10-K405 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1994 Commission file number 1-8124 FREEPORT-McMoRan INC. Organized in Delaware I.R.S. Employer Identification No. 13-3051048 1615 Poydras Street, New Orleans, Louisiana 70112 Registrant's telephone number, including area code: (504) 582-4000 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of Each Class Which Registered ------------------- ---------------- Common Stock Par Value $1.00 per Share New York Stock Exchange 10 7/8% Senior Subordinated Debentures due 2001 New York Stock Exchange 6.55% Convertible Subordinated Notes due 2001 New York Stock Exchange Zero Coupon Convertible Subordinated Debentures New York Stock Exchange due 2006 Securities registered pursuant to Section 12(g) of the Act: None 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 --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $2,400,961,000 on March 10, 1995. On March 10, 1995, there were issued and outstanding 136,516,816 shares of the common stock, par value $1.00 per share, of the registrant, not including treasury shares. Documents Incorporated by Reference Portions of each of the registrant's Annual Report to stockholders for the year ended December 31, 1994 (Parts I, II and IV), the registrant's Proxy Statement dated March 21, 1995, submitted to the registrant's stockholders in connection with its 1995 Annual Meeting to be held on May 2, 1995 (Part III) and the Annual Reports on Form 10-K of Freeport-McMoRan Copper & Gold Inc. and Freeport-McMoRan Resource Partners, Limited Partnership for the year ended December 31, 1994 (Part I). TABLE OF CONTENTS Page Part I............................................................ 1 Items 1 and 2. Business and Properties......................... 1 Introduction................................................. 1 Metals ...................................................... 2 Agricultural Minerals........................................ 3 Oil and Natural Gas.......................................... 4 Research and Development..................................... 4 Environmental Matters........................................ 5 Employees.................................................... 6 Item 3. Legal Proceedings...................................... 6 Item 4. Submission of Matters to a Vote of Security Holders.... 6 Executive Officers of the Registrant............................ 6 Part II........................................................... 7 Item 5. Market for Registrant's Common Equity and Related Stockholder Matters............................ 7 Item 6. Selected Financial Data................................ 7 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.......... 7 Item 8. Financial Statements and Supplementary Data............ 7 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................... 7 Part III.......................................................... 8 Items 10, 11, 12, and 13. Directors and Executive Officers of the Registrant, Executive Compensation, Security Ownership of Certain Beneficial Owners and Management, and Certain Relationships and Related Transactions.... 8 Part IV........................................................... 8 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........................................... 8 Signatures........................................................ 9 Index to Financial Statements..................................... F-1 Report of Independent Public Accountants.......................... F-1 Exhibit Index..................................................... E-1 PART I Items 1 and 2. Business and Properties. --------------------------------------- INTRODUCTION Freeport-McMoRan Inc. ("FTX" or the "Company"*), a Delaware corporation formed in 1981, is a leading and diversified natural resource company currently engaged in the exploration for and mining, production and/or processing of copper, gold, silver, sulphur, phosphate rock, phosphate-based fertilizers, uranium, oil and natural gas, and other natural resources. FTX engages in such activities primarily through the following entities: Freeport- McMoRan Copper & Gold Inc. ("FCX"), a Delaware Corporation in which FTX owned an approximate 68.9% interest as of March 10, 1995; Freeport-McMoRan Resource Partners, Limited Partnership ("FRP"), a Delaware limited partnership in which the Company owned an approximate 51.4% interest as of March 10, 1995; and Freeport-McMoRan Oil & Gas Company ("FMOG"), a division of FTX. The Company's reportable industry segments for 1994 are metals, including copper, gold and silver (FCX); agricultural minerals, including sulphur, phosphate fertilizers and phosphate rock (FRP); and oil and natural gas (FMOG and FRP). For information with respect to industry segments, including foreign operations, export sales and major customers, see Note 12 to the financial statements of FTX and its consolidated subsidiaries referred to on page F-1 hereof (the "FTX Financial Statements"). In May 1994, FTX announced a plan to separate its two principal businesses, metals and agricultural minerals, into two independent financial and operating entities. To accomplish this plan, FTX will effect a pro rata distribution (the "Distribution") to its common stockholders of all of the Class B common stock of FCX which it owns at the time of the Distribution on a tax-free basis. As a result of the Distribution, FTX will no longer own any interest in FCX. The Distribution is contingent on a number of factors, including the recapitalization of FCX and FTX. In order for FTX to make the Distribution on a tax-free basis, the FCX stockholders recently approved certain changes to FCX's capital structure and the voting rights of its common stock and preferred stock. Prior to the Distribution, the voting rights of FCX stockholders will be amended so that holders of Class B common stock elect 80% of the FCX directors and holders of Class A common stock and holders of preferred stock elect the balance. The Distribution is expected to occur by June 30, 1995. ---------------- *The term "Company", as used in this report, shall include FTX, its divisions, and its direct and indirect subsidiaries and affiliates, or any one or more of them, unless the context requires FTX only. In March 1995, FTX, FCX, The RTZ Corporation PLC ("RTZ") and RTZ America Inc. ("RTZ America") signed letters of intent to establish a strategic alliance. Pursuant to the proposed transactions, RTZ America will acquire from FTX approximately 21.5 million shares of FCX Class A common stock (approximately 10.4% of the outstanding common stock of FCX). RTZ America also will receive an option to acquire from FTX approximately 3.5 million shares of FCX Class A common stock. If this option is not exercised, FTX proposes to sell such FCX Class A common stock to other buyers. In connection with FTX's recapitalization, FTX intends to call its 6.55% Convertible Subordinated Notes, due 2001 (the "6.55% Notes"), for redemption for cash. The outstanding principal amount of the 6.55% Notes is approximately $373 million. FTX also intends to call its Zero Coupon Convertible Subordi- nated Debentures, due 2006 (the "ABC Debentures"), for redemption for cash. The outstanding principal amount of the ABC Debentures is approximately $750 million, with a redemption cost of approximately $280 million. If requested by FTX, RTZ America will make a cash tender offer for certain of FTX's convertible debt, and convert any such debt to FTX common stock. If RTZ America acquires such convertible debt and exercises its option, after completion of the Distribution, RTZ America will own up to approximately 12% of the FTX common stock expected to be outstanding and over 18% of the outstanding common stock of FCX. However, as the total number of shares of FCX will not change as a result of these transactions, RTZ America's acquisition of FCX common stock from FTX will not result in any dilution to the current holders of FCX Class A common stock. The transactions with RTZ America will enable FTX to complete its recapitalization and the Distribution. In addition to RTZ America's acquisition of FCX stock, FCX, PT-FI (as defined below) and Eastern Mining (as defined below) will enter into joint venture arrangements with subsidiaries of RTZ pursuant to which RTZ's subsidiaries intend to invest up to $850 million on exploration and development projects on lands controlled by PT-FI and Eastern Mining. RTZ also will acquire 25% of the Spanish smelter operations of RTM (as defined below), and a 25% interest in RTM's Spanish mineral exploration program. All of the transactions with RTZ and RTZ America are subject to, among other things, certain regulatory approvals. The transactions are expected to be completed by June 30, 1995; however, there can be no assurance that the trans- actions with RTZ and RTZ America will be consummated or consummated in the manner described above. In May 1994, the FTX Board of Directors declared a special pro rata distribution of one share of McMoRan Oil & Gas Co. ("MOXY") common stock for ten shares of FTX common stock held by stockholders of record at the close of business on May 20, 1994. MOXY, a Delaware corporation, was organized for the purpose of carrying on substantially all of the oil and natural gas exploration activities previously conducted by FTX. METALS The Company's metals segment is conducted by FCX. The principal operating subsidiary of FCX is P.T. Freeport Indonesia Company ("PT-FI"), a limited liability company organized under the laws of Indonesia and domesticated in Delaware. PT-FI engages in the exploration for and development, mining, and processing of copper, gold and silver in Indonesia and in the marketing of concentrates containing such metals worldwide. FCX believes that PT-FI has one of the lowest cost copper producing operations in the world, taking into account customary credits for related gold and silver production. At March 10, 1995, FCX owned 81.28% of the outstanding common stock of PT-FI. Of the remaining 18.72% of the outstanding PT-FI common stock, 9.36% is owned by the Government of the Republic of Indonesia (the "Government") and 9.36% is owned by an Indonesian limited liability company, P.T. Indocopper Investama Corporation ("PT-II"), in which FCX owns a 49% interest. In 1993 FCX acquired the Spanish company Rio Tinto Minera, S.A. ("RTM") which is principally engaged in the smelting and refining of copper concentrates in Spain through wholly owned subsidiaries. RTM provides an additional market for a portion of PT-FI's copper concentrates. FCX's wholly owned subsidiary, Eastern Mining Company, Inc. ("EMI"), owns 80% of the outstanding common stock of P.T. Irja Eastern Minerals Corporation ("Eastern Mining"), an Indonesian limited liability company, which signed a Contract of Work with the Government in August 1994 covering approximately 2.5 million acres in Indonesia. PT-II owns 10% of the outstanding common stock of Eastern Mining, and P.T. Setdco Ganesha, an Indonesian limited liability company, owns the remaining 10% of the outstanding common stock. PT-FI's operations are located in the rugged highlands of the Sudirman Mountain Range in the province of Irian Jaya, Indonesia, located on the western half of the island of New Guinea. Over the last 26 years, PT-FI has met an extraordinary combination of engineering and construction challenges to develop its mining and milling complex and supporting infrastructure in one of the least explored areas in the world. PT-FI's largest mine, Grasberg, discovered in 1988, contains the largest single gold reserve and one of the three largest open-pit copper reserves of any mine in the world. In order to develop the Grasberg deposit, PT-FI undertook an expansion program in stages, initially from 20,000 metric tons of ore per day ("MTPD") to 57,000 MTPD. Expansion from 57,000 MTPD to 66,000 MTPD was completed in 1993 ahead of schedule and within budget. PT-FI is currently expanding its production capacity from 66,000 MTPD to 115,000 MTPD, which is expected to be completed during the second half of 1995 and to almost double annual production to approximately 1.1 billion pounds of copper and approximately 1.5 million ounces of gold from the 1993 levels of 658 million pounds of copper and 787 thousand ounces of gold, respectively. PT-FI's proved and probable ore reserves at December 31, 1994, were 28 billion recoverable pounds of copper, 39.6 million recoverable ounces of gold and 80.8 million recoverable ounces of silver. For further information concerning FCX's reserves of copper, gold and silver, and production, sales and average realized price information, see Note 13 to the FTX Financial Statements. For further information with respect to the business and properties of FCX, PT-FI, RTM, and Eastern Mining, reference is made to the discussion in the FCX Annual Report on Form 10-K for the year ended December 31, 1994, under the heading "Items 1 and 2. Business and Properties.", on pages 1 through 13, inclusive, incorporated herein by reference. AGRICULTURAL MINERALS The Company's agricultural minerals segment is conducted through FRP and consists of the production, distribution and sale of phosphate fertilizers, the mining and sale of phosphate rock and the extraction of uranium oxide from phosphoric acid through its interest in IMC-Agrico Company, a Delaware General Partnership ("IMC-Agrico"); and the mining, purchase, transportation, terminaling and sale of sulphur. As the Administrative Managing General Partner of FRP, FTX exercises all management powers over the business and affairs of FRP. FTX also furnishes general executive, administrative, financial, accounting, legal, environmental, tax, research and development, sales and certain other services to FRP and is reimbursed by FRP for all direct and indirect costs in connection therewith. As of March 10, 1995, FTX owned general and limited partnership interests that constituted an approximate 51.4% interest in FRP, with the remaining interest being publicly owned and traded on the New York Stock Exchange. The public unitholders are entitled, through the cash distribution for the fourth quarter of 1996, to receive minimum quarterly distributions prior to any distribution on the partnership units held by FTX and FMRP Inc., a Managing General Partner and Special General Partner. For further information with respect to FRP's distributions, reference is made to Note 2 to the FTX Financial Statements. In July 1993, FRP and IMC Fertilizer, Inc., now IMC Global Inc. ("IGL"), contributed their respective phosphate fertilizer businesses, including the mining and sale of phosphate rock and the production, distribution and sale of phosphate chemicals, uranium oxide and related products, to IMC-Agrico. At the time, FRP and IGL were among the largest integrated phosphate fertilizer producers in the world and both were among the lowest cost producers. As a result of the formation of IMC-Agrico, FRP expects that it and IGL together will be able to achieve beginning in the 1995/1996 fertilizer year approximately $135 million per year of savings in aggregate production costs and selling, general and administrative expenses. FRP estimates that it and IGL actually realized $90 million of savings in the 1993/1994 fertilizer year. In January 1995, FRP acquired essentially all of the domestic assets of Pennzoil Sulphur Co. ("Pennzoil"), a division of Pennzoil Company, including the Culberson mine in Texas, sulphur terminals and loading facilities in Galveston, Texas and Tampa, Florida, land and marine transportation equipment and associated commercial contracts and obligations. Pennzoil will receive quarterly payments from FRP over 20 years based on the prevailing price of sulphur. FRP has completed development of the Main Pass sulphur and oil reserves which it discovered in 1988 and in which it has a 58.3% interest. Sulphur production at minimal levels began during the second quarter of 1992. In 1994 sulphur production averaged 6,200 long tons per day, exceeding design production capacity of 5,500 long tons per day. For further information with respect to FRP's reserves of sulphur and phosphate rock and sales information, see Note 13 to the FTX Financial Statements. For further information with respect to the businesses and properties of FRP, reference is made to the discussion in the FRP Annual Report on Form 10-K for the year ended December 31, 1994, under the heading "Items 1 and 2. Business and Properties.", on pages 1 through 11, inclusive, incorporated herein by reference. OIL AND NATURAL GAS The only significant FTX oil and gas* interest is held by FRP, which is engaged in the development and production of oil reserves at Main Pass associated with the same caprock reservoir as the sulphur reserves. The Main Pass oil property consists of 1,125 gross acres (656 acres net to FRP). FRP estimates remaining proved recoverable oil reserves at Main Pass as of December 31, 1994 to be 15.5 million barrels (7.3 million barrels net to FRP). The development and production of these reserves are being conducted by FMOG on behalf of FRP, as operator of the joint venture, pursuant to a management services agreement. Oil production commenced in the fourth quarter of 1991 and averaged approximately 14,400 barrels per day during 1994. For further information with respect to Main Pass and FTX's interest in FRP, see the heading "Agricultural Minerals" above. For information relating to estimates of the Company's net interests in proved oil reserves, sales and average realized price, see Note 13 to the FTX Financial Statements. No favorable or adverse event or major discovery has occurred since December 31, 1994, that the Company believes would cause a significant change in estimated proved reserves. RESEARCH AND DEVELOPMENT In 1993, FTX contracted with Crescent Technology, Inc. ("Crescent"), to furnish engineering consulting, research and development, environmental and safety services to the Company. Crescent owns and operates laboratory and pilot plant facilities at Belle Chasse, Louisiana, where mineral analyses, metallurgical work and other research and testing are conducted, and continues to conduct, which contribute to the Company's commercial operations. ------------------ *As used hereinafter, "oil" refers to crude oil, condensate and natural gas liquids, and "gas" refers to natural gas. Additionally, Crescent maintains engineering consulting and mine development groups in New Orleans, Louisiana, which provide engineering consulting, environmental services and design and construction supervision activities required to implement new ventures and apply improvements to existing operations. ENVIRONMENTAL MATTERS The Company has a history of commitment to environmental responsibility. Since the 1940s, long before the general public recognized the importance of maintaining environmental quality, the Company has conducted, and continues to conduct, preoperational, bioassay, marine ecological and other environmental surveys to ensure the environmental compatibility of its operations. The Company's Environmental Policy commits its operations to full compliance with applicable laws and regulations, and prescribes the use of periodic environmental audits of all facilities to evaluate compliance status and to communicate that information to management. FTX has contracted with Crescent to develop and implement corporatewide environmental programs and to study and implement methods to reduce discharges and emissions. The Company's domestic operations are subject to federal, state and local laws and regulations relating to the protection of the environment. Exploration, mining, development and production of natural resources, and chemical processing operations of the Company, like similar operations of other companies, may affect the environment. Moreover, such operations may involve the extraction, handling, production, processing, treatment, storage, transportation and disposal of materials and waste products which, under certain conditions, may be toxic or hazardous, and expressly regulated under environmental laws. Present and future environmental laws and regulations applicable to Company operations may require substantial capital expenditures or affect the Company's operations in other ways that cannot now be accurately predicted. The Company has made, and continues to make, expenditures with respect to its operations for the protection of the environment. In 1992, at a cost of $35.7 million, FRP completed the replacement of two sulphuric acid production units at an existing fertilizer plant thereby substantially reducing air emissions and increasing plant efficiency. As successor to FRP, IMC-Agrico completed at the end of 1993, at a cost of $27 million, an innovative drainage and cover plan for phosphogypsum storage areas in Louisiana to substantially reduce substances in wastewater discharged from its fertilizer operations, while at the same time increasing the capacity of these storage areas. Continued government and public emphasis on environmental issues can be expected to result in increased future investments for environmental controls. On analyzing its operations in relation to current and anticipated environmental requirements, the Company does not expect that these investments will have a significant impact on its future operations or financial condition. For further information with respect to environmental matters, reference is made to "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 13 through 20 and 23 through 26 of FTX's 1994 Annual Report to Stockholders, which is incorporated herein by reference. EMPLOYEES As of December 31, 1994, the Company had a total of 7,913 employees, compared with 7,658 employees at year-end 1993. PT-FI had a total of 6,074 employees as of December 31, 1994, of which approximately 94% were Indonesian. Approximately 40% of PT-FI's Indonesian employees are members of the All Indonesia Workers' Union, which operates under governmental supervision, with which a labor agreement covering PT-FI's hourly-paid Indonesian employees runs until September 30, 1995. There were no work stoppages in 1994, and relations with the union have generally been good. Approximately 95% of RTM's 1,250 employees are covered by union contracts. RTM experienced limited work stoppages in 1994, but relations with these unions have generally been good. The management of the Company believes that it has good relations with all other personnel employed in its domestic and international operations. Item 3. Legal Proceedings. -------------------------- Although the Company may be from time to time involved in various legal proceedings of a character normally incident to the ordinary course of its businesses, the Company believes that potential liability in any such pending or threatened proceedings would not have a material adverse effect on the financial condition or results of operations of the Company. FTX maintains liability insurance to cover some, but not all, potential liabilities normally incident to the ordinary course of its businesses as well as other insurance coverages customary in its businesses, with such coverage limits as management deems prudent. Item 4. Submission of Matters to a Vote of Security Holders. ------------------------------------------------------------ Not applicable. Executive Officers of the Registrant. ------------------------------------ Listed below are the names and ages, as of March 15, 1995, of the present executive officers of FTX together with the principal positions and offices with FTX held by each. All officers of FTX serve at the pleasure of the Board of Directors of FTX. Name Age Position or Office ---- --- ------------------ James R. Moffett 56 Chairman of the Board and Chief Executive Officer Rene L. Latiolais 52 President and Chief Operating Officer George A. Mealey 61 Executive Vice President John G. Amato 51 General Counsel Richard C. Adkerson 48 Senior Vice President Richard H. Block 44 Senior Vice President Thomas J. Egan 50 Senior Vice President Charles W. Goodyear 37 Senior Vice President W. Russell King 45 Senior Vice President The individuals listed above have served the Company in various executive capacities for at least the last five years. