35%
from that of the year-ago period. The continued weakness in the phosphate
fertilizer market prompted IMC-Agrico Company to make strategic curtailments
in its phosphate fertilizer production. Unit production cost declined from
the 1992 period reflecting initial production efficiencies from the joint
venture, reduced raw material costs for sulphur and lower phosphate rock
mining expenses, partially offset by increased natural gas costs and lower
production volumes. Contributing to the decline in phosphate rock costs is
the change in production facilities under IMC-Agrico Company discussed
earlier. FRP's realization for DAP was lower reflecting the near 20-year low
prices as well as an increase in the lower-priced Florida sales recognized
under the joint venture.
The outlook for the remainder of 1993 and into early 1994 is for somewhat
improved prices under more normal market demand levels. Lower domestic
operating rates have kept inventory levels from rising in spite of reduced
third quarter demand. Late in the third quarter, increased export purchases
contributed to a rise in market prices, with firming export prices helping to
rekindle domestic buying interests which had been unwilling to make purchase
commitments. Additionally, domestic phosphate fertilizer demand is expected
to benefit from increased corn acreage planted due to lower government set-
asides, and increased fertilizer application rates necessitated by the
widespread flooding that caused a depletion of nutrients in a number of mid-
western states.
FRP's proportionate share of the larger IMC-Agrico Company phosphate rock
operation resulted in sales volumes for the third quarter of 1993 increasing
from the 1992 period, with IMC-Agrico Company utilizing its least-costly
operations to maximize efficiencies.
Third-quarter 1993 sulphur production at the Caminada and Main Pass mines
increased compared with the 1992 period. Sales volumes for the current
quarter declined 26%, primarily because of reduced usage by the IMC-Agrico
Company operations caused by its curtailed fertilizer production. During the
second quarter of 1993, due to the continuing decline in the market price of
sulphur, FRP recorded a noncash charge to earnings (Note 1) for the excess
capitalized cost over expected realization of its non-Main Pass sulphur
assets, primarily the Caminada sulphur mine. Due to significant improvements
in Main Pass sulphur production, FRP no longer needs the marginally profitable
Caminada operation and is now taking steps to cease Caminada operations over
the next several months. The shutdown of Caminada will have no significant
impact on FRP's reported earnings. In the sulphur market, prices remain
depressed. Although reduced global demand has forced production cutbacks
worldwide, a rebound in price is not expected until demand improves.
Third Quarter Nine Months
---------------- -------------------
1993 1992 1993 1992
------- ------- --------- ---------
Phosphate fertilizers (short tons)a
Diammonium phosphate
Sales:
Florida........................ 220,900
Louisiana...................... 177,600
Other.......................... 31,800
-------
Total sales................. 430,300 661,700 1,769,600 2,029,800
Average realized price:b
Florida....................... $100.94
Louisiana..................... 112.03
Monoammonium phosphate
Sales:
Granular...................... 58,700 89,300 369,500 408,800
Powdered...................... 22,300 22,300
Average realized price:b
Granular...................... $115.34
Powdered...................... 93.95
Granular triple superphosphate
Sales........................... 89,700 183,000 430,300 564,500
Average realized price b........ $86.59
Phosphate rock (short tons)a
Sales............................. 1,026,700 796,200 2,708,900 2,555,900
Average realized price b.......... $20.20
Sulphur (long tons)
Sales c........................... 418,900 566,400 1,446,500 1,708,100
a. Beginning July 1, 1993, reflects FRP's 46.5% share of the assets of
IMC-Agrico Company during the year ended June 30, 1994. FRP is entitled
to 58.6% of the cash flow generated by IMC-Agrico Company during such
period.
b. Represents average realization f.o.b. plant/mine.
c. Includes 149,600 tons, 403,600 tons, 929,000 tons, and 1,186,700 tons
for the third-quarter and nine-month periods of 1993 and 1992,
respectively, which represent internal consumption and Main Pass
start-up sales that are not included in sales for accounting purposes.
At Main Pass, sulphur production is presently in excess of 3,400 tons per
day, up from 1,300 tons per day at the end of the second quarter. Sulphur
production continues to accelerate toward its full production level of two
million tons per year (5,500 tons per day). Given the rapid increases
achieved during 1993, full production will probably be reached in 1994. As a
result of the sulphur production increases, these activities became
operational for accounting purposes beginning July 1, 1993. Recognizing Main
Pass sulphur operations in income and discontinuing associated capitalized
interest did not affect cash flow, but did adversely affect reported operating
results. Main Pass sulphur operations will have a more positive effect on
FRP's future earnings as production increases and if sulphur prices improve
from their current low levels.