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder ----------------------------------------------------------------------------- Matters. ------- The information set forth under the captions "Common Shares" and "Common Share Dividends", on the inside back cover of FTX's 1994 Annual Report to stockholders, is incorporated herein by reference. As of March 10, 1995, there were 24,705 record holders of FTX's common stock. Item 6. Selected Financial Data. -------------------------------- The information set forth under the caption "Selected Financial Data" on page 22 of FTX's 1994 Annual Report to stockholders, is incorporated herein by reference. FTX's ratio of earnings to fixed charges for each of the years 1990 through 1994, inclusive, was 5.6x, 1.6x, 2.5x, a shortfall of $241.8 million and 2x, respectively. For this calculation, earnings are income from continuing operations before income taxes, minority interests and fixed charges. Fixed charges are interest, that portion of rent deemed represent- ative of interest and the preferred stock dividend requirements of majority- owned subsidiaries. Item 7. Management's Discussion and Analysis of Financial Condition --------------------------------------------------------------------------- and Results of Operations. ------------------------- The information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations", on pages 13 through 20 and 23 through 26 of FTX's 1994 Annual Report to stockholders, is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data. ---------------------------------------------------- The financial statements of FTX and its consolidated subsidiaries, the notes thereto and the report thereon of Arthur Andersen LLP, appearing on pages 27 through 49, inclusive, and the report of management on page 21, of FTX's 1994 Annual Report to stockholders, are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting ---------------------------------------------------------------------------- and Financial Disclosure. ------------------------- Not applicable. PART III Items 10, 11, 12, and 13. Directors and Executive Officers of the --------------------------------------------------------------------- Registrant, Executive Compensation, Security Ownership ---------------------------------------------------------- of Certain Beneficial Owners and Management, and Certain ---------------------------------------------------------- Relationships and Related Transactions. ------------------------------------------- The information set forth under the caption "Election of Directors," beginning on page 4 of the Proxy Statement dated March 21, 1995, submitted to the stockholders of FTX in connection with its 1995 Annual Meeting to be held on May 2, 1995, is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. -------------------------------------------------------------------------- (a)(1), (a)(2), and (d). Financial Statements. See Index to Financial Statements appearing on page F-1 hereof. (a)(3) and (c). Exhibits. See Exhibit Index beginning on page E-1 hereof. (b). Reports on Form 8-K. No reports on Form 8-K were filed by the registrant during the fourth quarter of 1994. SIGNATURES ---------- Pursuant to the requirements of Section 13 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, on March 24, 1995. FREEPORT-McMoRan INC. By: /s/ James R. Moffett ------------------------- James R. Moffett Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 24, 1995. /s/ James R. Moffett Chairman of the Board, Chief -------------------- Executive Officer and Director James R. Moffett (Principal Executive Officer) Richard C. Adkerson* Senior Vice President and Chief Financial Officer (Principal Financial Officer) John T. Eads* Controller-Financial Reporting (Principal Accounting Officer) Robert W. Bruce III* Director Thomas B. Coleman* Director William H. Cunningham* Director Robert A. Day* Director William B. Harrison, Jr.* Director Henry A. Kissinger* Director Bobby Lee Lackey* Director Rene L. Latiolais* Director Gabrielle K. McDonald* Director George Putnam* Director B. M. Rankin, Jr.* Director Benno C. Schmidt* Director J. Taylor Wharton* Director Ward W. Woods, Jr.* Director *By: /s/ James R. Moffett -------------------- James R. Moffett Attorney-in-Fact INDEX TO FINANCIAL STATEMENTS ----------------------------- The financial statements of FTX and its consolidated subsidiaries, the notes thereto, and the report thereon of Arthur Andersen LLP, appearing on pages 27 through 49, inclusive, of FTX's 1994 Annual Report to stockholders are incorporated by reference. The financial statement schedules listed below should be read in conjunction with such financial statements contained in FTX's 1994 Annual Report to stockholders. Page ---- Report of Independent Public Accountants . . . . . . . . . . F-1 III-Condensed Financial Information of Registrant . . . . . F-2 VIII-Valuation and Qualifing Accounts. . . . . . . . . . . . F-6 Schedules other than those listed above have been omitted, since they are either not required, not applicable or the required information is included in the financial statements or notes thereto. * * * * REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ---------------------------------------- We have audited, in accordance with generally accepted auditing standards, the financial statements as of December 31, 1994 and 1993 and for each of the three years in the period ended December 31, 1994 included in Freeport-McMoRan Inc.'s annual report to stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated January 24, 1995. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in the index above are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. The schedules for the years ended December 31, 1994, 1993 and 1992 have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Arthur Andersen LLP New Orleans, Louisiana, January 24, 1995 FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT BALANCE SHEETS December 31, ------------------------ 1994 1993 -------- -------- ASSETS (In Thousands) Current assets: Accounts receivable $ 17,503 $ 15,357 Prepaid expenses and other 5,833 10,527 -------- -------- Total current assets 23,336 25,884 Property, plant and equipment - net 93,517 152,171 Investment in FCX 287,665 267,853 Investment in FRP 229,588 252,341 Investment in other subsidiaries 18,359 17,800 Long-term note due from FCX 800 12,270 Long-term note due from FRP - 100,900 Long-term receivables and other assets 77,434 114,101 -------- -------- Total assets $730,699 $943,320 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued liabilities $105,860 $100,579 Long-term debt 753,433 695,624 Other liabilities and deferred credits 101,873 113,749 Deferred gain on sale of subsidiary interests - 32,719 Stockholders' equity (230,467) 649 -------- -------- Total liabilities and stockholders' equity $730,699 $943,320 ======== ======== The footnotes contained in FTX's 1994 Annual Report to stockholders are an integral part of these statements. FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF OPERATIONS Years Ended December 31, ------------------------------- 1994 1993 1992 -------- --------- -------- (In Thousands) Revenues $ 749 $ 6,852 $ 49,773 Cost of sales: Production and delivery 3,137 9,960 11,905 Depreciation and amortization 5,268 19,347 34,850 -------- --------- -------- Total cost of sales 8,405 29,307 46,755 Exploration expenses 3,738 22,067 17,407 Provision for restructuring charges - 12,403 - Gain on valuation and sale of assets, net - (50,688) - General and administrative expenses 12,664 19,785 27,229 -------- --------- -------- Total costs and expenses 24,807 32,874 91,391 -------- --------- -------- Operating loss (24,058) (26,022) (41,618) Interest expense, net (60,402) (58,189) (41,909) Equity in earnings (loss) of subsidiaries 64,973 (96,931) 106,997 Gain on sale of FCX shares - - 100,934 Gain on conversion/distribution of FCX securities 114,750 44,116 33,753 Other income, net 2,173 4,779 1,525 -------- --------- -------- Income (loss) before income taxes 97,436 (132,247) 159,682 Credit (provision) for income taxes (24,853) 49,129 28,129 -------- --------- -------- Income (loss) before extraordinary item and changes in accounting principle 72,583 (83,118) 187,811 Extraordinary loss on early extinguishment of debt, net 9,108 - - Cumulative effect of changes in accounting principle: FTX - (5,632) - Equity subsidiaries - (15,085) - -------- --------- -------- Net income (loss) 63,475 (103,835) 187,811 Preferred dividends (22,032) (22,368) (18,677) -------- --------- -------- Net income (loss) applicable to common stock $ 41,443 $(126,203) $169,134 ======== ========= ======== The footnotes contained in FTX's 1994 Annual Report to stockholders are an integral part of these statements. FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF CASH FLOW Years Ended December 31, ------------------------------ 1994 1993 1992 -------- --------- --------- Cash flow from operating activities: (In Thousands) Net income (loss) $ 63,475 $(103,835) $ 187,811 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Extraordinary loss on early extinguishment of debt 9,108 - - Cumulative effect of changes in accounting principle - 20,717 - Depreciation and amortization 9,073 26,180 42,567 Other noncash charges to income, including net reimbursements from subsidiaries - 27,623 - Oil and gas exploration expenses 5,231 26,710 16,704 Recognition of unearned revenues in income - 5,928 (10,977) Amortization of debt discount and financing costs 31,113 28,771 33,909 Equity in (earnings) losses of subsidiaries (64,973) 96,931 (106,997) Cash distributions from subsidiaries 92,000 85,853 127,124 Gain on sale of FCX Class A shares - - (100,934) Gain on conversion/distribution of FCX securities (114,750) (44,116) (33,753) Gain on valuation and sale of assets, net - (50,688) - Deferred income taxes 18,558 (54,731) 925 (Increase) decrease in working capital, net of effect of acquisitions and dispositions: Accounts receivable (2,146) 28,516 (12,632) Prepaid expenses and other 4,694 (719) (8,843) Accounts payable and accrued liabilities 22,389 (30,565) (15,092) Payment to Freeport-McMoRan Royalty Trust (2,854) (2,296) - Other (15,392) 924 2,364 -------- --------- --------- Net cash provided by operating activities 55,526 61,203 122,176 -------- --------- --------- Cash flow from investing activities: Capital expenditures (32,958) (57,165) (96,708) Contributions to subsidiaries - - (30,119) Sale of assets 65,596 99,983 - -------- --------- --------- Net cash provided by (used in) investing activities $ 32,638 $ 42,818 $(126,827) -------- --------- --------- FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF CASH FLOW Years Ended December 31, ------------------------------ 1994 1993 1992 --------- --------- --------- (In Thousands) Cash flow from financing activities: Proceeds from sale of Convertible Exchangeable Preferred Stock $ - $ - $ 245,700 Purchase of: FTX common shares (67,747) (22,229) (108,591) FCX Class A common shares (47,596) (16,482) - 10 7/8% Senior Debentures (142,919) - - Distribution of FMPO and MOXY shares (35,441) - (28,019) Borrowings of debt - net 155,000 3,943 330,821 (Increase) decrease in long-term note due from FCX 11,470 (12,270) - (Increase) decrease in long-term note due from FRP 100,900 138,450 (239,350) Cash dividends paid: Common stock (44,467) (175,890) (179,677) Preferred stock (22,110) (22,384) (16,882) Other 4,746 1,858 - -------- --------- --------- Net cash provided by (used in) financing activities (88,164) (105,004) 4,002 -------- --------- --------- Net decrease in cash and short-term investments - (983) (649) Cash and short-term investments at beginning of year - 983 1,632 -------- --------- --------- Cash and short-term investments at end of year $ - $ - $ 983 ======== ========= ========= The footnotes contained in FTX's 1994 Annual Report to stockholders are an integral part of these statements. FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS for the years ended December 31, 1994, 1993 and 1992 Col. A Col. B Col. C Col. D Col. E ----------------- ------------ ----------------------- --------- ---------- Additions ----------------------- Balance at Charged to Charged to Balance at Beginning of Costs and Other Other-Add End Description Period Expenses Accounts (Deduct) of Period ----------------- ------------ ----------- ---------- --------- ---------- (In Thousands) Reserves and allowances deducted from asset accounts: Reclamation and mine shutdown reserves: 1994: Sulphur $ 57,287 $ 1,041 $ - $ (3,223) $ 55,105 Fertilizer 38,437 2,310 - (3,064) 37,683 RTM 10,270 2,655 - - 12,925 Oil & Gas 14,963 3,799 - 1,227 19,989 -------- ------- ----- -------- -------- $120,957 $ 9,805 $ - $ (5,060)a $125,702 ======== ======= ===== ======== ======== 1993: Sulphur $ 35,200 $27,562 $ - $ (5,475) $ 57,287 Fertilizer 18,543 5,365 - 14,529 b 38,437 RTM - - - 10,270 c 10,270 Oil & Gas 8,617 7,995 - (1,649) 14,963 -------- ------- ----- -------- -------- $ 62,360 $40,922 $ - $ 17,675 d $120,957 ======== ======= ===== ======== ======== 1992: Sulphur $ 29,715 $ 4,335 $ - $ 1,150 $ 35,200 Fertilizer 21,772 7,123 - (10,352) 18,543 Oil & Gas 10,196 4,598 - (6,177) 8,617 -------- ------- ----- -------- -------- $ 61,683 $16,056 $ - $(15,379)e $ 62,360 ======== ======= ===== ======== ======== a. Includes expenditures of $9.7 million, net of a $4.6 million decrease in short-term payables. b. Includes $19.7 million which represents FRP's proportionate share of IMC-Agrico liabilities (see Note 2 to the Financial Statements) in excess of the FRP contributed amounts. c. Reflects the reserve associated with the acquisition of RTM, as further discussed in Note 2 to the Financial Statements. d. Includes expenditures of $14 million, net of a $1.7 million decrease in short-term payables and the items discussed in Notes b and c. e. Includes expenditures of $21.8 million and $5.6 million transferred to FMPO (as further discussed in Note 8 to the Financial Statements), net of a $12 million decrease in short-term payables. Freeport-McMoRan Inc. Exhibit Index ------------- Sequentially Exhibit Numbered Number Page ------ ---- 3.1 Composite copy of Certificate of Incorporation of FTX, as amended. Incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q of FTX for the quarter ended June 30, 1992 (the "FTX 1992 Second Quarter Form 10-Q"). 3.2 By-Laws of FTX, as amended. Incorporated by reference to Exhibit 3.2 to the FTX 1992 Second Quarter Form 10-Q. 4.1 Certificate of Designations of the $4.375 Convertible Exchangeable Preferred Stock of FTX. Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of FTX dated March 23, 1992. 4.2 Indenture dated as of May 15, 1986 between FTX and Manufacturers Hanover Trust Company ("Manufacturers"), Trustee, relating to $150,000,000 principal amount of 10-7/8% Senior Subordinated Debentures due 2001 of FTX. Incorporated by reference to Exhibit 19.1 to the Quarterly Report on Form 10-Q of FTX for the quarter ended September 30, 1986. 4.3 Subordinated Indenture dated as of November 9, 1990 between FTX and Chemical Bank, Trustee, relating to subordinated indebtedness of FTX. Incorporated by reference to Exhibit 28.2 to the Current Report on Form 8-K of FTX dated February 7, 1991 (the "FTX February 7, 1991 Form 8- K"). 4.4 Supplemental Indenture No. 1 dated as of February 5, 1991 between FTX and Chemical Bank, Trustee, relating to $373,000,000 principal amount of 6.55% Convertible Subordinated Notes due 2001 of FTX. Incorporated by reference to Exhibit 28.3 to the FTX February 7, 1991 Form 8-K. 4.5 Supplemental Indenture No. 2 dated as of August 5, 1991 between FTX and Chemical Bank, Trustee, relating to $750,000,000 face amount of Zero Coupon Convertible Subordinated Debentures due 2006 of FTX. Incorporated by reference to Exhibit (4-a) to the Current Report on Form 8-K of FTX dated August 9, 1991. 4.6 Credit Agreement dated as of June 1, 1993 (the "FTX/FRP Credit Agreement") among FTX, FRP, the several banks which are parties thereto (the "FTX/FRP Banks") and Chemical Bank, as Agent (the "FTX/FRP Bank Agent"). Incorporated by reference to Exhibit 4.8 to the Annual Report on Form 10-K of FRP for the fiscal year ended December 31, 1993 (the "FRP 1993 Form 10- K"). 4.7 First Amendment dated as of February 2, 1994 to the FTX/FRP Credit Agreement among FTX, FRP, the FTX/FRP Banks and the FTX/FRP Bank Agent. Incorporated by reference to Exhibit 4.9 to the FRP 1993 Form 10-K. 4.8 Second Amendment dated as of March 1, 1994 to the FTX/FRP Credit Agreement among FTX, FRP, the FTX/FRP Banks and the FTX/FRP Bank Agent. Incorporated by reference to Exhibit 4.10 to the FRP 1993 Form 10-K. 4.9 Third Consent and Waiver dated as of October 18, 1994 to the FTX/FRP Credit Agreement among FTX, FRP, the FTX/FRP Banks and the FTX/FRP Bank Agent. Incorporated by reference to Exhibit 4.11 to the Annual Report on From 10-K of FRP for the fiscal year ended December 31, 1994 (the "FRP 1994 Form 10-K"). 4.10 Fourth Amendment, Consent and Limited Waiver dated as of November 23, 1994 to the FTX/FRP Credit Agreement among FTX, FRP, the FTX/FRP Banks and the FTX/FRP Bank Agent. Incorporated by reference to Exhibit 4.12 to the FRP 1994 Form 10-K. 4.11 Amended and Restated Agreement of Limited Partnership of FRP dated as of May 29, 1987 (the "FRP Partnership Agreement") among FTX, Freeport Phosphate Rock Company and Geysers Geothermal Company, as general partners, and Freeport Minerals Company ("FMC"), as general partner and attorney- in-fact for the limited partners, of FRP. Incorporated by reference to Exhibit B to the Prospectus dated May 29, 1987 included in FRP's Registration Statement on Form S- 1, as amended, as filed with the Commission on May 29, 1987 (Registration No. 33-13513). 4.12 Amendment to the FRP Partnership Agreement dated as of December 16, 1988 effected by FMC, as Administrative Managing General Partner, and FTX, as General Partner, of FRP. Incorporated by reference to Exhibit 3.2 to the FRP 1994 From 10-K. 4.13 Amendment to the FRP Partnership Agreement dated as of March 29, 1990 effected by FMC, as Administrative Managing General Partner, and FTX, as Managing General Partner, of FRP. Incorporated by reference to Exhibit 19.2 to the Quarterly Report on Form 10-Q of FRP for the quarter ended March 31, 1990 (the "FRP 1990 First Quarter Form 10-Q"). 4.14 Amendment to the FRP Partnership Agreement dated as of April 6, 1990 effected by FTX, as Administrative Managing General Partner of FRP. Incorporated by reference to Exhibit 19.3 to the FRP 1990 First Quarter Form 10-Q. 4.15 Amendment to the FRP Partnership Agreement dated as of January 27, 1992 between FTX, as Administrative Managing General Partner, and FMRP Inc., as Managing General Partner of FRP. Incorporated by reference to Exhibit 3.3 to the Annual Report on Form 10-K of FRP for the fiscal year ended December 31, 1991 (the "FRP 1991 Form 10-K"). 4.16 Amendment to the FRP Partnership Agreement dated as of October 14, 1992 between FTX, as Administrative Managing General Partner, and FMRP Inc., as Managing General Partner of FRP. Incorporated by reference to Exhibit 3.4 to the Annual Report on Form 10-K of FRP for the fiscal year ended December 31, 1992 (the "FRP 1992 Form 10-K"). 4.17 Deposit Agreement dated as of June 27, 1986 (the "Deposit Agreement") among FRP, The Chase Manhattan Bank, N.A. ("Chase") and Freeport Minerals Company, as attorney-in-fact of those limited partners and assignees holding depositary receipts for units of limited partnership interests in FRP ("Depositary Receipts"). Incorporated by reference to Exhibit 28.4 to the Current Report on Form 8-K of FTX dated July 11, 1986. 4.18 Resignation dated December 26, 1991 of Chase as Depositary under the Deposit Agreement and appointment dated December 27, 1991 of Mellon Bank, N.A. ("Mellon") as successor Depositary, effective January 1, 1992. Incorporated by reference to Exhibit 4.5 to the FRP 1991 Form 10-K. 4.19 Service Agreement dated as of January 1, 1992 between FRP and Mellon pursuant to which Mellon will serve as Depositary under the Deposit Agreement and Custodian under the Custodial Agreement. Incorporated by reference to Exhibit 4.6 to the FRP 1991 Form 10-K. 4.20 Amendment to the Deposit Agreement dated as of November 18, 1992 between FRP and Mellon. Incorporated by reference to Exhibit 4.4 to the FRP 1992 Form 10-K. 4.21 Form of Depositary Receipt. Incorporated by reference to Exhibit 4.5 to the FRP 1992 Form 10-K. 4.22 Custodial Agreement regarding the FRP Depositary Unit Reinvestment Plan among FTX, FRP and Chase, effective as of April 1, 1987 (the "Custodial Agreement"). Incorporated by reference to Exhibit 19.1 to the Quarterly Report on Form 10-Q of FRP for the quarter ended June 30, 1987. 4.23 FRP Depositary Unit Reinvestment Plan. Incorporated by reference to Exhibit 4.4 to the FRP 1991 Form 10-K. 4.24 Composite copy of the Certificate of Incorporation of FCX. Incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K of FCX for the fiscal year ended December 31, 1994 (the "FCX 1994 Form 10-K"). 4.25 Credit Agreement dated as of June 1, 1993 (the "PT-FI Credit Agreement") among PT- FI, the several banks which are parties thereto (the "PT-FI Banks"), Morgan Guaranty Trust Company of New York ("Morgan"), as PT-FI Trustee (the "PT-FI Trustee"), and Chemical Bank, as Agent (the "PT-FI Bank Agent"). Incorporated by reference to Exhibit 4.10 to the FCX 1993 Form 10-K. 4.26 First Amendment dated as of February 2, 1994 to the PT-FI Credit Agreement among PT-FI, the PT-FI Banks, the PT-FI Trustee and the PT-FI Bank Agent. Incorporated by reference to Exhibit 4.11 to the FCX 1993 Form 10-K. 4.27 Second Amendment dated as of March 1, 1994 to the PT-FI Credit Agreement among PT-FI, the PT-FI Trustee and the PT-FI Bank Agent. Incorporated by reference to Exhibit 4.12 to the FCX 1993 Form 10-K. 4.28 Third Consent and Waiver dated as of October 18, 1994 to the PT-FI Credit Agreement among PT-FI, the PT-FI Banks, the PT-FI Trustee and the PT-FI Bank Agent. Incorporated by reference to Exhibit 4.19 to the Annual Report on Form 10-K of FCX for the fiscal year ended December 31, 1994 (the "FCX 1994 Form 10- K"). 4.29 Fourth Amendment, Consent and Limited Waiver dated as of November 23, 1994 to the PT-FI Credit Agreement among PT-FI, the PT-FI Banks, the PT-FI Trustee and the PT-FI Bank Agent. Incorporated by reference to Exhibit 4.20 to the FCX 1994 Form 10-K. 4.30 Term Loan and Working Capital Agreement dated as of November 4, 1994 (the "RTML Term Loan") among Rio Tinto Metal, S.A. ("RTML"), the Lenders and Barclays Bank PLC as Agent (the "Agent"). Incorporated by reference to Exhibit 4.21 to the FCX 1994 Form 10-K. 4.31 Amendment No. 1 dated as of March 7, 1995 to the RTML Term Loan among RTML, the Lenders and the Agent. Incorporated by reference to Exhibit 4.22 to the FCX 1994 Form 10-K. 4.32 Automatic Stock Purchase Plan of FTX. Incorporated by reference to Exhibit 4.28 to the Annual Report on Form 10-K of FTX for the fiscal year ended December 31, 1992 (the "FTX 1992 Form 10-K"). 10.1 Overriding Royalty Conveyance dated September 28, 1983, from McMoRan- Freeport Oil Company to McMoRan Oil & Gas Co. Incorporated by reference to Exhibit 2.2 to the Quarterly Report on Form 10-Q of FTX for the quarter ended September 30, 1983 (the "FTX 1983 Third Quarter Form 10- Q"). 10.2 Royalty Trust Indenture dated as of September 30, 1983 between FTX, as Trustor, and First City National Bank of Houston ("First City"), as Trustee. Incorporated by reference to Exhibit 2.3 to the FTX 1983 Third Quarter Form 10-Q. 10.3 First Amended and Restated Articles of General Partnership of Freeport-McMoRan Oil and Gas Royalty Partnership dated as of September 30, 1983 between McMoRan Offshore Management Co. and First City, as Trustee. Incorporated by reference to Exhibit 2.4 to the FTX 1983 Third Quarter Form 10-Q. 10.4 Contract of Work dated December 30, 1991 between The Government of the Republic of Indonesia and PT-FI. Incorporated by reference to Exhibit 10.20 to the Annual Report on Form 10-K of FCX for the fiscal year ended December 31, 1991. 10.5 Contribution Agreement dated as of April 5, 1993 between FRP and IMC (the "FRP-IMC Contribution Agreement"). Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of FRP dated July 15, 1993 (the "FRP July 15, 1993 Form 8-K"). 10.6 First Amendment dated as of July 1, 1993 to the FRP-IMC Contribution Agreement. Incorporated by reference to Exhibit 2.2 to the FRP July 15, 1993 Form 8-K. 10.7 Amended and Restated Partnership Agreement dated as of July 1, 1993 among IMC-Agrico GP Company, Agrico, Limited Partnership and IMC-Agrico MP Inc. Incorporated by reference to Exhibit 2.3 to the FRP July 15, 1993 Form 8-K. 10.8 Parent Agreement dated as of July 1, 1993 among IMC, FRP, FTX and IMC-Agrico. Incorporated by reference to Exhibit 2.4 to the FRP July 15, 1993 Form 8-K. 10.9 Asset Purchase Agreement dated as of October 22, 1994 between FRP and Pennzoil Company (the "Asset Purchase Agreement"). Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of FRP dated January 18, 1995 (the "FRP January 18, 1995 8-K"). 10.10 Amendment No. 1 dated as of January 3, 1995 to the Asset Purchase Agreement. Incorporated by reference to Exhibit 2.2 to the FRP January 18, 1995 8-K. Executive Compensation Plans and Arrangements (Exhibits 10.11 through 10.42) 10.11 FTX Employee Retirement Plan as of January 1, 1986. Incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K of Freeport-McMoRan Energy Partners, Ltd. ("FMP") for the fiscal year ended December 31, 1986. 10.12 Amendment No. 1 dated as of January 14, 1987 to the FTX Employee Retirement Plan. Incorporated by reference to Exhibit 10.10 to the FTX 1987 Form 10-K. 10.13 Amendment No. 2 dated as of May 31, 1987 to the FTX Employee Retirement Plan. Incorporated by reference to Exhibit 10.11 to the FTX 1987 Form 10-K. 10.14 Amendments to the FTX Employee Retirement Plan dated August 31, 1988, March 21, 1989 and December 29, 1989. Incorporated by reference to Exhibit 10.7 to the Annual Report on Form 10-K of FMP for the fiscal year ended December 31, 1989 (the "FMP 1989 Form 10-K"). 10.15 Amendment to the FTX Employee Retirement Plan dated March 6, 1990. Incorporated by reference to Exhibit 10.26 to the Annual Report on Form 10-K of FRP for the fiscal year ended December 31, 1989. 10.16 Amendment to the FTX Employee Retirement Plan dated December 20, 1991. Incorporated by reference to Exhibit 10.6 to the FRP 1991 Form 10-K. 10.17 Master Trust Agreement dated as of October 1, 1990 between FTX and Continental Bank, N.A., relating to the FTX Employee Retirement Plan. Incorporated by reference to Exhibit 19.2 to the Quarterly Report on Form 10-Q of FTX for the quarter ended September 30, 1990 (the "FTX 1990 Third Quarter Form 10-Q"). 10.18 Excess Benefits Plan of FTX. Incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of FTX for the quarter ended March 31, 1988. 10.19 Amendments to the Excess Benefits Plan of FTX dated January 17, 1989, December 8, 1989, June 29, 1990 and October 17, 1990. Incorporated by reference to Exhibits 19.3, 19.4, 19.5 and 19.6, respectively, to the FTX 1990 Third Quarter Form 10-Q. 10.20 Amended and Restated FTX Employee Capital Accumulation Program dated September 14, 1990, generally effective as of January 1, 1989. Incorporated by reference to Exhibit 19.1 to the FTX 1990 Third Quarter Form 10-Q. 10.21 FTX Supplemental Executive Capital Accumulation Plan. Incorporated by reference to Exhibit 10.13 to the FTX 1987 Form 10-K. 10.22 Amendments, effective March 1, 1989 and January 1, 1990, to the FTX Supplemental Executive Capital Accumulation Plan. Incorporated by reference to Exhibit 10.20 to the FMP 1989 Form 10-K. 10.23 Amendment, effective May 1, 1991, to the FTX Supplemental Executive Capital Accumulation Plan. Incorporated by reference to Exhibit 19.1 to the FTX 1991 Third Quarter Form 10-Q. 10.24 Annual Incentive Plan of FTX, as amended. 10.25 1992 Long-Term Performance Incentive Plan of FTX, as amended. 10.26 1987 Long-Term Performance Incentive Plan of FTX, as amended. 10.27 FTX Variable Compensation Incentive Program, as amended. Incorporated by reference to Exhibit 19.4 to the FTX 1991 Third Quarter Form 10-Q. 10.28 Incentive Compensation Plan of FTX. Incorporated by reference to Exhibit 20.3 to the Quarterly Report on Form 10-Q of FTX for the Quarter ended June 30, 1981. 10.29 FTX Performance Incentive Awards Program, as amended. 10.30 FTX 1992 Stock Option Plan. Incorporated by reference to Exhibit 10.3 to the FCX 1992 Second Quarter Form 10-Q. 10.31 1982 Stock Option Plan of FTX, as amended. 10.32 FTX 1992 Stock Incentive Unit Plan. Incorporated by reference to Exhibit 10.2 to the FCX 1992 Second Quarter Form 10-Q. 10.33 1988 Stock Option Plan for Non-Employee Directors of FTX, as amended. Incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q of FTX for the quarter ended June 30, 1992. 10.34 FTX 1991 Plan for Deferral of Directors' Fees. Incorporated by reference to Exhibit 10.20 to the Annual Report on Form 10-K of FTX for the fiscal year ended December 31, 1991. 10.35 FTX Directors' Charitable Gift Program. Incorporated by reference to Exhibit 10.29 to the FTX 1992 Form 10-K. 10.36 FTX Matching Gifts Program. Incorporated by reference to Exhibit 10.30 to the FTX 1992 Form 10-K. 10.37 Financial Counseling and Tax Return Preparation and Certification Program of FTX. Incorporated by reference to Exhibit 10.31 to the FTX 1992 Form 10-K. 10.38 FTX Executive Universal Life Insurance Plan. Incorporated by reference to Exhibit 10.32 to the FTX 1992 Form 10-K. 10.39 Letter Agreement dated January 2, 1986 between FTX and Benno C. Schmidt. Incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K of FTX for the fiscal year ended December 31, 1985. 10.40 Agreement for Consulting Services between FTX and B. M. Rankin, Jr., effective as of January 1, 1990. Incorporated by reference to Exhibit 19.2 to the Quarterly Report on Form 10-Q of FTX for the quarter ended March 31, 1990. 10.41 Consulting Agreement dated as of December 22, 1988, between FTX and Kissinger Associates, Inc. ("Kissinger Associates"). Incorporated by reference to Exhibit 10.35 to the FTX 1992 Form 10-K. 10.42 Letter Agreement dated May 1, 1989, between FTX and Kent Associates, Inc. (predecessor in interest to Kissinger Associates). Incorporated by reference to Exhibit 10.36 to the FTX 1992 Form 10-K. 11.1 FTX and Consolidated Subsidiaries Computation of Net Income Per Common and Common Equivalent Share. 12.1 FTX Computation of Ratio of Earnings to Fixed Charges. 13.1 Those portions of the 1994 Annual Report to stockholders of FTX which are incorporated herein by reference. 21.1 Subsidiaries of FTX. 23.1 Consent of Arthur Andersen LLP dated March 24, 1995. 24.1 Certified resolution of the Board of Directors of FTX authorizing this report to be signed on behalf of any officer or director pursuant to a Power of Attorney. 24.2 Powers of Attorney pursuant to which this report has been signed on behalf of certain officers and directors of FTX. 27.1 FTX Financial Data Schedule. 99.1 Annual Report on Form 10-K of FRP for the fiscal year ended December 31, 1994. 99.2 Annual report on Form 10-K of FCX for the fiscal year ended December 31, 1994. EX-10 2 Exhibit 10.24 ANNUAL INCENTIVE PLAN OF FREEPORT-MCMORAN INC. ARTICLE I PURPOSE OF PLAN SECTION 1.1. The purpose of the Annual Incentive Plan of Freeport-McMoRan Inc. (the "Plan") is to provide incentives for senior executives whose performance in fulfilling the responsibilities of their positions can have a major impact on the profitability and future growth of Freeport-McMoRan Inc. (the "Company") and its subsidiaries. ARTICLE II ADMINISTRATION OF THE PLAN SECTION 2.1. Subject to the authority and powers of the Board of Directors in relation to the Plan as hereinafter provided, the Plan shall be administered by a Committee designated by the Board of Directors consisting of two or more members of the Board each of whom is a "disinterested person" within the meaning of Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934. The Committee shall have full authority to interpret the Plan and from time to time to adopt such rules and regulations for carrying out the Plan as it may deem best. All determinations by the Committee shall be made by the affirmative vote of a majority of its members, but any determination reduced to writing and signed by a majority of the members shall be fully as effective as if it had been made by a majority vote at a meeting duly called and held. All decisions by the Committee pursuant to the provisions of the Plan and all orders or resolutions of the Board of Directors pursuant thereto shall be final, conclusive and binding on all persons, including the Participants, the Company and its subsidiaries and their respective equity holders. ARTICLE III ELIGIBILITY FOR AND PAYMENT OF AWARDS SECTION 3.1. Subject to the provisions of the Plan, in each calendar year the Committee may select salaried officers or employees (including officers or employees who are also directors) of the Company or any of its subsidiaries to receive Awards under the Plan with respect to such year, and determine the amount of such Awards. 1 SECTION 3.2. Subject to the provisions of the Plan, Awards with respect to any year shall be paid to each Participant at such time established by the Committee following the determination of the amounts of such Awards, which payment shall in no event be later than February 28 of the year following such Award Year. SECTION 3.3. Notwithstanding the provisions of Section 3.2, if, prior to the date established by the Committee for any Award Year, a Participant shall so elect, in accordance with procedures established by the Committee, all or any part of an Award to such Participant with respect to such Award Year shall be deferred and paid in one or more periodic installments, not in excess of ten, at such time or times before or after the date of such Participant's Termination of Employment, but not later than ten years after such date of Termination of Employment, as shall be specified in such election. If and only if any Award or portion thereof is so deferred for payment after December 31 of the year following such Award Year, such Award or portion thereof, as the case may be, shall, commencing with January 1 of the year following such Award Year, be increased at a rate equal to the prime commercial lending rate announced from time to time by The Chase Manhattan Bank, N.A. (compounded quarterly) or at such other rate and in such manner as shall be determined from time to time by the Committee. If such Participant's Termination of Employment occurs for any reason other than death, retirement under the Company's retirement plan, or retirement with the consent of the Company outside the Company's retirement plan and if, on the date of such Termination of Employment, there remain unpaid any installments of Awards which have been deferred as provided in this Section 3.3, the Committee may, in its sole discretion, authorize payment to the Participant of the aggregate amount of such unpaid installments in a lump sum, notwithstanding such election. SECTION 3.4. (a) Notwithstanding the provisions of Sections 3.1, 3.2, 3.3, 4.2(a), and 4.2(b) hereof, any Award to any Covered Employee shall be granted in accordance with the provisions of this Section 3.4. Subject to the discretion of the Committee as set forth in Section 4.2(c) hereof, the amount of the Award that may be granted with respect to any calendar year to the Covered Employee who is the chief executive officer of the Company at the time of such grant shall be 32% of the Plan Funding Amount for such year, the amount of the Award that may be granted with respect to any calendar year to the Covered Employee who is the chief operating officer of the Company at the time of such grant shall be 23% of the Plan Funding Amount for such year, and the amount of the Award that may be granted with respect to any calendar year to any other Covered Employee shall be, as to each such individual, 15% of the Plan Funding Amount for such year. 2 (b) All Awards to Covered Employees under the Plan will be made and administered by two or more members of the Committee who are also "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, and rules promulgated by the Internal Revenue Service of the Department of the Treasury thereunder. (c) Any provision of the Plan to the contrary notwithstanding, no Covered Employee shall be entitled to any payment of an Award with respect to a calendar year unless the members of the Committee referred to in Section 3.4(b) hereof shall have certified the Plan Funding Amount for such year and that the condition of Section 4.1 hereof has been met for such year. ARTICLE IV GENERAL PROVISIONS SECTION 4.1. Any provision of the Plan to the contrary notwithstanding, no Award shall be made pursuant to Section 3.1 or 3.4 with respect to any calendar year if the average of the Return on Investment for such calendar year and each of the four preceding calendar years, after giving effect to the aggregate amount (if any) that was awarded or credited with respect to such prior years and the aggregate amount that would otherwise have been so awarded or credited with respect to such calendar year, would be less than six percent. SECTION 4.2. (a) In determining the aggregate amount awarded to Participants under the Plan for any calendar year, the Committee shall consider as a guideline that the aggregate amount of all Awards granted with respect to any calendar year should not exceed two and one-half percent of Net Cash Provided by Operating Activities for such year. (b) If Managed Net Income or Total Investment of Capital for any year shall have been affected by special factors (including material changes in accounting policies or practices, material acquisitions or dispositions of property, or other unusual items) which in the Committee's judgment should or should not be taken into account, in whole or in part, in the equitable administration of the Plan, the Committee may, for any purpose of the Plan, adjust Managed Net Income or Total Investment of Capital and make payments and reductions accordingly under the Plan. (c) Notwithstanding the provisions of subparagraphs (a) and (b) above, the amount available for the grant of Awards under the Plan to Covered Employees with respect to a calendar year shall be equal to the Plan Funding Amount for such year and 3 any adjustments made in accordance with or for the purposes of subparagraphs (a) or (b) shall be disregarded for purposes of calculating the Plan Funding Amount. The Committee may, in the exercise of its discretion, determine that the aggregate amount of all Awards granted to Covered Employees with respect to a calendar year shall be less than the Plan Funding Amount for such year, but the excess of such Plan Funding Amount over such aggregate amount covered by Awards granted to Covered Employees shall not be available for any Awards to Covered Employees with respect to future years. In addition, the Committee may, in the exercise of its discretion, reduce or eliminate the amount of an Award to a Covered Employee otherwise calculated in accordance with the provisions of Section 3.4 prior to payment thereof. SECTION 4.3. A Participant may designate in writing a beneficiary (including the trustee or trustees of a trust) who shall upon the death of such Participant be entitled to receive all amounts which would have been payable hereunder to such Participant. A Participant may rescind or change any such designation at any time. Except as provided in this Section 4.3, none of the amounts which may be payable under the Plan may be assigned or transferred otherwise than by will or by the laws of descent and distribution. SECTION 4.4. All payments made pursuant to the Plan shall be subject to withholding in respect of income and other taxes required by law to be withheld, in accordance with procedures to be established by the Committee. SECTION 4.5. The selection of an individual for participation in the Plan shall not give such Participant any right to be retained in the employ of the Company or any of its subsidiaries, and the right of the Company and of any such subsidiary to dismiss or discharge any such Participant is specifically reserved. The benefits provided for Participants under the Plan shall be in addition to, and shall in no way preclude, other forms of compensation to or in respect of such Participants. SECTION 4.6. The Board of Directors and the Committee shall be entitled to rely on the advice of counsel and other experts, including the independent public accountants for the Company. No member of the Board of Directors or of the Committee or any officers of the Company or its subsidiaries shall be liable for any act or failure to act under the Plan, except in circumstances involving bad faith on the part of such member or officer. SECTION 4.7. Nothing contained in the Plan shall prevent the Company or any subsidiary or affiliate of the Company from adopting or continuing in effect other compensation 4 arrangements, which arrangements may be either generally applicable or applicable only in specific cases. ARTICLE V AMENDMENT OR TERMINATION OF THE PLAN SECTION 5.1. The Board of Directors may at any time terminate, in whole or in part, or from time to time amend the Plan, provided that, except as otherwise provided in the Plan, no such amendment or termination shall adversely affect any Awards previously made to a Participant and deferred by such Participant pursuant to Section 3.3. In the event of such termination, in whole or in part, of the Plan, the Committee may in its sole discretion direct the payment to Participants of any Awards not theretofore paid out prior to the respective dates upon which payments would otherwise be made hereunder to such Participants, and in a lump sum or installments as the Committee shall prescribe with respect to each such Participant. The Board may at any time and from time to time delegate to the Committee any or all of its authority under this Section 5.1. ARTICLE VI DEFINITIONS SECTION 6.1. For the purposes of the Plan, the following terms shall have the meanings indicated: (a) Award: The grant of an award of cash by the Committee to a Participant pursuant to Section 3.1 or 3.4. (b) Award Year: Any calendar year with respect to which an Award may be granted. (c) Board of Directors: The Board of Directors of the Company. (d) Committee: The Committee designated pursuant to Section 2.1. Until otherwise determined by the Board of Directors, the Corporate Personnel Committee designated by such Board shall be the Committee under the Plan. (e) Covered Employee: At any date, (i) any individual who, with respect to the previous taxable year of the Company, was a "covered employee" of the Company within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, and the 5 rules promulgated thereunder by the Internal Revenue Service of the Department of the Treasury, provided, however, the term "Covered Employee" shall not include any such individual who is designated by the Committee, in its discretion, at the time of any grant as reasonably expected not to be such a "covered employee" with respect to the current taxable year of the Company and (ii) any individual who is designated by the Committee, in its discretion, at the time of any grant as reasonably expected to be such a "covered employee" with respect to the current taxable year of the Company. Notwithstanding the foregoing, at any date in fiscal year 1994, "Covered Employee" shall mean any individual designated by the Committee, in its discretion, at the time of any grant as reasonably expected to be a "covered employee" with respect to the Company's taxable year 1994. (f) Managed Net Income: With respect to any year, the sum of (i) the net income (or net loss) of the Company and its consolidated subsidiaries for such year as shown in the Company's Annual Report to Stockholders for such year; plus (or minus) (ii) the minority interests' share in the net income (or net loss) of the Company's consolidated subsidiaries for such year as shown in the Company's Annual Report to Stockholders for such year; plus (or minus) (iii) changes in accounting principles of the Company and its consolidated subsidiaries for such year plus (or minus) the minority interests' share in such changes in accounting principles as shown in the Company's Annual Report to Stockholders for such year; plus (iv) the portion for such year of the deferred gain on the 1992 sale of newly issued Freeport-McMoRan Resource Partners, Limited Partnership depositary units as shown in the Company's Annual Report to Stockholders for such year. (g) Net Cash Provided by Operating Activities: With respect to any year, the net cash provided by operating activities of the Company and its consolidated subsidiaries for such year as shown in the Company's Annual Report to Stockholders for such year. (h) Net Interest Expense: With respect to any year, the net interest expense of the Company and its consolidated subsidiaries for such year as shown in the Company's Annual Report to Stockholders for such year. (i) Participant: An individual who has been selected by the Committee to receive an Award. 6 (j) Plan Funding Amount: With respect to any year, two and one-half percent of Net Cash Provided by Operating Activities for such year. (k) Return on Investment: With respect to any year, the result (expressed as a percentage) calculated according to the following formula: a + (b - c) d in which "a" equals Managed Net Income for such year, "b" equals Net Interest Expense for such year, "c" equals Tax on Net Interest Expense for such year, and "d" equals Total Investment of Capital for such year. (l) Tax on Net Interest Expense: With respect to any year, the tax on the net interest expense of the Company and its consolidated subsidiaries for such year calculated at the statutory federal income tax rate for such year as shown in the Company's Annual Report to Stockholders for such year. (m) Termination of Employment: Solely for purposes of Section 3.3 hereof, the cessation of the rendering of services, whether or not as an employee, to any and all of the following entities: the Company, any subsidiary of the Company, Freeport-McMoRan Copper & Gold Inc., any subsidiary of Freeport-McMoRan Copper & Gold Inc., McMoRan Oil & Gas Co., any subsidiary of McMoRan Oil & Gas Co., and any law firm rendering services to any of the foregoing entities provided such law firm consists of at least two or more members or associates who are or were officers of the Company or any subsidiary of the Company. (n) Total Investment of Capital: With respect to any year, the sum of (i) the weighted average of the stockholders' equity in the Company and its consolidated subsidiaries for such year, (ii) the weighted average of the minority interests in the consolidated subsidiaries of the Company for such year, and (iii) the weighted average of the long-term debt of the Company and its consolidated subsidiaries for such year, all as shown in the quarterly balance sheets of the Company and its consolidated subsidiaries for such year. 7 EX-10 3 Exhibit 10.25 1992 LONG-TERM PERFORMANCE INCENTIVE PLAN OF FREEPORT-McMoRan INC. ARTICLE I PURPOSE OF PLAN SECTION 1.1. The purpose of the 1992 Long-Term Performance Incentive Plan of Freeport-McMoRan Inc. (the "Plan") is to provide incentives for senior executives whose performance in fulfilling the responsibilities of their positions can have a major impact on the profitability and future growth of Freeport-McMoRan Inc. (the "Company") and its subsidiaries. ARTICLE II ADMINISTRATION OF THE PLAN SECTION 2.1. Subject to the authority and powers of the Board of Directors in relation to the Plan as hereinafter provided, the Plan shall be administered by a Committee designated by the Board of Directors consisting of two or more members of the Board each of whom is a "disinterested person" within the meaning of Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934. The Committee shall have full authority to interpret the Plan and from time to time to adopt such rules and regulations for carrying out the Plan as it may deem best. All determinations by the Committee shall be made by the affirmative vote of a majority of its members, but any determination reduced to writing and signed by a majority of the members shall be fully as effective as if it had been made by a majority vote at a meeting duly called and held. All decisions by the Committee pursuant to the provisions of the Plan and all orders or resolutions of the Board of Directors pursuant thereto shall be final, conclusive and binding on all persons, including but not limited to the Participants, the Company and its Subsidiaries and their respective equity holders. ARTICLE III ELIGIBILITY FOR AND GRANT OF PERFORMANCE AWARDS SECTION 3.1. Subject to the provisions of the Plan, the Committee may from time to time select salaried officers or employees (including officers or employees who are also directors) of the Company or of any of its Subsidiaries to be granted Performance Awards under the Plan, and determine the number of Performance Units covered by each such Performance Award. Performance Awards may be granted at different times to 1 the same individual. The Plan shall expire on December 31, 1997 and no Performance Awards shall be granted hereunder after such date. SECTION 3.2. Upon the grant of a Performance Award to a Participant, the Company shall establish a Performance Award Account for such Participant and shall credit to such Performance Award Account the number of Performance Units covered by such Performance Award. SECTION 3.3. The number of Performance Units outstanding at any time shall not exceed 3,000,000. Performance Units that shall have been forfeited or with respect to which payment has been made pursuant to Section 4.2 or deferred pursuant to Section 4.4 shall not thereafter be deemed to be credited or outstanding for any purpose of the Plan and may again be the subject of Performance Awards. SECTION 3.4. (a) Notwithstanding the provisions of Section 3.1, 3.2, and 3.3 hereof, the number of Performance Units covered by an annual Performance Award that may be granted to the Covered Employee who is the chief executive officer of the Company at the time of such grant shall be 100,000; the number of Performance Units covered by an annual Performance Award that may be granted to the Covered Employee who is the chief operating officer of the Company at the time of such grant shall be 75,000; and the number of Performance Units covered by an annual Performance Award that may be granted to any other Covered Employee shall be, as to each such individual, 40,000. (b) All Performance Awards to Covered Employees under the Plan will be made and administered by two or more members of the Committee who are also "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, and rules promulgated by the Internal Revenue Service of the Department of the Treasury thereunder. ARTICLE IV CREDITS TO AND PAYMENTS FROM PARTICIPANTS' PERFORMANCE AWARD ACCOUNTS SECTION 4.1. Subject to the provisions of the Plan, the Performance Award Account or Accounts of each Participant at December 31 of any year shall be credited, as of such December 31, with an amount equal to the Annual Earnings Per Share (or Net Loss Per Share) for such year times the number of Performance Units then credited to each such Performance Award Account; provided that, if in any year there shall be any outstanding Net Loss Carryforward applicable to such Performance Award Account, such Net Loss Carryforward shall be applied to reduce any amount 2 which would otherwise be credited to such Performance Award Account pursuant to this Section 4.1 in such year until such Net Loss Carryforward has been fully so applied. SECTION 4.2. (a) Subject to the provisions of the Plan, the balance credited to a Participant's Performance Award Account shall be paid to such Participant as soon as practicable on or after the Award Valuation Date with respect to such Performance Award. (b) Payments pursuant to Section 4.2(a) shall be in cash. (c) Notwithstanding any other provision of the Plan to the contrary, no Covered Employee shall be entitled to any payment with respect to a Performance Award unless the members of the Committee referred to in Section 3.4(b) hereof shall have certified the amount of the Annual Earnings Per Share (or Net Loss Per Share) for each year covered by such Performance Award. SECTION 4.3. In addition to any amounts payable pursuant to Section 4.2, the Committee may in its sole discretion determine that there shall be payable to a former Participant a supplemental amount not exceeding the excess, if any, of (i) the amount determined in accordance with Section 4.1 which would have been payable to such former Participant if the Award Valuation Date with respect to a Performance Award of such Participant had been December 31 of the first, second or third calendar year next following the year in which such Participant's Termination of Employment occurred (the selection of such first, second or third calendar year to be in the sole discretion of the Committee subject only to the last sentence of this Section 4.3) over (ii) the amount determined in accordance with said Section 4.1 as of December 31 of the calendar year in which such Termination of Employment actually occurred. Any such supplemental amount so payable shall be paid in a lump sum as promptly as practicable on or after December 31 of the calendar year so selected by the Committee or in one or more installments ending not later than five years after such December 31, as the Committee may in its discretion direct. In no event shall any payment under this Section 4.3 be made with respect to any calendar year after the year in which such former Participant reaches his normal retirement date under the Company's retirement plan. SECTION 4.4. (a) Prior to January 1 of any calendar year in which it is anticipated that an Award Valuation Date with respect to any Performance Award may occur, a Participant may elect, in accordance with procedures established by the Committee, to defer, as and to the extent hereinafter provided, the payment of the amount, if any, which shall be paid pursuant to Section 4.2. 