OIL AND GAS OPERATIONS
During the second quarter of 1992, FTX transferred substantially all of its
non-Main Pass oil and gas properties to FM Properties Inc. whose shares were
distributed to FTX shareholders. FTX's oil and gas operations (excluding the
Main Pass oil operation) involves exploring for new reserves. These
activities generated a loss of $8.7 million, including exploration expense of
$9 million, for the third quarter of 1993 compared with a loss of $5.4
million, including exploration expense of $2 million, for the 1992 period.
For the nine months ended September 30, 1993, these operations generated a
loss of $28.5 million compared with a loss of $30.9 million for the year-ago
period. In July, FTX sold its interests in the recently discovered
undeveloped reserves at East Cameron Blocks 331/332, offshore Louisiana in the
Gulf of Mexico, for $95 million cash, recognizing a pretax gain of $69.1
million (not included in oil and gas operations earnings). FTX had drilled
seven development wells, then sold the reserves before setting permanent
production facilities.
Main Pass's oil operations achieved the following:
Third Quarter Nine Months
-------------------- --------- ---------
1993 1992 1993 1992
--------- --------- --------- ---------
Sales (barrels)............ 1,066,100 1,705,000 2,425,300 4,208,000
Average realized price..... $14.25 $16.82 $15.15 $15.85
Earnings (in millions)..... $.8 $5.1 $0 $4.5
Since completion of development drilling in mid-April, the Main Pass oil
production volumes increased to and remained steady at approximately 24,000
barrels of oil per day, exceeding expectations. FRP estimates that its share
of oil production will approximate 3.4 million barrels for 1993. Production
for 1994 is expected to approximate that of 1993, with the anticipated
drilling of additional wells offsetting a production decline in existing
wells. At September 30, 1993, FRP's investment in its Main Pass oil
facilities ($109.2 million) approximated the future net cash flows expected to
be received. Low future prices, increases in costs, or negative reserve
revisions could result in a charge to future earnings.
CAPITAL RESOURCES AND LIQUIDITY
Cash flow from operating activities declined during the first nine months of
1993 to $10.9 million from $141.3 million for the 1992 period, due to lower
income from operations partially offset by working capital changes. Net cash
used in investing activities was $281.4 million compared with $492.9 million
for the 1992 period. Increased metals capital expenditures were incurred
associated with PT-FI's expansion and FCX's investment in Rio Tinto Minera,
S.A. (RTM) (Note 3). Lower capital expenditures were incurred at Main Pass as
its development was completed in 1992 and significantly lower capital
expenditures were incurred in agricultural minerals operations. Net cash used
in financing activities was $57.9 million, whereas the 1992 period provided
net cash of $736.8 million. The 1993 period includes $561.1 million of
proceeds from the FCX preferred stock offerings (Note 4), whereas the 1992
period includes $1.3 billion of proceeds from equity security offerings.
Distributions to minority interest holders of FCX and FRP securities increased
during 1993 as a result of the 1992 sale of equity securities by these
entities.
FCX recently announced an expected addition of almost 4 billion payable
pounds of copper and slightly over 2 million recoverable ounces of gold to its
proved and probable reserve base, with most of the reserves being added in
1993. These expected reserve additions resulted form delineation drilling at
the Big Gossan mineral resource and from the Grasberg ore body resulting from
the contemplated 115,000 MTPD expansion discussed below.
Through 1995, FTX's capital expenditures are expected to be greater than
cash flow from operations. Upon completion of FCX's previously announced
90,000 MTPD expansion and the contemplated further expansion to 115,000 MTPD
by year-end 1995, annual production is expected to approach 1.1 billion pounds
of copper and 1.5 million ounces of gold. Completion of the FCX expansion,
along with the additional cash flows generated through savings achieved by
IMC-Agrico Company, are expected to enhance FTX's financial flexibility.
Subsequently, capital expenditures will be determined by the results of FCX's
exploration activities and ongoing capital maintenance programs. Estimated
capital expenditures through 1995 for the expansion to 115,000 MTPD, the
initial phase of the Enhanced Infrastructure Program (EIP) discussed below,
the remaining cost of the acquisition of RTM and ongoing capital maintenance
expenditures are expected to range from $700 million to $800 million and will
be funded by operating cash flow, sales of existing and to-be-constructed
infrastructure assets and a wide range of financing sources available as a
result of the future cash flow from FTX's mineral reserve asset base. These
sources include, but are not limited to, FTX's credit facility and the
issuances of public and private securities. Additional expenditures for EIP
assets beyond the initial phase, which could range between $300 million and
$400 million, depend on the success of PT-FI's exploration program.
Additional EIP expenditures, if any, would be expected to be funded by third-
party financing sources, which may include debt, equity or asset sales.