3 (b) All payments deferred pursuant to Section 4.4(a) shall be paid in one or more periodic installments, not in excess of ten, at such time or times after the applicable Award Valuation Date, but not later than ten years after such Award Valuation Date, as shall be specified in such Participant's election pursuant to Section 4.4(a). (c) In the case of payments deferred as provided in Section 4.4(a), the unpaid amounts shall, commencing with the applicable Award Valuation Date, be increased at a rate equal to the prime commercial lending rate announced from time to time by The Chase Manhattan Bank, N.A. (compounded quarterly) or at such other rate and in such manner as shall be determined from time to time by the Committee. If subsequent to such Participant's election pursuant to Section 4.4(a) such Participant's Termination of Employment occurs for any reason other than death, Disability, retirement under the Company's retirement plan, or retirement with the consent of the Company outside the Company's retirement plan, the Committee may, in its sole discretion, pay to such Participant in a lump sum the aggregate amount of any payments so deferred, notwithstanding such election. SECTION 4.5. Anything contained in the Plan to the contrary notwithstanding: (a) The Committee may, in its sole discretion, suspend, permanently or for a specified period of time or until further determination by the Committee, the making of any part or all of the credits which would otherwise have been made to the Performance Award Accounts of all the Participants or to such Accounts of one or more Participants as shall be designated by the Committee. (b) All Performance Units and other amounts credited to a Participant's Performance Award Account with respect to or arising from any Performance Award shall be forfeited in the event of the Discharge for Cause of such Participant prior to December 31 of the third year following the year of grant of such Performance Award. (c) All Performance Units and other amounts credited to a Participant's Performance Award Account with respect to or arising from a Performance Award shall, unless and to the extent that the Committee shall in its absolute discretion otherwise determine by reason of special mitigating circumstances, be forfeited in the event that such Participant's Termination of Employment shall occur for any reason other than death, Disability, retirement under the Company's retirement plan, or retirement with the consent of the Company outside the Company's retirement plan, at any time (except within two years after the date on which a Change in Control shall have occurred) prior to 4 December 31 of the third year following the year of grant of such Performance Award. (d) If any suspension is in effect pursuant to Section 4.5(a) on a date when a credit would otherwise have been made pursuant to Section 4.1, the amounts which would have been credited but for such suspension shall be forfeited and no credits shall thereafter be made in lieu thereof. If the Committee shall so determine in its sole discretion, the amounts theretofore credited to any Performance Award Account or Accounts shall be increased, during the suspension period, at a rate equal to the prime commercial lending rate announced from time to time by The Chase Manhattan Bank, N.A. (compounded quarterly) or at such other rate and in such manner as shall be determined from time to time by the Committee. ARTICLE V GENERAL INFORMATION SECTION 5.1. If Net Income, Annual Earnings Per Share or Net Loss Per Share for any year shall have been affected by special factors (including material changes in accounting policies or practices, material acquisitions or dispositions of property, or other unusual items) which in the Committee's judgment should or should not be taken into account, in whole or in part, in the equitable administration of the Plan, the Committee may, for any purpose of the Plan, adjust Net Income, Annual Earnings Per Share or Net Loss Per Share, as the case may be, for such year (and subsequent years as appropriate), or any combination of them, and make credits, payments and reductions accordingly under the Plan; provided, however, the Committee shall not have the authority to make any such adjustments to payments with respect to the Performance Awards of, or credits to the Performance Award Accounts of, any Participant who is at such time a Covered Employee. Notwithstanding the foregoing, the Committee may, in the exercise of its discretion prior to the making of credits to the Performance Award Accounts of Participants with respect to a particular year, reduce or eliminate the amount of the Annual Earnings Per Share that would otherwise be credited to any Performance Award Account of any Participant, including but not limited to any Covered Employee, for such year in accordance with the terms of the Plan. SECTION 5.2. The Committee shall for purposes of Articles III and IV make appropriate adjustments in the number of Performance Units which shall remain subject to Performance Awards and in the number of Performance Units which shall have been credited to Participants' accounts, in order to reflect any merger or consolidation to which the Company is a party or any stock dividend, split-up, combination or reclassification of the 5 outstanding shares of Company Common Stock or any other relevant change in the capitalization of the Company. SECTION 5.3. A Participant may designate in writing a beneficiary (including the trustee or trustees of a trust) who shall upon the death of such Participant be entitled to receive all amounts which would have been payable hereunder to such Participant. A Participant may rescind or change any such designation at any time. Except as provided in this Section 5.3, none of the amounts which may be payable under the Plan may be assigned or transferred otherwise than by will or by the laws of descent and distribution. SECTION 5.4. All payments made pursuant to the Plan shall be subject to withholding in respect of income and other taxes required by law to be withheld, in accordance with procedures to be established by the Committee. SECTION 5.5. The selection of an individual for participation in the Plan shall not give such Participant any right to be retained in the employ of the Company or any of its Subsidiaries, and the right of the Company and of such Subsidiary to dismiss or discharge any such Participant is specifically reserved. The benefits provided for Participants under the Plan shall be in addition to, and shall in no way preclude, other forms of compensation to or in respect of such Participants. SECTION 5.6. The Board of Directors and the Committee shall be entitled to rely on the advice of counsel and other experts, including the independent public accountants for the Company. No member of the Board of Directors or of the Committee or any officers of the Company or its Subsidiaries shall be liable for any act or failure to act under the Plan, except in circumstances involving bad faith on the part of such member or officer. SECTION 5.7. Nothing contained in the Plan shall prevent the Company or any subsidiary or affiliate of the Company from adopting or continuing in effect other compensation arrangements, which arrangements may be either generally applicable or applicable only in specific cases. ARTICLE VI AMENDMENT OR TERMINATION OF THE PLAN SECTION 6.1. The Board of Directors may at any time terminate, in whole or in part, or from time to time amend the Plan, provided that, except as otherwise provided in the Plan, no such amendment or termination shall adversely affect the amounts credited to the Performance Award Account of a Participant with 6 respect to Performance Awards previously made to such Participant. In the event of such termination, in whole or in part, of the Plan, the Committee may in its sole discretion direct the payment to Participants of any amounts specified in Article IV and not theretofore paid out, prior to the respective dates upon which payments would otherwise be made hereunder to such Participants, and in a lump sum or installments as the Committee shall prescribe with respect to each such Participant. The Board may at any time and from time to time delegate to the Committee any or all of its authority under this Article VI. ARTICLE VII DEFINITIONS SECTION 7.1. For the purposes of the Plan, the following terms shall have the meanings indicated: (a) Annual Earnings Per Share: With respect to any year, the result obtained by dividing (i) Net Income for such year by (ii) the average number of issued and outstanding shares (excluding treasury shares and shares held by any Subsidiaries) of Company Common Stock during such year as shown in the Company's Annual Report to Stockholders for such year. (b) Award Valuation Date: With respect to any Performance Award, (i) December 31 of the year in which the third anniversary of the grant of such Performance Award to a Participant shall occur or, (ii) if earlier, December 31 of the year in which such Participant's Termination of Employment shall occur, if such Termination of Employment occurs (x) within two years after a Change in Control or (y) as a result of death, Disability, retirement under the Company's retirement plan or retirement with the consent of the Company outside the Company's retirement plan. (c) Board of Directors: The Board of Directors of the Company. (d) Change in Control: A Change in Control shall be deemed to have occurred if either (i) any person, or any two or more persons acting as a group, and all affiliates of such person or persons, shall own beneficially more than 20% of the Company Common Stock outstanding (exclusive of shares held in the Company's treasury or by the Company's Subsidiaries) pursuant to a tender offer, exchange offer or series of purchases or other acquisitions, or any combination of those transactions, or (ii) there shall be a change in the composition of the Board of Directors of the Company at any time within two years after any tender offer, exchange offer, merger, consolidation, sale of assets or contested election, or any combination of those 7 transactions (a "Transaction"), so that (A) the persons who were directors of the Company immediately before the first such Transaction cease to constitute a majority of the Board of Directors of the corporation which shall thereafter be in control of the companies that were parties to or otherwise involved in such first Transaction, or (B) the number of persons who shall thereafter be directors of such corporation shall be fewer than two-thirds of the number of directors of the Company immediately prior to such first Transaction. A Change in Control shall be deemed to take place upon the first to occur of the events specified in the foregoing clauses (i) and (ii). (e) Committee: The Committee designated pursuant to Section 2.1. Until otherwise determined by the Board of Directors, the Corporate Personnel Committee designated by such Board shall be the Committee under the Plan. (f) Company Common Stock: Common Stock, par value $1, of the Company. (g) Covered Employee: At any date, (i) any individual who, with respect to the previous taxable year of the Company, was a "covered employee" of the Company within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, and the rules promulgated thereunder by the Internal Revenue Service of the Department of the Treasury, provided, however, the term "Covered Employee" shall not include any such individual who is designated by the Committee, in its discretion, at the time of any grant or at any subsequent time as reasonably expected not to be such a "covered employee" with respect to the current taxable year of the Company and (ii) any individual who is designated by the Committee, in its discretion, at the time of any grant or at any subsequent time as reasonably expected to be such a "covered employee" with respect to the current taxable year of the Company. Notwithstanding the foregoing, at any date in fiscal year 1994, "Covered Employee" shall mean any individual designated by the Committee, in its discretion, as reasonably expected to be a "covered employee" with respect to the Company's taxable year 1994. (h) Disability: In the case of any Participant, disability which after the expiration of more than 26 weeks after its commencement is determined to be total and permanent by a physician selected by the Company and acceptable to such Participant or his legal representatives. (i) Discharge for Cause: Involuntary Termination of Employment as a result of dishonesty or similar serious misconduct directly related to the performance of duties for any and all of the Related Entities. 8 (j) Net Income: With respect to any year, the sum of (i) the net income (or net loss) of the Company and its consolidated subsidiaries for such year as shown in the Company's Annual Report to Stockholders for such year; plus (or minus) (ii) the minority interests' share in the net income (or net loss) of the Company's consolidated subsidiaries for such year as shown in the Company's Annual Report to Stockholders for such year; plus (or minus) (iii) changes in accounting principles of the Company and its consolidated subsidiaries for such year plus (or minus) the minority interests' share in such changes in accounting principles as shown in the Company's Annual Report to Stockholders for such year; plus (iv) the portion for such year of the deferred gain on the 1992 sale of newly issued Freeport- McMoRan Resource Partners, Limited Partnership depositary units as shown in the Company's Annual Report to Stockholders for such year. (k) Net Loss Carryforward: With respect to any Performance Award Account, (i) an amount equal to the Net Loss Per Share for any year times the number of Performance Units then outstanding and credited to such Performance Award Account, reduced by (ii) any portion thereof which has been applied in any prior year as provided in Section 4.1. (l) Net Loss Per Share: The amount obtained when the calculation of Annual Earnings Per Share results in a number that is less than zero. (m) Participant: An individual who has been selected by the Committee to receive a Performance Award and in respect of whose Performance Award Account any amounts remain payable. (n) Performance Award: The grant of Performance Units by the Committee to a Participant pursuant to Section 3.1 or 3.4. (o) Performance Award Account: An account established for a Participant pursuant to Section 3.2. (p) Performance Unit: A unit covered by Performance Awards granted or subject to grant pursuant to Article III. (q) Related Entities: The Company, any subsidiary of the Company, Freeport-McMoRan Copper & Gold Inc., any subsidiary of Freeport-McMoRan Copper & Gold Inc., McMoRan Oil & Gas Co., any subsidiary of McMoRan Oil & Gas Co., and any law firm rendering services to any of the foregoing entities provided such law firm consists of at least two or more members or associates who are or were officers of the Company or any subsidiary of the Company. (r) Subsidiary: (i) Freeport-McMoRan Copper & Gold Inc. and Freeport-McMoRan Resource Partners, Limited Partnership, 9 in each case for as long as Freeport-McMoRan Inc. shall own any equity interest in such entity, and (ii) any corporation or other entity in which Freeport-McMoRan Inc. possesses directly or indirectly equity interests representing at least 50% of the total ordinary voting power or at least 50% of the total value of all classes of equity interests of such corporation or other entity. (s) Termination of Employment: The cessation of the rendering of services, whether or not as an employee, to any and all of the Related Entities. 10 EX-10 4 Exhibit 10.26 1987 LONG-TERM PERFORMANCE INCENTIVE PLAN OF FREEPORT-MCMORAN INC. ARTICLE I PURPOSE OF PLAN SECTION 1.1. The purpose of the 1987 Long-Term Performance Incentive Plan of Freeport-McMoRan Inc. (the "Plan") is to provide incentives for senior executives whose performance in fulfilling the responsibilities of their positions can have a major impact on the profitability and future growth of Freeport- McMoRan Inc. (the "Company") and its subsidiaries. ARTICLE II ADMINISTRATION OF THE PLAN SECTION 2.1. Subject to the authority and powers of the Board of Directors in relation to the Plan as hereinafter provided, the Plan shall be administered by a Committee designated by the Board of Directors consisting of two or more members of the Board each of whom is a "disinterested person" within the meaning of Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934. The Committee shall have full authority to interpret the Plan and from time to time to adopt such rules and regulations for carrying out the Plan as it may deem best. All determinations by the Committee shall be made by the affirmative vote of a majority of its members, but any determination reduced to writing and signed by a majority of the members shall be fully as effective as if it had been made by a majority vote at a meeting duly called and held. All decisions by the Committee pursuant to the provisions of the Plan and all orders or resolutions of the Board of Directors pursuant thereto shall be final, conclusive and binding on all persons, including but not limited to the Participants, the Company and its Subsidiaries and their respective equity holders. ARTICLE III ELIGIBILITY FOR AND GRANT OF PERFORMANCE AWARDS SECTION 3.1. Subject to the provisions of the Plan, the Committee may from time to time select salaried officers or employees (including officers or employees who are also directors) of the Company or of any of its Subsidiaries to be 1 granted Performance Awards under the Plan, and determine the number of Performance Units covered by each such Performance Award. Performance Awards may be granted at different times to the same individual. The Plan shall expire on December 31, 1992 and no Performance Awards shall be granted hereunder after such date. SECTION 3.2. Upon the grant of a Performance Award to a Participant, the Company shall establish a Performance Award Account for such Participant and shall credit to such Performance Award Account the number of Performance Units covered by such Performance Award. SECTION 3.3. The number of Performance Units outstanding at any time shall not exceed 1,500,000. Performance Units that shall have been forfeited or with respect to which payment has been made pursuant to Section 4.2 or deferred pursuant to Section 4.4 shall not thereafter be deemed to be credited or outstanding for any purpose of the Plan and may again be the subject of Performance Awards. ARTICLE IV CREDITS TO AND PAYMENTS FROM PARTICIPANTS' PERFORMANCE AWARD ACCOUNTS SECTION 4.1. Subject to the provisions of Section 4.5, the Performance Award Account or Accounts of each Participant at December 31 of any year shall be credited, as of such December 31, with an amount equal to the Annual Earnings Per Share (or Net Loss Per Share) for such year times the number of Performance Units then credited to each such Performance Award Account; provided that, if in any year there shall be any outstanding Net Loss Carryforward applicable to such Performance Award Account, such Net Loss Carryforward shall be applied to reduce any amount which would otherwise be credited to such Performance Award Account pursuant to this Section 4.1 in such year until such Net Loss Carryforward has been fully so applied. SECTION 4.2. (a) Subject to Section 4.4, the balance credited to a Participant's Performance Award Account shall be paid to such Participant as soon as practicable on or after the Award Valuation Date with respect to such Performance Award. (b) Payments pursuant to Section 4.2(a) shall be in cash. SECTION 4.3. In addition to any amounts payable pursuant to Section 4.2, the Committee may in its sole discretion determine that there shall be payable to a former Participant a supplemental amount not exceeding the excess, if any, of (i) the 2 amount determined in accordance with Section 4.1 which would have been payable to such former Participant if the Award Valuation Date with respect to a Performance Award of such Participant had been December 31 of the first, second or third calendar year next following the year in which such Participant's Termination of Employment occurred (the selection of such first, second or third calendar year to be in the sole discretion of the Committee subject only to the last sentence of this Section 4.3) over (ii) the amount determined in accordance with said Section 4.1 as of December 31 of the calendar year in which such Termination of Employment actually occurred. Any such supplemental amount so payable shall be paid in a lump sum as promptly as practicable on or after December 31 of the calendar year so selected by the Committee or in one or more installments ending not later than five years after such December 31, as the Committee may in its discretion direct. In no event shall any payment under this Section 4.3 be made with respect to any calendar year after the year in which such former Participant reaches his normal retirement date under the Company's retirement plan. SECTION 4.4. (a) Prior to January 1 of any calendar year in which it is anticipated that an Award Valuation Date with respect to any Performance Award may occur, a Participant may elect, in accordance with procedures established by the Committee, to defer, as and to the extent hereinafter provided, the payment of the amount, if any, which shall be paid pursuant to Section 4.2. (b) All payments deferred pursuant to Section 4.4(a) shall be paid in one or more periodic installments, not in excess of ten, at such time or times after the applicable Award Valuation Date, but not later than ten years after such Award Valuation Date, as shall be specified in such Participant's election pursuant to Section 4.4(a). (c) In the case of payments deferred as provided in Section 4.4(a), the unpaid amounts shall, commencing with the applicable Award Valuation Date, be increased at a rate equal to the prime commercial lending rate announced from time to time by The Chase Manhattan Bank, N.A. (compounded quarterly) or at such other rate and in such manner as shall be determined from time to time by the Committee. If subsequent to such Participant's election pursuant to Section 4.4(a) such Participant's Termination of Employment occurs for any reason other than death, Disability, retirement under the Company's retirement plan, or retirement with the consent of the Company outside the Company's retirement plan, the Committee may, in its sole discretion, pay to such Participant in a lump sum the aggregate amount of any payments so deferred, notwithstanding such election. 3 SECTION 4.5. Anything contained in the Plan to the contrary notwithstanding: (a) The Committee may, in its sole discretion, suspend, permanently or for a specified period of time or until further determination by the Committee, the making of any part or all of the credits which would otherwise have been made to the Performance Award Accounts of all the Participants or to such Accounts of one or more Participants as shall be designated by the Committee. (b) All Performance Units and other amounts credited to a Participant's Performance Award Account with respect to or arising from any Performance Award shall be forfeited in the event of the Discharge for Cause of such Participant prior to December 31 of the third year following the year of grant of such Performance Award. (c) All Performance Units and other amounts credited to a Participant's Performance Award Account with respect to or arising from a Performance Award shall, unless and to the extent that the Committee shall in its absolute discretion otherwise determine by reason of special mitigating circumstances, be forfeited in the event that such Participant's Termination of Employment shall occur for any reason other than death, Disability, retirement under the Company's retirement plan, or retirement with the consent of the Company outside the Company's retirement plan, at any time (except within two years after the date on which a Change in Control shall have occurred) prior to December 31 of the third year following the year of grant of such Performance Award. (d) If any suspension is in effect pursuant to Section 4.5(a) on a date when a credit would otherwise have been made pursuant to Section 4.1, the amounts which would have been credited but for such suspension shall be forfeited and no credits shall thereafter be made in lieu thereof. If the Committee shall so determine in its sole discretion, the amounts theretofore credited to any Performance Award Account or Accounts shall be increased, during the suspension period, at a rate equal to the prime commercial lending rate announced from time to time by The Chase Manhattan Bank, N.A. (compounded quarterly) or at such other rate and in such manner as shall be determined from time to time by the Committee. ARTICLE V GENERAL INFORMATION 4 SECTION 5.1. If Net Income, Annual Earnings Per Share or Net Loss Per Share for any year shall have been affected by special factors (including material changes in accounting policies or practices, material acquisitions or dispositions of property, or other unusual items) which in the Committee's judgment should or should not be taken into account, in whole or in part, in the equitable administration of the Plan, the Committee may, for any purpose of the Plan, adjust Net Income, Annual Earnings Per Share or Net Loss Per Share, as the case may be, for such year (and subsequent years as appropriate), or any combination of them, and make credits, payments and reductions accordingly under the Plan. SECTION 5.2. The Committee shall for purposes of Articles III and IV make appropriate adjustments in the number of Performance Units which shall remain subject to Performance Awards and in the number of Performance Units which shall have been credited to Participants' accounts, in order to reflect any merger or consolidation to which the Company is a party or any stock dividend, split-up, combination or reclassification of the outstanding shares of Company Common Stock or any other relevant change in the capitalization of the Company. SECTION 5.3. A Participant may designate in writing a beneficiary (including the trustee or trustees of a trust) who shall upon the death of such Participant be entitled to receive all amounts which would have been payable hereunder to such Participant. A Participant may rescind or change any such designation at any time. Except as provided in this Section 5.3, none of the amounts which may be payable under the Plan may be assigned or transferred otherwise than by will or by the laws of descent and distribution. SECTION 5.4. All payments made pursuant to the Plan shall be subject to withholding in respect of income and other taxes required by law to be withheld, in accordance with procedures to be established by the Committee. SECTION 5.5. The selection of an individual for participation in the Plan shall not give such Participant any right to be retained in the employ of the Company or any of its Subsidiaries, and the right of the Company and of such Subsidiary to dismiss or discharge any such Participant is specifically reserved. The benefits provided for Participants under the Plan shall be in addition to, and shall in no way preclude, other forms of compensation to or in respect of such Participants. SECTION 5.6. The Board of Directors and the Committee shall be entitled to rely on the advice of counsel and other experts, including the independent public accountants for the Company. No member of the Board of Directors or of the Committee or any 5 officers of the Company or its Subsidiaries shall be liable for any act or failure to act under the Plan, except in circumstances involving bad faith on the part of such member or officer. ARTICLE VI AMENDMENT OR TERMINATION OF THE PLAN SECTION 6.1. The Board of Directors may at any time terminate, in whole or in part, or from time to time amend the Plan, provided that, except as otherwise provided in the Plan, no such amendment shall increase the number of Performance Units which may be outstanding at any time, nor shall any such amendment or termination adversely affect the amounts credited to the Performance Award Account of a Participant with respect to Performance Awards previously made to such Participant. In the event of such termination, in whole or in part, of the Plan, the Committee may in its sole discretion direct the payment to Participants of any amounts specified in Article IV and not theretofore paid out, prior to the respective dates upon which payments would otherwise be made hereunder to such Participants, and in a lump sum or installments as the Committee shall prescribe with respect to each such Participant. The Board may at any time and from time to time delegate to the Committee any or all of its authority under this Article VI. ARTICLE VII DEFINITIONS SECTION 7.1. For the purposes of the Plan, the following terms shall have the meanings indicated: (a) Annual Earnings Per Share: With respect to any year, the result obtained by dividing (i) Net Income for such year by (ii) the average number of issued and outstanding shares (excluding treasury shares and shares held by any Subsidiaries) of Company Common Stock during such year as shown in the Company's Annual Report to Stockholders for such year. (b) Award Valuation Date: With respect to any Performance Award, (i) December 31 of the year in which the third anniversary of the grant of such Performance Award to a Participant shall occur or, (ii) if earlier, December 31 of the year in which such Participant's Termination of Employment shall occur, if such Termination of Employment occurs (x) within two years after a Change in Control or (y) as a result of death, Disability, retirement under the 6 Company's retirement plan or retirement with the consent of the Company outside the Company's retirement plan. (c) Board of Directors: The Board of Directors of the Company. (d) Change in Control: A Change in Control shall be deemed to have occurred if either (i) any person, or any two or more persons acting as a group, and all affiliates of such person or persons, shall own beneficially more than 20% of the Company Common Stock outstanding (exclusive of shares held in the Company's treasury or by the Company's Subsidiaries) pursuant to a tender offer, exchange offer or series of purchases or other acquisitions, or any combination of those transactions, or (ii) there shall be a change in the composition of the Board of Directors of the Company at any time within two years after any tender offer, exchange offer, merger, consolidation, sale of assets or contested election, or any combination of those transactions (a "Transaction"), so that (A) the persons who were directors of the Company immediately before the first such Transaction cease to constitute a majority of the Board of Directors of the corporation which shall thereafter be in control of the companies that were parties to or otherwise involved in such first Transaction, or (B) the number of persons who shall thereafter be directors of such corporation shall be fewer than two-thirds of the number of directors of the Company immediately prior to such first Transaction. A Change in Control shall be deemed to take place upon the first to occur of the events specified in the foregoing clauses (i) and (ii). (e) Committee: The Committee designated pursuant to Section 2.1. Until otherwise determined by the Board of Directors, the Corporate Personnel Committee designated by such Board shall be the Committee under the Plan. (f) Company Common Stock: Common Stock, par value $1, of the Company. (g) Disability: In the case of any Participant, disability which after the expiration of more than 26 weeks after its commencement is determined to be total and permanent by a physician selected by the Company and acceptable to such Participant or his legal representatives. (h) Discharge for Cause: Involuntary Termination of Employment as a result of dishonesty or similar serious misconduct directly related to the performance of duties for any and all Related Entities. 7 (i) Net Income: With respect to any year, the sum of: (i) the net income (or net loss) of the Company and its consolidated subsidiaries for such year as shown in the Company's Annual Report to Stockholders for such year; plus (or minus) (ii) the net income (or net loss) of each Subsidiary that is not wholly-owned, directly or indirectly, by the Company, as shown in such Subsidiary's annual audited financial statements for such year, attributable to shares of common stock or other equity securities or interests that are not owned, directly or indirectly, by the Company for such portion of the year that the Company owned directly or indirectly equity securities or interests in such Subsidiary. (j) Net Loss Carryforward: With respect to any Performance Award Account, (i) an amount equal to the Net Loss per Share for any year times the number of Performance Units then outstanding and credited to such Performance Award Account, reduced by (ii) any portion thereof which has been applied in any prior year as provided in Section 4.1. (k) Net Loss Per Share: The amount obtained when the calculation of Annual Earnings Per Share results in a number that is less than zero. (l) Participant: An individual who has been selected by the Committee to receive a Performance Award and in respect of whose Performance Award Account any amounts remain payable. (m) Performance Award: The grant of Performance Units by the Committee to a Participant pursuant to Section 3.1. (n) Performance Award Account: An account established for a Participant pursuant to Section 3.2. (o) Performance Unit: A unit covered by Performance Awards granted or subject to grant pursuant to Article III. (p) Related Entities: The Company, any subsidiary of the Company, Freeport-McMoRan Copper & Gold Inc., any subsidiary of Freeport-McMoRan Copper & Gold Inc., McMoRan Oil & Gas Co., any subsidiary of McMoRan Oil & Gas Co., and any law firm rendering services to any of the foregoing entities provided such law firm consists of at least two or 8 more members or associates who are or were officers of the Company or any subsidiary of the Company. (q) Subsidiary: Any corporation of which stock representing at least 50% of the ordinary voting power is owned, directly or indirectly, by the Company and any other entity of which equity securities or interests representing at least 50% of the ordinary voting power or 50% of the total value of all classes of equity securities or interests of such entity are owned, directly or indirectly, by the Company. (r) Termination of Employment: The cessation of the rendering of services, whether or not as an employee, to any and all of the Related Entities. 9 EX-10 5 Exhibit 10.29 FREEPORT-MCMORAN INC. PERFORMANCE INCENTIVE AWARDS PROGRAM 1. Purpose. The purpose of the Performance Incentive Awards Program (the "Plan") of Freeport-McMoRan Inc. (the "Company") is to provide greater incentives for certain key management, professional and technical employees whose performance in fulfilling the responsibilities of their positions can significantly affect the performance of the Company or its operating units. The Plan provides an opportunity to earn additional compensation in the form of cash incentive payments based on the employee's individual performance and on the results achieved by the Company and by the operating or staff unit for which the employee performs services. 2. Administration. The Plan shall be administered by the Chairman of the Board of the Company who shall have full authority to interpret the Plan and from time to time adopt rules and regulations for carrying out the Plan, subject to such directions as the Corporate Personnel Committee (the "Committee") of the Company's Board of Directors may give, either as guidelines or in particular cases. In connection with his administration of the Plan, the Chairman of the Board may seek the views and recommendations of the Company's Operating Committee. 3. Eligibility for Participation. Each year the Chairman of the Board shall select the key managerial, professional or technical employees of the Company or of any of its subsidiaries who shall be eligible for participation in the Plan during that year. The Chairman of the Board may in his discretion make such selection, in whole or in part, on the basis of minimum salary levels, or position-point levels. The selection of an employee for eligibility in a particular year shall not constitute entitlement either to an incentive payment under the Plan for that year or to selection for eligibility in any subsequent year. Selection of employees for eligibility in a particular year will ordinarily be made in January of that year, but selection of any employee or employees may be made at any subsequent time or times in such year. No officer or employee shall receive any incentive payment under the Plan for any year during which such officer or employee was a participant in the Freeport-McMoRan Inc. Annual Incentive Plan. 4. Determination of Target Incentives. At the time each employee is selected for eligibility in the Plan for a particular 1 year, the Chairman of the Board shall determine a target incentive or a target incentive range for the employee with respect to that year. Such incentive or range shall be indicative of the incentive payment which the employee might expect to receive on the basis of strong performance by such employee, by the Company and by such employee's operating or staff unit, having regard to such performance standards and objectives as may be established with respect to that year. 5. Cash Incentive Payments. After the end of each year the Chairman of the Board shall evaluate, or cause to be evaluated, the performance of each employee selected for eligibility under the Plan for that year, as well as the performance of the Company and the employee's operating or staff unit. Based on such evaluation, the Chairman of the Board shall determine whether a cash incentive payment shall be made to such employee for that year and, if so, the amount of such payment. The aggregate amount of all such incentive payments shall be submitted to the Committee for its approval. Subject to such approval, each such payment (less applicable withholding and other taxes) shall be made at such time established by the Chairman of the Board or the Committee after such approval, which shall in no event be later than February 28 of the year following the year for which the incentive payments are made. 6. Optional Deferral of Payments. If, prior to the date established by the Chairman of the Board or the Committee for any year for which incentive payments are made, an employee selected for participation in the Plan shall so elect, in accordance with procedures established by the Chairman of the Board, all or any part of a cash incentive payment to such employee with respect to such year shall be deferred and paid in one or more periodic installments, not in excess of ten, at such time or times before or after the date of such employee's Termination of Employment (as hereinafter defined), but not later than ten years after such date of Termination of Employment, as shall be specified in such election. If and only if any cash incentive payment or portion thereof is so deferred for payment after December 31 of the year following the year for which the incentive payment is made, such cash incentive payment or portion thereof, as the case may be, shall, commencing with January 1 of the year following the year for which the incentive payment is made, be increased at a rate equal to the prime commercial lending rate announced from time to time by The Chase Manhattan Bank, N.A. (compounded quarterly) or at such other rate and in such manner as shall be determined from time to time by the Committee. If such employee's Termination of Employment occurs for any reason other than early or normal retirement under the retirement plan of this corporation or retirement with the consent of this corporation outside the retirement plan of this corporation and if, on the date of such Termination of Employment, there remain unpaid any installments of cash incentive payments which have been deferred as provided in this Section 6, the Committee or the Chairman of the Board 2 may, in its or his discretion, direct the payment to such employee of the aggregate amount of such unpaid installments in a lump sum, notwithstanding such election. Solely for purposes of this Section 6, the term "Termination of Employment" shall mean the cessation of the rendering of services, whether or not as an employee, to any and all of the following entities: the Company, any subsidiary of the Company, Freeport-McMoRan Copper & Gold Inc., any subsidiary of Freeport-McMoRan Copper & Gold Inc., McMoRan Oil & Gas Co., any subsidiary of McMoRan Oil & Gas Co., and any law firm rendering services to any of the foregoing entities provided such law firm consists of at least two or more members or associates who are or were officers of the Company or any subsidiary of the Company. 7. General Provisions. The selection of an employee for participation in the Plan shall not give such employee any right to be retained in the employ of the Company or any of its subsidiaries, and the right of the Company and of such subsidiary to dismiss or discharge any such employee is specifically reserved. The benefits provided for employees under the Plan shall be in addition to, and in no way preclude, other forms of compensation to or in respect of such employee. 8. Amendment or Termination. The Committee may from time to time amend or at any time terminate the Plan. 3 EX-10 6 Exhibit 10.31 1982 STOCK OPTION PLAN ARTICLE I PURPOSE OF THE PLAN This 1982 Stock Option Plan (this "Plan") is intended to provide a method whereby Employees (as hereinafter defined) of Freeport-McMoRan Inc. (the "Company") and its Subsidiaries (as hereinafter defined) who are largely responsible for their management and growth, and who are making and continue to make substantial contributions to their success, may be encouraged to acquire a proprietary interest in the Company and whereby needed new Employees may be persuaded to accept employment by the Company and its Subsidiaries, and to provide both present and new Employees with greater incentive, encourage their entrance or continuance in the Company's service and promote the interests of the Company and all its stockholders. Accordingly, the Company may from time to time on or before April 18, 1992, in its discretion, grant to such persons as may be selected in the manner hereinafter provided options to purchase shares of Common Stock of the Company ("Common Stock"), and Stock Appreciation Rights or SARs (as hereinafter defined), on the terms and subject to the conditions hereinafter set forth. ARTICLE II ADMINISTRATION OF THE PLAN SECTION 1. Subject to the authority as described herein of the Board of Directors of the Company (the "Board"), this Plan shall be administered by a committee (the "Committee") designated by the Board, which shall be composed of at least three members of the Board all of whom are Disinterested Persons (as hereinafter defined). Until otherwise determined by the Board, the Corporate Personnel Committee designated by the Board shall be the Committee under this Plan. The Committee is authorized to interpret this Plan and may from time to time adopt such rules and regulations for carrying out this Plan as it may deem best. All determinations by the Committee shall be made by the affirmative vote of a majority of its members, but any determination reduced to writing and signed by a majority of its members shall be fully as effective as if it had been made by a majority vote at a meeting duly called and held. Subject to any applicable provisions of the Company's By-Laws or of this Plan, all determinations by the Committee or by the Board pursuant to the provisions of this Plan, and all related orders or resolutions of the Committee or the Board, shall be final, 1 conclusive and binding on all persons, including the Company and its stockholders, Employees and optionees. SECTION 2. All authority delegated to the Committee pursuant to this Plan, including that referred to in Section 1 of this Article II, may also be exercised by the Board. No action of the Board taken pursuant to the provisions of this Plan shall be effective unless at the time both a majority of the Board and a majority of the directors acting in the matter are Disinterested Persons. In the event of any conflict or inconsistency between determinations, orders, resolutions or other actions of the Committee and the Board taken in connection with this Plan, the actions of the Board shall control. ARTICLE III STOCK SUBJECT TO THE PLAN SECTION 1. The shares to be issued or delivered upon exercise of options or rights granted under this Plan shall be made available, at the discretion of the Board, either from the authorized but unissued shares of Common Stock of the Company or from shares of Common Stock reacquired by the Company, including shares purchased by the Company in the open market or otherwise obtained; provided, however, that the Company, at the discretion of the Committee or the Board, may, upon exercise of options or rights granted under this Plan, cause a Subsidiary to deliver shares of Common Stock held by such Subsidiary. Any Subsidiary Equity Securities (as hereinafter defined) distributed pursuant to Section 7 of Article VI of this Plan shall be made available, at the discretion of the Board or the Committee, either directly from the issuer thereof or from the Company's holdings of such Subsidiary Equity Securities purchased by the Company or a Subsidiary in the open market or otherwise obtained. SECTION 2. Subject to the provisions of Section 3 of this Article III, the aggregate number of shares of Common Stock which may be subject to options or SARs granted at any time under this Plan shall not exceed 7,500,000. If any option or SAR or portion thereof lapses or terminates without the issuance of shares of Common Stock or other consideration in lieu of such shares, the shares of Common Stock subject to such option or SAR shall again be available for grant under the Plan, to the extent of such lapse or termination. SECTION 3. In the event of the payment of any dividends payable in Common Stock or in the event of any subdivision or combination of the Common Stock, the number of shares which may be subject to options and SARs under this Plan shall be increased or decreased proportionately, as the case may be, and the number 2 of shares or other amount deliverable upon the exercise thereafter of any option or SAR theretofore granted (whether or not then exercisable) shall be increased or decreased proportionately, as the case may be, without change in the aggregate purchase or exercise price. In the event of any other recapitalization or reorganization affecting the Common Stock or in the event of any significant distribution in kind (including, without limitation, a distribution of units representing beneficial interests in any royalty trust with respect to oil and gas or other mineral properties and distributions of equity securities representing interests in Subsidiaries or affiliates of the Company), the number of shares which may be subject to options and SARs under this Plan, and, with the consent of the optionee, the terms of any option or SAR theretofore granted hereunder (whether or not then exercisable), including without limitation the number of shares or other equity securities or any other amounts deliverable upon the exercise of such option or SAR or of any right attached thereto or provided for therein and the exercise price therefor, shall be subject to such adjustment as the Committee or the Board may deem appropriate. In the event the Company is merged or consolidated into or with another corporation, or substantially all of its assets are sold to another corporation, appropriate provisions shall be made for the protection and continuation of any outstanding options and SARs by the substitution, on an equitable basis, of such stock, other securities, cash or combination thereof as shall be appropriate. In the event of (i) a dividend or distribution (other than cash dividends or distributions) with respect to any Subsidiary Equity Securities distributable or payable in the form of cash pursuant to Section 7 of Article VI hereof, (ii) a subdivision or combination of any such Subsidiary Equity Securities, (iii) any recapitalization, reorganization, merger, consolidation, liquidation, or other extraordinary event affecting any such Subsidiary Equity Securities, or (iv) the disposition by the Company and its Subsidiaries of all or substantially all of their holdings of any such Subsidiary Equity Securities, the terms of any option or SAR theretofore granted hereunder (whether or not then exercisable) shall be subject to such adjustment as the Committee or the Board may deem appropriate, including, without limitation, a proportional adjustment in the number of such Subsidiary Equity Securities deliverable upon the exercise of such option or SAR or of any right attached thereto or provided for therein or the substitution, on an equitable basis, of Common Stock, other Subsidiary Equity Securities, or cash or a combination thereof for such Subsidiary Equity Securities. ARTICLE IV PURCHASE PRICE OF OPTIONED SHARES 3 Unless the Committee or the Board shall fix a greater purchase price, the purchase price per share of Common Stock under each option, and the exercise price of any Stock Appreciation Right, shall be 100% of the Fair Market Value (as