PT-FI has an agreement with Huarte S.A. (Huarte) to construct the initial
phase of the EIP. Under the terms of a March 1993 agreement with ALatieF, an
Indonesian investor, certain portions of the EIP are to be sold by PT-FI to a
joint venture owned 1/3 by PT-FI and 2/3 by ALatieF for total consideration of
$270 million. The joint venture is expected to purchase approximately $90
million of EIP assets annually through 1995, with funding provided by equity
contributions from the joint venture partners ($90 million) and debt financing
($180 million). The acquired assets will be managed by ALatieF and will be
made available to PT-FI and its employees and designees under arrangements
that will provide the joint venture with a guaranteed minimum rate of return
on its investment. The completion of the transaction is subject to execution
of definitive agreements, obtaining applicable approvals from the Government
of Indonesia, and arranging the appropriate debt financing.
The new contract of work contains provisions for PT-FI to conduct or
cause to be conducted a feasibility study relating to the construction of a
copper smelting facility in Indonesia and for the eventual construction of
such a facility, if it is deemed to be economically viable by PT-FI and the
Government of Indonesia. PT-FI is participating in a group assessing the
feasibility of constructing a copper smelting facility in Indonesia. PT-FI
would hold a minority interest in the smelter and supply one-half of the
smelter's copper concentrate requirements at market prices.
During the first nine months of 1993 FCX's Zero Coupon Exchangeable Notes
(the Notes) with a face value of $259.6 million were exchanged for 3.9 million
FCX Class A common shares, leaving Notes with a face value of $449 million
outstanding (43% of the original face amount issued). It is contemplated that
PT-FI will, subject to receipt of appropriate approvals, issue shares of its
stock to FCX as repayment for Notes exchanged for FCX stock.
At September 30, 1993, FTX had $52.5 million of cash and short-term
investments compared with $381 million at December 31, 1992, with a $345.4
million decrease occurring at FCX. The significant reduction at FCX reflects
a reduction in borrowings under PT-FI's amended credit agreement as well as
capital expenditures and dividends paid during 1993. The FTX and PT-FI credit
agreements were amended in June 1993, with FTX and FCX guaranteeing PT-FI
borrowings under the agreement. The amended credit agreements expire on
December 31, 1999 and each is structured as a three year revolving line of
credit followed by a 3 1/2 year reducing revolver. As of October 15, 1993,
$460 million was available under the credit facility.
FCX currently pays an annual cash dividend of 60 cents per share to FTX
and to its public common shareholders. FCX's Board of Directors determines
the FCX dividend payment on a quarterly basis and in its discretion may change
or maintain the dividend payment. Based on the policy adopted by the FCX
Board, this dividend is anticipated to continue at this level through
completion of the expansion in 1995, absent significant changes in the prices
of copper and gold.
Publicly owned FRP units have cumulative rights to receive quarterly
distributions of 60 cents per unit through December 31, 1996 (the Preference
Period) before any distributions may be made to FTX. At September 30, 1993,
FTX had deferred past distributions totaling $181.6 million, which will be
paid to FTX only to the extent of part of the excess of future quarterly FRP
distributions over 60 cents per unit for all units. Additionally,
distributable cash for the third quarter of 1993 was such that all of the
funds necessary to pay the distribution of 60 cents per public unit to be paid
November 15, 1993 will be borrowed under the New Credit Agreement, with FTX
deferring its entire $31.9 million. FRP has announced that beginning with the
cash distribution for the fourth quarter of 1993 (scheduled for payment in
February 1994), it no longer intends to supplement distributable cash with
borrowings. FRP's ability to continue to distribute cash to its public
unitholders is dependent on the cash distributions received from IMC-Agrico
Company, which will primarily be determined by prices of its commodities and
the cost reductions achieved by its combined operations, and the future cash
flow of FRP's sulphur and oil operations. As a result, future distributions
from FRP, reflecting the preference discussed above, will be impacted by the
cyclical nature of its fertilizer business. Due to the current depressed
fertilizer market, FRP will not receive a cash distribution from IMC-Agrico
Company for the third-quarter 1993 operations.
FTX's Board of Directors determines the dividend payment on a quarterly
basis and in its discretion may change or maintain the dividend payment. In
determining dividend policy, the Board of Directors considers many factors,
including current and expected future prices and sales volumes of commodities
produced by FTX and its subsidiaries, future capital expenditure requirements
and the availability and cost of financing available from third parties.
Management believes that operating cash flow, existing lines of credit,
selected asset sales, third-party financing, and discretion with respect to
capital, exploration and development spending provides FTX with sufficient
financial flexibility and capital resources to meet anticipated requirements.
________________________
The results of operations reported and summarized above are not necessarily
indicative of future operating results.
FREEPORT-McMoRan INC.
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
Controller - Financial Reporting
(authorized signatory and
Principal Accounting Officer)
Date: April 12, 1994