hereinafter defined) of a share of Common Stock at the time such option or SAR is granted, but in no case shall such price be less than the par value of the Common Stock. ARTICLE V ELIGIBILITY OF RECIPIENTS Options and SARs will be granted only to persons who are Employees of the Company or a Subsidiary or who have agreed in writing to become Employees of the Company or a Subsidiary within not more than 30 days following the date on which the option or SAR is granted. Neither the members of the Committee nor any member of the Board who is not an Employee of the Company or a Subsidiary shall be eligible to receive an option or SAR under this Plan. ARTICLE VI GRANT OF OPTIONS AND SARS SECTION 1. Each option granted under this Plan shall constitute either an incentive stock option, intended to qualify under Section 422A of the Internal Revenue Code of 1986 (the "Code"), or a nonqualified stock option, not intended to qualify under said Section 422A, as determined in each case by the Committee or the Board. The aggregate Fair Market Value (determined as of the time the option is granted) of the stock for which any person may be granted incentive stock options in any calendar year prior to 1987 (under all plans of the Company and its parent and subsidiary corporations) shall not exceed $100,000 plus any "unused limit carryover to such year" within the meaning of said Section 422A. With respect to any incentive stock option granted under this Plan after December 31, 1986 and in accordance with procedures to be established by the Committee, the aggregate Fair Market Value (determined as of the time the option is granted) of the stock for which any person may be granted incentive stock options that become exercisable for the first time during any calendar year (under all plans of the Company and its Subsidiaries) shall not exceed $100,000. The instruments evidencing incentive stock options granted under this Plan shall contain such provisions with respect to sequential exercise as may be required by said Section 422A, as in effect from time to time. The Board of Directors shall have the authority to amend any incentive stock option theretofore granted 4 under this Plan, with the consent of the optionee, in a manner that has the intent or effect of causing such incentive stock option to become a nonqualified stock option. SECTION 2. The Committee or the Board shall from time to time determine the persons to be granted options and SARs, it being understood that options and SARs may be granted at different times to the same person. In addition, the Committee or the Board shall determine (a) the number of shares subject to each option or SAR, (b) the time or times when the options and SARs will be granted, (c) the purchase price of the shares subject to each option or the exercise price of each SAR, which price shall be not less than the limit specified in Article IV, and (d) the time or times when each option or SAR may be exercised within the limits stated in this Plan, which except as provided in the following sentence shall in no event be less than six months after the date of grant thereof. Notwithstanding the foregoing, all options and SARs granted under this Plan shall become exercisable in their entirety at such time as there shall be a Change in Control (as hereinafter defined) of the Company. SECTION 3. All instruments evidencing options and SARs granted under this Plan shall be in such form, which shall be consistent with this Plan and any applicable determinations, orders, resolutions or other actions of the Committee or the Board, as the officers of the Company shall, in their discretion, deem appropriate. SECTION 4. If the Committee or the Board shall in its discretion so determine, any nonqualified option granted after April 20, 1987 which does not contain a Stock Appreciation Right may provide that promptly following the last Income Recognition Date (as hereinafter defined) with respect to an exercise of all or any portion of such option the Company shall pay to the holder of such option an amount in cash equal to the Option Gain (as hereinafter defined) multiplied by the Applicable Rate (as hereinafter defined). No cash payment shall be made pursuant to this Section 4 to an optionee who is, on the effective date of such optionee's exercise of an option or part thereof, subject to Section 16 of the Securities Exchange Act of 1934 with respect to the Company Common Stock covered by such option or any Subsidiary Equity Securities including fractions thereof distributed or paid in the form of cash pursuant to Section 7 of this Article VI in connection with such exercise unless (x) such optionee's exercise shall have been made only during an Election Period (as hereinafter defined), (y) such optionee's exercise shall have occurred following a Change in Control of the Company, or (z) the Committee or the Board otherwise consents. SECTION 5. Any option granted under this Plan on or after April 20, 1987 may, if the Committee or the Board shall in its 5 discretion so determine, contain a provision (a "Stock Appreciation Right" or "SAR") that the Company shall, at the election of the holder, purchase all or any part of such option to the extent that such option is exercisable at the date of such election, for an amount (payable in the form of cash, shares of Common Stock or any combination thereof, all as the Committee or the Board shall in its discretion determine) equal to the Stock Appreciation Gain (as hereinafter defined) relating to such option or part thereof so purchased on the date such election shall be made. Such purchase pursuant to the exercise of a Stock Appreciation Right shall not be deemed to be an exercise of such option. The Committee, or the Board, in its discretion may also determine to grant Stock Appreciation Rights not in connection with or in tandem with any option, in which case each such SAR shall represent the right to receive upon exercise, for each share in respect of which the SAR is exercised, an amount in cash equal to the excess of the Fair Market Value of a share of Company Common Stock on the date of exercise over the exercise price of such SAR. No payment shall be made pursuant to this Section 5 to any such holder who is, on the effective date of such holder's election, subject to Section 16 of the Securities Exchange Act of 1934 with respect to the Company Common Stock covered by such option or SAR or any Subsidiary Equity Securities including fractions thereof, the value of which is included in the payment to be made to the holder pursuant to this Section 5, unless (x) such holder's election shall have been made only during an Election Period, (y) such holder's election shall have occurred following a Change in Control of the Company, or (z) the Committee or the Board otherwise consents. SECTION 6. Any option granted under this Plan on or after April 20, 1987 may, if the Committee or the Board shall in its discretion so determine, contain a provision (a "Limited Right") that the Company shall, at the election of the holder (which election may be made only during the period beginning on the first day following the date of expiration of any Offer, as hereinafter defined, and ending on the forty-fifth day following such date), purchase all or any part of such option, for an amount (payable entirely in cash) equal to the sum of (a) the difference between (i) the aggregate Offer Price (as hereinafter defined) of the shares of Common Stock covered by such option or part thereof so purchased on the date such election shall be made and (ii) the aggregate exercise price of such shares so covered plus (b) the Fair Market Value of any Subsidiary Equity Securities including fractions thereof that would have been distributed or paid in the form of cash pursuant to Section 7 of Article VI hereof had there been an exercise, as of the effective date of such Limited Right exercise, of the number of shares of Company Common Stock covered by such Limited Right exercise, as such fair market values are determined in each case on the date of such exercise. Such purchase pursuant to the exercise of a 6 Limited Right shall not be deemed to be an exercise of such option. Notwithstanding any other provision of this Plan, no Limited Right may be exercised within six months of the date of its grant. SECTION 7. Any option granted under this Plan on or after April 20, 1987 may provide that, upon the exercise of such option or part thereof such optionee will be entitled to receive from the Company any Subsidiary Equity Securities distributed or distributable in respect of the shares of Common Stock covered by such exercise, to which the optionee would have been entitled had such optionee been a holder of record of such covered shares at all times from the date of grant of such option to the date immediately preceding the effective date of such exercise. Any such distribution will be in kind, with cash payment for fractional interests of any Subsidiary Equity Security to be valued in proportion to the Fair Market Value of the respective Subsidiary Equity Security on the date of such exercise. Notwithstanding the foregoing, if the optionee is on the effective date of any such exercise (i) ineligible to own any Subsidiary Equity Securities that would otherwise be distributable to such optionee in accordance with this Section 7 or (ii) subject to Section 16 of the Securities Exchange Act of 1934 with respect to any such Subsidiary Equity Securities that would otherwise be distributable to such optionee in accordance with this Section 7, such optionee shall not receive such Subsidiary Equity Securities in kind but shall be entitled to receive from the Company in cash the Fair Market Value, as of such date, of any such Subsidiary Equity Securities including fractions thereof; provided, however, no cash payment for any Subsidiary Equity Securities including fractions thereof shall be made pursuant to the foregoing clause (i) of this Section 7 to an optionee who is, on the effective date of such optionee's exercise of an option or part thereof, subject to Section 16 of the Securities Exchange Act of 1934 with respect to such Subsidiary Equity Securities or pursuant to the foregoing clause (ii) of this Section 7 to an optionee unless (x) such optionee's exercise shall have been made only during an Election Period, (y) such optionee's exercise shall have occurred following a Change in Control of the Company, or (z) the Committee or the Board otherwise consents. SECTION 8. The authority with respect to the grant of options and SARs and the determination of the provisions thereof contained in Sections 1 and 2 and 4 through 7 of this Article VI may be delegated by the Committee or the Board to one or more officers of the Company, subject to such conditions and limitations as the Committee or the Board may prescribe; provided, however, that no such authority shall be delegated with respect to the grant of options or SARs to any officer or 7 director of the Company or with respect to the determination of any of the provisions thereof. ARTICLE VII NON-TRANSFERABILITY OF OPTIONS AND SARS No option or SAR granted under this Plan shall be transferable by the holder thereof otherwise than by will or by the laws of descent and distribution, and any such option or SAR shall be exercised during the lifetime of the holder thereof only by such holder or such holder's duly appointed legal representative. ARTICLE VIII EXERCISE OF OPTIONS AND SARS SECTION 1. Each incentive stock option granted under this Plan shall terminate not later than the expiration of 10 years from the date on which it was granted. Each nonqualified stock option and each SAR granted under this Plan shall terminate not later than the expiration of 10 years and two days from the date on which it was granted. SECTION 2. Except in cases provided for in Article IX hereof, each option and SAR granted under this Plan may be exercised only while the holder is an Employee of the Company or a Subsidiary or provides services to any of the Related Entities. SECTION 3. A person electing to exercise an option then exercisable shall give written notice to the Company of such election and of the number of shares of Common Stock such person has elected to purchase, and shall at the time of purchase tender the full purchase price of such shares, which tender shall be made in cash or cash equivalent (which may be such person's personal check) or, if the Committee or the Board so determines either generally or with respect to a specified option or group of options, in shares of Common Stock already owned by such person (which shares shall be valued for such purpose on the basis of their Fair Market Value on the date of exercise), or in any combination thereof. The Company shall have no obligation to deliver shares of Common Stock pursuant to the exercise of any option, or any Subsidiary Equity Securities distributable in connection therewith, in whole or in part, until such payment in full of the purchase price of such shares of Common Stock is received by the Company. No optionee, or legal representative, legatee or distributee of such optionee, shall be or be deemed to be a holder of any shares of Common Stock subject to such option 8 or any Subsidiary Equity Securities distributable in connection therewith, or entitled to any rights of a stockholder of the Company or a Subsidiary in respect of any shares of Common Stock covered by such option or any Subsidiary Equity Securities distributable in connection therewith until such shares of Common Stock have been paid for in full and such shares of Common Stock and such Subsidiary Equity Securities have been issued or delivered by the Company. A person electing to exercise a Stock Appreciation Right or Limited Right then exercisable shall give written notice to the Company of such election and of the number of shares of Common Stock covered by the option or SAR or part thereof which is to be purchased by the Company or otherwise exercised. SECTION 4. Each option and SAR shall be subject to the requirement that if at any time the Board shall in its discretion determine that the listing, registration or qualification of the shares of Common Stock subject to such option, or the Subsidiary Equity Securities distributable in connection therewith, upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such option or SAR or the issue or purchase of shares thereunder or the distribution of Subsidiary Equity Securities with respect thereto, such option or SAR may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free from any conditions not reasonably acceptable to the Board. SECTION 5. The Company may establish appropriate procedures to provide for payment or withholding of such income or other taxes as may be required by law to be paid or withheld in connection with the exercise of options or rights under this Plan, and to ensure that the Company receives prompt advice concerning the occurrence of any event which may create, or affect the timing or amount of, any obligation to pay or withhold any such taxes or which may make available to the Company any tax deduction resulting from the occurrence of such event. ARTICLE IX TERMINATION OF EMPLOYMENT SECTION 1. If and when the Termination of Employment of an optionee shall occur for any reason other than death, retirement under the Company's Retirement Plan, or retirement with the consent of the Company outside the Company's Retirement Plan, all of the optionee's options and SARs shall be terminated except that (a) any option to the extent then exercisable, or (b) any 9 Stock Appreciation Right or Limited Right to the extent then exercisable, may be exercised within three months after such Termination of Employment, but in either case not later than the termination date of the option or SAR or in the case of a Limited Right not later than the expiration date of such Right. SECTION 2. If and when the Termination of Employment of an optionee shall occur by reason of the optionee's early, normal or deferred retirement under the Company's Retirement Plan or retirement with the consent of the Company outside the Company's Retirement Plan, all of the optionee's options shall be terminated except that (a) any Stock Appreciation Right in tandem with an option or Limited Right to the extent then exercisable or exercisable within one year thereafter may be exercised within three months after such retirement, but not later than the termination date of the option or in the case of a Limited Right not later than the expiration date of such Right, and (b) any option or any SAR not in tandem with an option to the extent (in either case) then exercisable or exercisable within one year thereafter may, if it so provides, be exercised within three years after such retirement, but not later than the termination date of the option or SAR, unless after such retirement the Committee or the Board determines, in its discretion, that such option or SAR may be exercised within a period of greater duration (not greater than five years after such retirement, and in no event later than the termination date of the option or SAR) or unless within 45 days after such retirement the Committee or the Board determines, in its discretion, that such option or SAR may be exercised only within a period of shorter duration (not less than three months following notice of such determination to the optionee or holder) to be specified by the Committee or the Board, as the case may be. SECTION 3. Any question as to whether and when there has been a retirement under the Company's Retirement Plan or a retirement with the consent of the Company outside the Company's Retirement Plan or whether or when a Termination of Employment has occurred for any other reason shall be determined by the Committee or the Board, and any such reasonable determination shall be final. SECTION 4. Should an optionee die before such optionee's Termination of Employment, all the optionee's options shall be terminated, except that any option to the extent exercisable by the optionee at the time of such death, together with the unmatured installment (if any) of such option which at that time is next scheduled to become exercisable, may be exercised within one year after the date of such death, but not later than the termination date of the option, by the optionee's estate or by the person designated in the optionee's last will and testament. Notwithstanding the foregoing, no Stock Appreciation Right or 10 Limited Right shall be exercisable after the death of a holder thereof, except that an SAR granted not in tandem with an option may be exercised to the extent set forth in the preceding sentence. SECTION 5. Should an optionee die after such optionee's Termination of Employment, all of the optionee's options shall be terminated, except that any option to the extent exercisable by the optionee at the time of such death may be exercised within one year after the date of such death, but not later than the termination date of the option, by the optionee's estate or by the person designated in the optionee's last will and testament. Notwithstanding the foregoing, no Stock Appreciation Right or Limited Right shall be exercisable after the death of a holder thereof, except that an SAR granted not in tandem with an option may be exercised to the extent set forth in the preceding sentence. ARTICLE X AMENDMENTS SECTION 1. The Board may at any time terminate or from time to time amend, modify or suspend this Plan; provided, however, that no such amendment or modification without the approval of the stockholders shall: (a) increase the maximum number (determined as provided in this Plan) of shares of Common Stock which may be subject to options and SARs granted under this Plan; (b) permit the granting of any option or SAR under this Plan at a purchase price less than 100% of the Fair Market Value of the Common Stock at the time such option is granted; (c) permit the exercise of an option or SAR unless the full purchase price of the shares as to which the option is exercised is paid at the time of exercise; or (d) extend beyond April 18, 1992, the period during which options or SARs may be granted. SECTION 2. The Committee and the Board shall have the authority, with the consent of the option holder, to amend or modify any outstanding options or SARs previously granted hereunder in a manner not inconsistent with the provisions relating to options granted after April 20, 1987 contained in this Plan. 11 ARTICLE XI DEFINITIONS For the purposes of this Plan, the following terms shall have the meanings indicated: Applicable Rate: The rate, expressed as a percentage, determined according to the following formula x divided by (1-x) in which x equals the maximum federal income tax rate applicable to individuals in effect on the applicable Income Recognition Date; provided, the Applicable Rate shall never exceed 100%. Change in Control: A Change in Control shall be deemed to have occurred if either (a) any person, or any two or more persons acting as a group, and all affiliates of such person or persons, shall own beneficially more than 20% of the Common Stock outstanding (exclusive of shares held in the Company's treasury or by the Company's Subsidiaries) pursuant to a tender offer, exchange offer or series of purchases or other acquisitions, or any combination of those transactions, or (b) there shall be a change in the composition of the Board at any time within two years after any tender offer, exchange offer, merger, consolidation, sale of assets or contested election, or any combination of those transactions (a "Transaction"), so that (i) the persons who were directors of the Company immediately before the first such Transaction cease to constitute a majority of the Board of Directors of the corporation which shall thereafter be in control of the companies that were parties to or otherwise involved in such Transaction, or (ii) the number of persons who shall thereafter be directors of such corporation shall be fewer than two-thirds of the number of directors of the Company immediately prior to such first Transaction. A Change in Control shall be deemed to take place upon the first to occur of the events specified in the foregoing clauses (a) and (b). Disinterested Persons: Such term shall have the meaning ascribed thereto in Rule 16b-3(d)(3) under the Securities Exchange Act of 1934 as such rule, or any successor thereto, may be amended from time to time. Election Period: The period beginning on the third business day following a date on which the Company releases for publication its quarterly or annual summary statements 12 of sales and earnings, and ending on the twelfth business day following such date. Employee: Such term shall include any officer of the Company or a Subsidiary whether or not employed by such entity, any employee of the Company or a Subsidiary, and any director who is also an employee of the Company or a Subsidiary. Such term shall also include an employee on approved leave of absence provided such employee's right to continue employment with the Company or a Subsidiary upon expiration of such employee's leave of absence is guaranteed either by statute or by contract with or by a policy of the Company or a Subsidiary. Fair Market Value: The average of the high and low quoted sale prices of a share of Common Stock or a Subsidiary Equity Security on the date in question (or, if there is no reported sale on such date, on the last preceding date on which any reported sale occurred) on the Composite Tape for the New York Stock Exchange-Listed Stocks or, if on such date the Common Stock or Subsidiary Equity Security is not quoted on such Composite Tape, on the New York Stock Exchange. Income Recognition Date: With respect to any share of Common Stock purchased upon the exercise of an option or any Subsidiary Equity Security distributed in connection therewith, the later of (a) the date of such exercise, or (b) the date on which the rights of the holder of such option in such security become transferable and not subject to a substantial risk of forfeiture (within the meaning of Section 83 of the Code); provided, however, that if such holder shall make an election pursuant to Section 83(b) of the Code with respect to such security the Income Recognition Date with respect thereto shall be the date of the option exercise. Offer: Any tender offer, exchange offer or series of purchases or other acquisitions, or any combination of those transactions, as a result of which any person, or any two or more persons acting as a group, and all affiliates of such person or persons, shall own beneficially more than 40% of the Common Stock outstanding (exclusive of shares held in the Company's treasury or by the Company's Subsidiaries). Offer Price: The highest price per share of Common Stock paid in any Offer which is in effect at any time beginning on the ninetieth day prior to the date on which a Limited Right is exercised. Any securities or property which are part or all of the consideration paid for shares of Common Stock in the Offer shall be valued in determining 13 the Offer Price at the higher of (a) the valuation placed on such securities or property by the person or persons making such Offer, or (b) the valuation, if any, placed on such securities or property by the Committee or the Board. Option Gain: The sum of (a) the difference between (i) the Fair Market Value of the shares of Common Stock covered by the exercise of an option granted under the Plan and (ii) the purchase price of such shares under such option plus (b) the Fair Market Value of any Subsidiary Equity Securities including fractions thereof distributed or paid in the form of cash pursuant to Section 7 of Article VI hereof, as such fair market values are determined in each case on (x) the Income Recognition Date with respect to each such security or (y) the date of such exercise, whichever is less. Related Entities: The Company, any subsidiary of the Company, Freeport-McMoRan Copper & Gold Inc., any subsidiary of Freeport-McMoRan Copper & Gold Inc., McMoRan Oil & Gas Co., any subsidiary of McMoRan Oil & Gas Co., and any law firm rendering services to any of the foregoing entities provided such law firm consists of at least two or more members or associates who are or were officers of the Company or any subsidiary of the Company. Stock Appreciation Gain: The sum of (a) the difference between (i) the Fair Market Value of the shares of Common Stock covered by the exercise of a Stock Appreciation Right granted under the Plan and (ii) the purchase price of such shares under the option relating to such Stock Appreciation Right plus (b) the Fair Market Value of any Subsidiary Equity Securities including fractions thereof that would have been distributed or paid in the form of cash pursuant to Section 7 of Article VI hereof had there been an option exercise, as of the effective date of such Stock Appreciation Right exercise, of the number of shares of Company Common Stock covered by such Stock Appreciation Right exercise, as such fair market values are determined in each case on the date of such exercise. Stock Appreciation Right or SAR: A right granted under the Plan pursuant to Section 5 of Article VI. Subsidiary: Any corporation of which stock representing at least 50% of the ordinary voting power is owned, directly or indirectly, by the Company and any other entity of which equity securities or interests representing at least 50% of the ordinary voting power or 50% of the total value of all classes of equity securities or interests of such entity are owned, directly or indirectly, by the Company. 14 Subsidiary Equity Security: Any security or interest in the nature of an equity security or interest, according to generally accepted accounting principles, of a Subsidiary or a former Subsidiary or any security or interest representing such a security or interest; including specifically, but without limiting the generality of the foregoing, shares of common stock of Freeport-McMoRan Gold Company, Freeport-McMoRan Copper & Gold Inc., Freeport- McMoRan Oil & Gas Company, and McMoRan Oil & Gas Co. and depositary units of Freeport-McMoRan Energy Partners, Ltd. and Freeport-McMoRan Resource Partners, Limited Partnership. Termination of Employment: The cessation of the rendering of services, whether or not as an employee, to any and all of the Related Entities. 15 EX-11 7 Exhibit 11.1 FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE Years Ended December 31, ----------------------------------- 1994 1993 1992 -------- --------- -------- (In Thousands, Except Per Share Amounts) Primary: Net income (loss) applicable to common stock $ 41,443 $(126,203) $169,134 ======== ========= ======== Average common shares outstanding 138,633 140,818 143,641 Common stock equivalents: Stock options 590 777 874 -------- --------- -------- Average common and common equivalent shares outstanding 139,223 141,595 144,515 ======== ========= ======== Net income (loss) per common and common equivalent share $.30 $(.89) $1.17 ==== ===== ===== Fully Diluted: Net income (loss) applicable to common stock $ 41,443 $(126,203) $169,134 Plus preferred dividends - - 630 Plus interest, net of tax effect, on convertible subordinated debentures - - - -------- --------- -------- Net income applicable to common stock $ 41,443 $(126,203) $169,764 ======== ========= ======== Average common shares outstanding 138,633 140,818 143,641 Common stock equivalents: Stock options 590 1,281 882 Convertible securities: Convertible subordinated debentures - - - Preferred stock - - 734 -------- --------- -------- Average common and common equivalent shares outstanding 139,223 142,099 145,257 ======== ========= ======== Net income (loss) per common and common equivalent share $.30 $(.89) $1.17 ==== ===== ===== EX-12 8 Exhibit 12.1 FREEPORT-McMoRan INC. Computation of Ratio of Earnings to Fixed Charges Years Ended December 31, ------------------------------------------------- 1994 1993 1992 1991 1990 ---------------- -------- -------- -------- (In Thousands) Income (loss) from continuing operations $ 72,583 $(83,118) $187,811 $ 96,703 $283,523 Add: Provision for income taxes 148,388 17,854 75,597 2,970 258,796 Minority interest income 168,951 (61,689) 72,987 67,953 126,415 Interest expense 91,834 79,882 51,788 98,102 100,350 Rental expense factor(a) 14,274 14,348 10,352 5,873 5,674 --------- ------- -------- -------- -------- Earnings available for fixed charges $496,030 $(32,723) $398,535 $271,601 $774,758 ======== ======== ======== ======== ======== Interest expense $ 91,834 $ 79,882 $ 51,788 $ 98,102 $100,350 Capitalized interest 53,340 62,240 84,683 67,321 32,726 Preferred stock of majority- owned subsidiaries (b) 94,251 52,644 12,773 - - Rental expense factor(a) 14,274 14,348 10,352 5,873 5,674 --------- ------- -------- -------- -------- Fixed charges $253,699 $209,114 $159,596 $171,296 $138,750 ======== ======== ======== ======== ======== Ratio of earnings to fixed charges(c) 2x (d) 2.5x 1.6x 5.6x == ==== ==== ==== a. Portion of rent deemed representative of an interest factor. b. Includes tax "gross-up" for the preferred stock dividend requirements of majority-owned subsidiaries included in minority interest income. c. For purposes of this calculation, earnings are income from continuing operations before income taxes, minority interests and fixed charges. Fixed charges consist of interest, that portion of rent deemed representative of interest, and the preferred stock dividend requirements of majority-owned subsidiaries. d. Earnings were inadequate to cover fixed charges by $241.8 million. EX-13 9 Exhibit 13.1 FREEPORT-McMoRan INC. SELECTED FINANCIAL DATA 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- (In Millions, Except Per Share Amounts) Revenues $1,982.4 $1,610.6 $1,654.9 $1,579.2 $1,580.6 Operating income (loss) 370.8 (88.5) 251.9 223.9 731.5 Net income (loss) from: Operations $(18.8) $ (68.0) $ 34.4 $90.8 $ 13.4 Nonrecurring gains/(losses), net a 69.3 (37.5) 134.7 5.0 257.3 Changes in accounting principle and early extinguishment of debt (9.1) (20.7) - (55.7) - ------ ------- ------ ----- ------ Net income (loss) applicable to common stock $ 41.4 $(126.2) $169.1 $40.1 $270.7 ====== ======= ====== ===== ====== Net income (loss) per primary share from: Operations $(.13) $(.48) $ .24 $.65 $ .12 Nonrecurring gains/(losses), net a .50 (.26) .93 .04 2.23 Changes in accounting principle and early extinguishment of debt (.07) (.15) - (.40) - ----- ----- ----- ---- ----- Net income (loss) applicable to common stock $ .30 $(.89) $1.17 $.29 $2.35 ===== ===== ===== ==== ===== Average common shares outstanding 139.2 141.6 144.5 139.6 115.2 Earnings by sources:b Metals Indonesian copper/gold $280.2 $161.7c $276.4 $177.7 $204.5 Spanish copper smelter/gold (.1) (6.4) - - - North American gold - - - - 316.0d Agricultural minerals 123.8 (105.0)e 16.6 72.5 236.1f Energy Oil and natural gas g (9.1) (41.5) (24.5) (23.9) (41.4) Uranium - - - 17.1 13.5 Geothermal - - - - 13.2 Other (24.0) (97.3)h (16.6) (19.5) (10.4) ------ ------ ------ ------ ------ Operating income $370.8 $(88.5) $251.9 $223.9 $731.5 ====== ====== ====== ====== ====== Dividends per common share: Cash $ .3125 $1.25 $1.250 $1.25 $1.25 Property i 1.2946 - .175 - - ------- ----- ------ ----- ----- $1.6071 $1.25 $1.425 $1.25 $1.25 ======= ===== ====== ===== ===== At December 31: Property, plant and equipment, net $3,366.2 $2,773.7 $2,276.9 $2,253.8 $2,204.5 Long-term debt, including current portion and short- term borrowings 1,671.3 1,331.7 1,510.7 1,942.0 1,591.0 Minority interests 1,507.5 1,199.3 782.9 293.6 309.3 Stockholders' equity (230.5) .6 346.0 388.3 337.4 Total assets 4,373.6 3,714.1 3,546.7 3,565.4 3,101.3 a. In 1994, includes gains on the conversion/distribution of FCX securities ($74.6 million or $0.54 per share) and an insurance settlement ($11.9 million or $0.09 per share), net of a minority interest charge ($17.2 million or $0.12 per share) because FTX did not receive its proportionate share of distributions from FRP; in 1993, includes the loss on the restructuring activities and the loss on valuation and sale of assets ($66.2 million or $0.46 per share), net of a gain on the conversion of FCX securities ($28.7 million or $0.20 per share); in 1992, from the sale and conversion of FCX securities; in 1991, from an insurance settlement gain ($7.3 million or $0.05 per share), net of a loss on the valuation of assets ($2.3 million or $0.02 per share); and in 1990, from the sale of assets. b. Restated to conform to 1994 presentation. c. Includes charges totaling $37.1 million for restructuring and other related charges. d. Includes $311.2 million gain from the sale of Freeport-McMoRan Gold Company. e. Includes net charges totaling $73.5 million for restructuring, asset recoverability and other related charges. f. Includes $183.6 million gain from the sale of assets. g. Includes charges totaling $84.4 million for restructuring, asset recoverability and other related charges in 1993. Also includes $69.1 million gain in 1993, $4.3 million gain in 1991 and $14.6 million gain in 1990 from the sale of oil and gas properties. h. Includes charges totaling $70.5 million for asset recoverability and other related charges. i. Reflects the fair market value of the FCX and MOXY shares distributed in 1994 and the FM Properties Inc. shares distributed in 1992. FREEPORT-McMoRan INC. MANAGEMENT'S DISCUSSION AND ANALYSIS For FTX 1994 proved to be a year of achievement; building on the accomplishments of 1993 while focusing on expansion and growth opportunities for the future. FTX conducts its metals operations through its 68.3 percent- owned affiliate FCX and conducts its agricultural minerals operations through its 51.4 percent-owned affiliate FRP. Highlights for FTX and its operating units include the following: - Dramatic improvements in world copper and phosphate fertilizer markets resulted in significantly higher earnings from its Metals and Agricultural Minerals segments. Product realizations continued to strengthen into 1995. - PT-FI continued toward mine and mill capacity of 115,000 MTPD; completion is expected during the second half of 1995. PT-FI will have doubled its mill throughput rate in less than three years. - RTM's, smelter expansion to 270,000 metric tons of metal per year is under way. FCX also agreed in principle to form a joint venture to construct a copper smelter with annual production of 200,000 metric tons of metal. Subsequent to completion of these projects, approximately 70 percent of PT-FI's expanded annual concentrate production will be sold to affiliates at market prices. - FRP concentrated on maximizing operational and organizational efficiencies as a result of the formation of IMC-Agrico. The January 1995 purchase of the Pennzoil sulphur assets and the pending acquisition of Fertiberia provide additional growth opportunities. - FTX's plan to separate its two principal businesses, copper/gold and agricultural minerals, into two independent financial and operating entities progressed (see Note 2 to the financial statements). As a result of this plan, FTX would no longer own any interest in FCX. The spinoff of FCX is expected to provide greater access to credit markets and reduce financing costs for FCX and FRP. The proposed distribution, expected to occur by mid-1995, will include a restructuring of the liabilities of FTX which requires the use of a portion of the FCX shares currently owned by FTX. RESULTS OF OPERATIONS 1994 1993 1992 -------- -------- -------- (In Millions, Except Per Share Amounts) Revenues $1,982.4 $1,610.6 $1,654.9 Operating income (loss) 370.8a (88.5)b 251.9 Net income (loss) to common stock 41.4a,c (126.2)d 169.1c Net income (loss) per primary share .30a,c (.89)d 1.17c Operating income (loss) by segment: Metals $280.1 $155.3 $276.4 Agricultural minerals 123.8 (105.0) 16.6 Energy (9.1) (41.5) (24.5) Other (24.0) (97.3) (16.6) ------ ------ ------ $370.8 $(88.5) $251.9 ====== ====== ====== a. Includes a $32.6 million gain ($11.9 million to net income or $0.09 per share) from an insurance settlement on the June 1993 ore pass cave-in. b. Includes a net charge of $196.4 million for restructuring the administrative organization, asset sales/recoverability and other related charges (Note 4). c. Includes a $74.6 million gain ($0.54 per share) in 1994 and a $134.7 million gain ($0.93 per share) in 1992 on the sale/conversion/distribution of FCX securities (Notes 2, 5, and 7). 1994 also includes a $17.2 million minority interest charge ($0.12 per share) because FTX did not receive its proportionate share of distributions from FRP (Note 2) and a $9.1 million charge ($0.07 per share) from the early extinguishment of debt (Note 5). d. Includes a $37.5 million charge ($0.26 per share) for the items discussed in Note b, net of a gain on the conversion of FCX securities. Also includes a $20.7 million charge ($0.15 per share) for the cumulative effect of changes in accounting principle (Note 1). 1994 COMPARED WITH 1993 FTX's results benefited from higher sales volumes and product realizations for nearly all of its commodities (Note 13). Depreciation and amortization for 1994 was lower as a result of adjustments caused by FRP's disproportionate interest in cash distributions from the IMC-Agrico joint venture (Note 2) and from lower oil sales volumes. Exploration expenditures for 1994 declined reflecting the formation of MOXY in May 1994 (Note 8), partially offset by increases at FCX. General and administrative expenses in 1994 benefited from the formation of IMC-Agrico and other restructuring activities undertaken in 1993. General and administrative expenses were higher for the metals segment because of the additional personnel and administrative effort required to manage its expanding operations. Interest expense increased in 1994 as a result of higher average interest rates and the Main Pass sulphur project becoming operational for accounting purposes in July 1993 (previously, related interest costs were capitalized). See Note 6 to the financial statements for information on the provision for income taxes. Minority interests' share of net income reflected a $22.9 million increase in FCX preferred stock dividends and a $26.5 million charge because FTX did not receive its proportionate share of distributions from FRP. Metals Operations. FCX and its operating units contributed 1994 operating income of $280.1 million on revenues of $1,212.3 million compared with operating income of $155.3 million on revenues of $925.9 million for 1993. Significant items affecting operating income follow (in millions): Metals operating income - 1993 $155.3 ------ Increases (decreases): Price realizations: Copper 82.7 Gold 15.4 Sales volumes: Copper 49.9 Gold 11.5 Treatment charges (14.4) Adjustments to prior year concentrate sales 10.3 RTM revenues, net of eliminations 140.0 Other (9.0) ------ Revenue variance 286.4a Cost of sales (180.7) 1993 provision for restructuring charges 20.8 1994 gain on insurance settlement 32.6 Exploration expenses (6.6) General and administrative (27.7) ------ 124.8 ------ Metals operating income - 1994 $280.1 ====== a. Includes net reductions totaling $103 million in 1994 and net additions totaling $36.8 million in 1993 related to PT-FI's price protection program. Also includes reductions totaling $4.3 million in 1994 and $5.9 million in 1993 related to RTM's hedging program. Revenues increased significantly primarily because of a 13 percent improvement in PT-FI's copper realizations, including the impact of the price protection program, and a 5 percent increase in gold realizations. Additionally, copper sales volumes rose 9 percent resulting from expanded mill throughput, partially offset by lower grades and recoveries. Treatment charges increased because of higher copper sales volumes and prices, as certain charges vary with the price of copper. Treatment charges, which are negotiated annually with customers, will decline significantly on a per-pound basis in 1995 as a result of the overall tightness currently being experienced in the copper concentrates market, although higher copper prices expected in 1995 would somewhat offset reduced charges because of price participation. Adjustments to prior year concentrate sales are caused by changes in prices on prior year open sales. Rising copper prices in early 1994 caused positive adjustments as opposed to negative adjustments for 1993 when copper prices declined early in the year. As discussed in Note 1 to the financial statements, PT-FI recorded $1.01 per pound during the third quarter and fourth quarter of 1994 on 192 million pounds of open copper sales at year end. This price will not be adjusted in 1995 because of PT-FI's price protection program. PT-FI's 1994 mill throughput rate rose 16 percent. PT-FI's 1994 site production and delivery costs totaled $401.5 million compared with $317.1 million for 1993, excluding charges related to restructuring activities discussed below. Unit site production and delivery costs increased 8 cents per pound because of lower copper grades and recoveries, higher jobsite administrative expenses, expansion related activities and costs associated with initial privatization efforts. Unit royalty costs were higher in 1994 because of higher copper prices. Recovery rates for copper and gold vary depending on the quality of the ore mined. PT-FI anticipates mining a lower copper grade ore in 1995 which is expected to have a negative impact on its unit costs and operating results prior to completion of the expansion. Operating results are expected to improve during the second half of 1995 as the expansion is completed and higher gold grades are projected. For at least a year following attainment of 115,000 MTPD, PT-FI intends to fine-tune its operations to achieve cost efficiencies and maximum cash flows from its expanded operations. During this optimization period, PT-FI will continue to review the feasibility of further expansions as well as the results of exploration activities to ascertain where best to make future investments. As a result of significant 1993 reserve additions, PT-FI's 1994 depreciation rate decreased to 7.5 cents per pound compared with 8.3 cents for 1993. The initial depreciation rate for 1995 is expected to increase to 8.1 cents per pound as capital expenditures were added in 1994 to support current operating levels. Once operating levels reach 115,000 MTPD, the depreciation rate will be reevaluated to take into account the 115,000 MTPD expansion capital additions, changes in ore reserve estimates and assessments of future expansion. In June 1993, two of PT-FI's four mill level ore passes caved resulting in a blockage of a portion of the ore pass delivery system. The blockage's primary effect was to limit mill throughput to approximately 40,700 MTPD for eight weeks. The impact of the blockage was minimized by using an ore stockpile adjacent to the mill and installing conveyors to alternative ore pass systems. In December 1994, PT-FI settled the resulting property and business interruption insurance claims and recognized a $32.6 million gain. PT-FI's copper concentrates, which contain significant amounts of recoverable gold and silver, are sold primarily under long-term sales agreements. PT-FI's current markets include Japan, Asia, Europe and North America. PT-FI has commitments from various parties to purchase virtually all of its estimated 1995 production at market prices. Sales for 1995, currently estimated to be approximately 850 million pounds of copper and 1.1 million ounces of gold will depend on the timing of completion of the 115,000 MTPD expansion. Upon completion of RTM's smelter expansion and the proposed Gresik smelter (Note 10), FTX anticipates that approximately 70 percent of PT-FI's expanded annual concentrate production will be sold to affiliates at market prices. During 1994, PT-FI implemented a price protection program at a cost of $31.7 million to cover anticipated copper sales for 1995 and a portion of 1996. In late 1994 and early 1995, when spot copper prices rose significantly, PT-FI closed a portion of its 1995 contracts realizing $46.9 million which will be recognized in first-half 1995 revenues. As a result of these transactions, PT-FI will realize $1.21 per pound on 142.2 million pounds of copper in the first half of 1995. An additional 155.2 million pounds of first-half 1995 PT-FI copper sales will be priced at a minimum average price of $0.88 per pound, with full participation in prices above an average of $0.98 per pound. For the second half of 1995, PT-FI's program established a minimum average price of $0.83 per pound on sales of 396.8 million pounds of copper with full participation in prices above that amount. PT-FI will also realize an average price of $1.13 per pound on 119 million pounds of copper during the second half of 1995. For 1996, PT-FI's program currently has established a minimum average price of $0.90 per pound on 596.9 million pounds of copper, with full participation in prices above that amount. As of December 31, 1994, the unrecognized cost to unwind PT-FI's hedging positions was approximately $40 million, net of deferred gains on closed contracts. As conditions warrant, PT-FI may modify or extend its existing program. This program reflects a philosophy of providing for an assurance of realizing the benefits of higher copper prices for a significant portion of FCX's production while it is expanding its operations. Subsequently, management's intention is to provide a floor price for its production, if attainable at an acceptable cost, to protect operating cash flow from the impact of potentially significant declines in copper prices, while providing for full participation in potentially higher prices. RTM generated earnings of $0.6 million in 1994 compared with a $15.7 million loss for the 1993 period. Smelter cash margins improved in 1994 because of higher operating rates, cost reduction efforts and greater price participation resulting from higher copper prices. Cathode refinery operations also continued to maintain high operating rates. Higher 1994 mill throughput and recoveries at RTM's gold mining operations resulted in an increase in gold sales; however, the impact was more than offset by significantly lower silver grades. Fluctuations in RTM's ore grades are expected to continue as the mine nears the end of its economic life. RTM's 1995 results are expected to be negatively affected by the significant industrywide decline in treatment charge rates. Additionally, RTM's smelter will be shutdown in 1995 for major maintenance turnarounds and expansion tie-ins. RTM's results continue to be subject to variations based on the relative value of the U.S. dollar and the Spanish peseta. Based on current operating levels, a one peseta change in the exchange rate has an approximate $1 million impact on RTM's annual earnings and cash flow. To assure price participations on a portion of its estimated 1995 concentrate purchases, RTM wrote call option contracts in December 1994 on 19.8 million pounds of copper for 1995 at an average price of $1.18 per pound, collecting $4.6 million in premiums. These premiums were deferred and will be recognized in cost of sales during 1995. RTM also has a hedging program for its mining operations. At December 31, 1994, RTM had sold forward 56,280 ounces of gold at $394.75 per ounce and 1,106,520 ounces of silver at $4.82 per ounce for 1995. As of December 31, 1994, the unrecognized cost to unwind RTM's hedging position was $0.5 million. FCX continues its exploration activities within the original 24,700 acre Block A area, the adjacent approximate 4.8 million acre Block B area and the approximate 2.5 million acre Eastern Mining area. Delineation drilling continues at the Big Gossan prospect within Block A with development expected to begin in early 1995. Exploration activities continue in other locations including the Wanagon and Lembah Tembaga prospects, both within Block A, and the Wabu gold prospect in Block B. Exploratory drilling with three rigs is also continuing at Etna Bay located within the Eastern Mining acreage. PT-FI has relinquished its rights to approximately 1.7 million acres at Block B and will relinquish an additional approximate 3.2 million acres over the next four years. Similarly, 75 percent of the Eastern Mining area must be relinquished over the next two to seven years. FCX's exploration costs, currently budgeted at approximately $50 million for 1995, totaled $40.4 million in 1994, $33.7 million in 1993 and $12.2 million in 1992. FCX's general and administrative expenses were $109 million in 1994, $81.4 million in 1993 and $68.5 million in 1992. The increases resulted from the inclusion of RTM activities for a full year in 1994 and additional personnel and administrative efforts to manage the expanding operations. Included in the 1993 amount were charges of $6.3 million primarily consisting of a $2 million write-off of deferred charges incurred in 1992 for a planned securities offering that was withdrawn and $4 million to downsize FCX's management information systems (MIS) structure. Agricultural Minerals Operations. FTX's agricultural minerals segment, which includes FRP's fertilizer and phosphate rock operations (conducted through IMC-Agrico) and its sulphur business, reported 1994 operating income of $123.8 million on revenues of $730.4 million compared with an operating loss of $105 million on revenues of $619.3 million in 1993. Significant items affecting operating income follow (in millions): Agricultural minerals operating loss - 1993 $ (105.0) -------- Increases (decreases): Sales volumes 15.8 Realizations 102.7 Other (7.4) -------- Revenue variance 111.1 Cost of sales 46.8a,b 1993 provision for restructuring charges 33.9 1993 loss on valuation and sale of assets, net 14.8 General and administrative and exploration 22.2a -------- 228.8 -------- Agricultural minerals operating income - 1994 $ 123.8 ======== a. 1993 included $17.5 million in cost of sales and $7.3 million in general and administrative expenses resulting from the restructuring project. b. 1994 included a $15.8 million reduction and 1993 included a $10.8 million increase to depreciation and amortization caused by FRP's disproportionate interest in IMC-Agrico cash distributions. FRP's 1994 sales volumes for DAP, its principal fertilizer product, were slightly below 1993 levels. Sales activity benefited from continued strong export demand and improved domestic activity. This demand caused producer inventories to remain at prior-year levels despite a rise in industrywide production. As a result, phosphate fertilizer prices rose sharply from the near 20-year lows experienced during 1993, with FRP's average DAP realization increasing 32 percent. Unit production costs benefited from efficiencies at IMC-Agrico, somewhat offset by higher raw material prices for ammonia. Strong export demand for phosphate fertilizer products has continued into early 1995, resulting in improving phosphate fertilizer prices. IMC-Agrico resumed production at its only idle fertilizer facility in January 1995. FRP's phosphate rock sales volumes rose 14 percent during 1994, reflecting increased demand and the addition of a long-term supply contract in October 1994. Main Pass sulphur production averaged nearly 6,200 TPD, exceeding full design operating rates of 5,500 TPD, which lowered unit production costs from 1993. Production is expected to be maintained near the 6,000 TPD level for the immediate future. With increased Main Pass production, FRP ceased operating the marginally profitable Caminada mine in January 1994. Average sulphur realizations for 1994 were lower, reflecting the decline in prices which occurred throughout 1993. However, improved phosphate fertilizer operating rates, coupled with reduced imports, resulted in sulphur price increases in Tampa, Florida since mid-1994. As a result, Tampa sulphur prices are currently above year-ago levels. To the extent U.S. phosphate fertilizer production remains strong, improved sulphur demand is expected to continue, although the availability of Canadian sulphur impacts the potential for significant price increases. Oil and Gas Operations. Prior to the May 1994 MOXY distribution, FTX's oil and gas operations (excluding the Main Pass oil operation) involved exploring for new reserves. These activities generated a 1994 loss of $11.9 million, including exploration expense of $5.2 million. Earnings for 1993 totaled $20 million as FTX recognized a $69.1 million gain from the $95.3 million cash sale of the undeveloped reserves discovered at East Cameron Blocks 331/332 offshore Louisiana, partially offset by exploration expense of $22.3 million and $24.4 million of charges resulting from the restructuring project. Subsequent to the MOXY distribution, FTX's only significant oil and gas operations occured at Main Pass. Main Pass oil operations achieved the following: 1994 1993 --------- --------- Sales (barrels) 2,533,700 3,443,000 Average realized price $13.74 $14.43 Operating income (in millions) $2.8 $(61.5) Main Pass oil production was limited during 1994 because of a redevelopment program which involved drilling two additional wells and recompleting three existing wells. FRP's 1995 net production is estimated to approximate 1994 levels, as the benefits of the redevelopment program are expected to partially offset declining reservoir production. Oil realizations recovered somewhat from the signifiant decline which occurred in late 1993, with prices rising to near $15 per barrel in January 1995. The 1993 price decline resulted in a $60 million charge to FRP's earnings for the excess net book value of its Main Pass oil assets over the estimated future net cash flow to be received. Restructuring Activities. During 1993, FTX undertook a restructuring of its administrative organization. This restructuring represented a major step by FTX to lower the costs of operating and administering its businesses in response to weak market prices of commodities produced by its operating units. As part of this restructuring, FTX significantly reduced the number of employees engaged in administrative functions, changed its MIS environment to achieve efficiencies, reduced its needs for office space, outsourced a number of administrative functions and took other actions to lower costs. The restructuring process resulted in FTX incurring certain one-time costs (Note 4). CAPITAL RESOURCES AND LIQUIDITY Net cash provided by operating activities during 1994 increased to $506.8 million, compared with $117.3 million for 1993, primarily reflecting higher income from operations. Cash used in investing activities totaled $694.2 million during 1994, compared with $429 million in 1993, reflecting an increase in capital expenditures for continuing expansion at PT-FI and RTM. Cash flow provided by financing activities totaled $189.2 million compared with a use of $29.5 million during 1993. The 1994 period included $515.4 million of proceeds from public securities offerings compared with $561.1 million in 1993. During 1994, FTX acquired 3.8 million of its common shares for an aggregate $67.7 million and 2.2 million FCX Class A common shares for an aggregate $47.6 million under its established program to acquire shares when warranted by market conditions. During 1993, 1.3 million FTX shares and 0.8 million FCX shares were purchased for an aggregate $38.7 million. FTX had additions to debt of $7.1 million in 1994, net of the purchase of its 10 7/8% Debentures, compared with net repayments of $179.5 million during 1993. The reduction in cash dividends paid during 1994 resulted from FTX's June 1994 change in dividend policy to begin distributing FCX common stock in lieu of paying cash dividends (Note 7). Net cash provided by operating activities declined in 1993 to $117.3 million from $339.6 million for 1992, primarily reflecting lower income from operations. Net cash used in investing activities was $429 million compared with $885.5 million for 1992. Increased metals capital expenditures were incurred in 1993 associated with PT-FI's expansion and lower capital expenditures were incurred at Main Pass and in FRP's agricultural minerals operations, where development projects were completed in 1992. Asset sales generated proceeds of $145.2 million during 1993; 1992 included the purchase of an indirect interest in PT-FI for $211.9 million. Net cash used in financing activities was $29.5 million in 1993; 1992 financing activities provided net cash of $837.3 million. The 1993 period included $561.1 million of proceeds from the FCX preferred stock offerings, and 1992 included $1.3 billion of proceeds form equity security offerings. Increased distributions to minority interest holders of FCX and FRP securities were made during 1993 as a result of the equity sales during 1993. As indicated above, an aggregate $38.7 million was spent in 1993 to purchae FTX and FCX shares; in 1992, 5.7 million FTX shares and 0.8 million FCX shares were purchased for an aggregate $123.8 million. Net long-term debt repayments were $179.5 million in 1993 compared with net borrowings of $53.7 million in 1992. During 1995, PT-FI's estimated capital expenditures are expected to approximate $450 million. These expenditures will be funded by operating cash flow, sales of infrastructure assets, the bank credit facility (Note 5) and other financing sources. Upon completion of the 115,000 MTPD expansion during the second half of 1995, PT-FI's operating cash flow will increase significantly. For at least one year after completion fo the 115,000 MTPD expansion, FCX plans to undertake efforts to reduce costs and maximize cash flows. During this period, FCX will assess the feasibility of further mine/mill expansions, taking into account the results of its exploration activities, to determine where best to make future investments in capital projects. In connection with FTX's proposed restructuring plan (Note 2), the existing FTX credit agreement in which PT-FI participates is expected to be modified to become a separate facility for PT-FI and a new facility will be arranged for FCX and PT-FI which is expected to provide greater access to credit markets and reduce financing costs. PT-FI's long-lived, low-cost reserve base provides it potential access to a broad range of sources of capital, including additional public and private issuances of securities. In June 1994, RTM signed a turnkey contract to expand its smelter capacity to 270,000 metric tons of metal per year by early 1996 at a cost of approximately $215 million. In December 1994, RTM obtained $290 million of project financing, nonrecourse to FCX, which also provided funds for refinancing a portion of RTM's gold, silver and working capital loans (Note 5). RTM's future operating cash flow will be determined by the supply and demand for copper smelter capacity, smelter and refining production rates, the exchange rate between the U.S. dollar and the Spanish peseta and prices and sales volumes of gold. In January 1995, FCX agreed in principle to form a joint venture, 20 percent owned by FCX, to develop a 200,000 metric tons of metal per year copper smelter in Gresik, Indonesia (Note 10). Alternatives for financing the estimated $550 million aggregate project cost, which excludes approximately $100 million of working capital, are being reviewed. In January 1995, FRP acquired essentially all of the domestic assets of Pennzoil Co.'s sulphur division. Pennzoil will receive quarterly payments from FRP over 20 years based on the prevailing price of sulphur. The installment payments may be terminated earlier either by FRP through the exercise of a $65 million call option or by Pennzoil through a $10 million put option. Neither option may be exercised prior to 1999. FRP has agreed in principle to acquire Fertiberia, S.L., the restructured nitrogen and phosphate fertilizer business of Ercros, S.A., a Spanish conglomerate. Since September 1993, FRP has managed this company with the goal of establishing Fertiberia as a financially viable concern. FRP intends to continue to work with the Spanish authorities on improving the operations of Fertiberia and eventually to acquire essentially all of the company's capital stock in return for agreeing to make a capital contribution of $11.5 million upon closing and a further contingent payment of $10 million in January 1998. As part of the agreement, $38.5 million of nonrecourse financing has been arranged at Fertiberia with payment terms dependent upon its financial performance. The acquisition of Fertiberia, one of the largest fertilizer manufacturers in Europe, is conditioned upon satisfaction of a number of issues. Publicly owned FRP units have cumulative rights to receive quarterly distributions of 60 cents per unit through the distribution for the quarter ending December 31, 1996 (the Preference Period) before any distributions may be made to FTX. On January 20, 1995, FRP declared a distribution of 60 cents per publicly held unit ($30.2 million) and 26 cents per FTX-owned unit ($13.9 million), payable February 15, 1995, bringing the total unpaid distribution to FTX to $353.1 million. Unpaid distributions to FTX will be recoverable from one-half of the excess of future quarterly FRP distributions over 60 cents per unit for all units. The January 1995 distributable cash included $52.2 million from IMC-Agrico. FRP's future distributions will be dependent on the distributions received from IMC-Agrico and Fertiberia and future cash flow from FRP's sulphur and oil operations. FTX is primarily a holding company and its sources of cash flow are dividends and distributions from its ownership in FCX and FRP. Through mid- 1994, FTX borrowed funds when the cash received from FCX, FRP and asset sales was insufficient to pay dividends and cover FTX's other cash requirements for interest, general and administrative expenses and oil and gas operations. Since the second quarter of 1994, in lieu of paying a $0.3125 quarterly cash dividend to its common stockholders, FTX distributed quarterly one FCX Class A common share for each 80 FTX common shares owned. Subsequent to the spin-off of FCX (Note 2), FTX's business activity will essentially consist of its 51.4 percent ownership in FRP and its source of cash flow will be distributions from FRP, which are subject to the FRP public unitholders' preferential distribution right discussed above. FTX will have certain obligations relating to its past business activities including income tax settlements, oil and gas payments and employee benefit liabilities. It may also have obligations relating to its guarantee of the debt of FM Properties Inc. (FMPO) discussed in Note 8 to the financial statements. FTX anticipates that its cash distributions from FRP and amounts available to it under the new FTX/FRP credit facility (Note 5) will be sufficient to meet these obligations. FTX's Board of Directors will determine its new dividend policy based on the availability of cash to FTX. 1993 COMPARED WITH 1992 Results for 1993 were adversely affected by significantly reduced earnings from FTX's metals and agricultural minerals business segments, generally caused by lower product realizations and charges resulting from the restructuring project. The reduction in general and administrative expenses reflected the initial benefits from the restructuring activities. Interest expense increased, as no interest was capitalized on the Main Pass sulphur operations subsequent to its becoming operational for accounting purposes in July 1993. See Note 6 to the financial statements for information on the provision for income taxes. Minority interests' share of net income increased as a result of dividends following the issuance of additional FCX preferred stock during 1993 (Note 2). Metals Operations. FCX contributed 1993 operating income of $155.3 million on revenues of $925.9 million compared with operating income of $276.4 million on revenues of $714.3 million for 1992. Revenues in 1993 increased as a result of the RTM acquisition. PT-FI revenues were down 4 percent primarily because of lower copper realizations. Operating income was affected adversely by increased unit site production and delivery, general and administrative and exploration costs, and by RTM's losses. Significant items affecting operating income follow (in millions): Metals operating income - 1992 $276.4 ------ Increases (decreases): Price realizations: Copper (84.7) Gold 14.7 Sales volumes: Copper (5.5) Gold 30.2 Treatment charges 23.6 Adjustments to prior year concentrate sales (13.0) RTM revenues, net of eliminations 240.7 Other 5.6 ------ Revenue variance 211.6 a Cost of sales (277.4)b 1993 provision for restructuring charges (20.8) Exploration expenses (21.6) General and administrative (12.9)b ------ (121.1) ------ Metals operating income - 1993 $155.3 ====== a. Includes net additions totaling $36.8 million in 1993 and net reductions totaling $8.9 million in 1992 related to PT-FI's price protection program. Also includes reductions totaling $5.9 million in 1993 related to RTM's hedging program. b. 1993 included $10 million in cost of sales and $6.3 million in general and administrative expenses resulting from the restructuring project. Copper price realizations, taking into account PT-FI's price protection program, were 12 percent lower than in 1992. Gold realizations were up 6 percent. Although mill throughput averaged 62,300 MTPD in 1993, 8 percent higher than in 1992, copper sales volumes decreased slightly because of a reduction in inventory during 1992. Gold sales volumes in 1993 benefited from higher gold grades and an increase in gold recovery rates. Treatment charges declined 3.4 cents per pound from 1992, resulting from a tightening in the concentrate market and lower copper prices. Open copper sales at the beginning of 1993 were recorded at an average price of $1.04 per pound, but subsequently were adjusted downward as copper prices fell during the first few months of the year. PT-FI's unit site production and delivery costs, excluding charges related to the restructuring project, rose slightly from 1992 because of costs incurred in connection with the ore pass blockage and higher production overhead costs related to expansion activities. Unit cash production costs declined 9.6 cents per pound in 1993, benefiting from higher gold and silver credits, lower treatment charges and reduced royalties. PT-FI's depreciation rate increased from 7.4 cents per pound during 1992 to 8.3 cents in 1993, reflecting the increased cost relating to the 66,000 MTPD expansion. Agricultural Minerals Operations. FTX's agricultural minerals segment reported a 1993 operating loss of $105 million on revenues of $619.3 million compared with operating income of $16.6 million on revenues of $799 million in 1992. Significant items affecting operating income follow (in millions): Agricultural minerals operating income - 1992 $ 16.6 ------- Increases (decreases): Sales volumes (67.4) Realizations (103.2) Other (9.1) ------- Revenue variance (179.7) Cost of sales 89.5a 1993 provision for restructuring charges (33.9) 1993 loss on valuation and sale of assets, net (14.8) General and administrative and exploration 17.3a ------- (121.6) ------- Agricultural minerals operating loss - 1993 $(105.0) ======= a. 1993 included $17.5 million in cost of sales and $7.3 million in general and administrative expenses resulting from the restructuring project. Weak industrywide demand and changes attributable to FRP's participation in IMC-Agrico resulted in 1993 DAP sales volumes declining 17 percent. Unit production costs, excluding charges related to the restructuring project, declined from 1992 reflecting initial production efficiencies from IMC-Agrico, reduced raw material costs for sulphur and lower phosphate rock mining expenses, partially offset by increased natural gas costs and lower production volumes. FRP's realization for DAP was lower, reflecting the near 20-year low prices realized during 1993 as well as an increase in the lower-priced Florida sales by IMC-Agrico. FRP's proportionate share of the larger IMC-Agrico phosphate rock operation caused 1993 sales volumes to increase 12 percent. Combined sulphur production from the Caminada and Main Pass mines increased compared with 1992. However, sales volumes declined 16 percent, primarily because of reduced purchases by IMC-Agrico resulting from its curtailed fertilizer production. Due to a significant decline in the market price of sulphur during 1993, FRP recorded a 1993 charge to earnings for the excess of capitalized cost over expected realization of its non-Main Pass sulphur assets, primarily the Caminada sulphur mine. Main Pass sulphur became operational for accounting purposes beginning July 1993. Oil and Gas Operations. FTX's non-Main Pass oil operations generated 1993 earnings of $20 million, including exploration expense of $22.3 million, $24.4 million of charges resulting from the restructuring project and a $69.1 million gain from the sale of the East Cameron Block 331/332 oil and gas property. A loss of $29.1 million, including exploration expense of $18.3 million, was generated in 1992. During 1992, FTX transferred substantially all of its non-Main Pass oil and gas properties to FMPO, whose shares were distributed to FTX common shareholders (Note 8). Main Pass oil operations achieved the following: 1993 1992 --------- --------- Sales (barrels) 3,443,000 4,884,000 Average realized price $14.43 $15.91 Operating income (in millions) $(61.5) $4.6 Main Pass oil production during early 1993 was hampered by water encroachment. As discussed earlier, the 1993 operating loss includes a $60 million recoverability charge because of lower oil prices. ENVIRONMENTAL FTX has a history of commitment to environmental responsibility. Since the 1940s, long before public attention focused on the importance of maintaining environmental quality, FTX has conducted preoperational, bioassay, marine ecological and other environmental surveys to ensure the environmental compatibility of its operations. FTX's Environmental Policy commits its operations to full compliance with local, state and federal laws and regulations, and prescribes the use of periodic environmental audits of all domestic facilities to evaluate compliance status and communicate that information to management. FTX has access to environmental specialists who have developed and implemented corporatewide environmental programs. FTX's operating units continue to study and implement methods to reduce discharges and emissions. Federal legislation (sometimes referred to as "Superfund") requires payments for cleanup of certain abandoned waste disposal sites, even though such waste disposal activities were performed in compliance with regulations applicable at the time of disposal. Under the Superfund legislation, one party may, under certain circumstances, be required to bear more than its proportional share of cleanup costs at a site where it has responsibility pursuant to the legislation, if payments cannot be obtained from other responsible parties. Other legislation mandates cleanup of certain wastes at unabandoned sites. States also have regulatory programs that can mandate waste cleanup. Liability under these laws involves inherent uncertainties. FTX has received notices from governmental agencies that it is one of many potentially responsible parties at certain sites under relevant federal and state environmental laws. Further, FTX is aware of additional sites for which it may receive such notices in the future. Some of these sites involve significant cleanup costs; however, at each of these sites other large and viable companies with equal or larger proportionate shares are among the potentially responsible parties. The ultimate settlement for such sites usually occurs several years subsequent to the receipt of notices identifying potentially responsible parties because of the many complex technical and financial issues associated with site cleanup. FTX believes that the aggregation of any costs associated with these potential liabilities will not exceed amounts accrued and expects that any costs would be incurred over a period of years. FTX maintains insurance coverage in amounts deemed prudent for certain types of damages associated with environmental liabilities which arise from unexpected and unforeseen events and has an indemnification agreement covering certain acquired sites (Note 10). In June 1994, a sinkhole was found at a phosphogypsum storage area at IMC- Agrico's New Wales, Florida facility. In addition, there was an earthen dam breach at two of its phosphate rock facilities in late 1994 (Note 10). While there is no evidence indicating underground water contamination in areas away from the facilities, this issue continues to be monitored. If there were contamination, which IMC-Agrico considers unlikely, the costs that would be required are uncertain and cannot be estimated at the present. If significant costs were incurred it would be necessary to determine the applicability of insurance coverage maintained by IMC-Agrico, and separately by FRP, and for the sharing of costs between the joint venture partners. FTX has made, and will continue to make, expenditures at its operations for protection of the environment. Continued government and public emphasis on environmental issues can be expected to result in increased future investments for environmental controls, which will be charged against income from future operations. Present and future environmental laws and regulations applicable to FTX's operations may require substantial capital expenditures and may affect its operations in other ways that cannot now be accurately predicted. -------------------------------- The results of operations reported and summarized above are not necessarily indicative of future operating results. REPORT OF MANAGEMENT Freeport-McMoRan Inc. (the Company) is responsible for the preparation of the financial statements and all other information contained in this Annual Report. The financial statements have been prepared in conformity with generally accepted accounting principles and include amounts that are based on management's informed judgments and estimates. The Company maintains a system of internal accounting controls designed to provide reasonable assurance at reasonable costs that assets are safeguarded against loss or unauthorized use, that transactions are executed in accordance with management's authorization and that transactions are recorded and summarized properly. The system is tested and evaluated on a regular basis by the Company's internal auditors, Price Waterhouse LLP. In accordance with generally accepted auditing standards, the Company's independent public accountants, Arthur Andersen LLP, have developed an overall understanding of our accounting and financial controls and have conducted other tests as they consider necessary to support their opinion on the financial statements. The Board of Directors, through its Audit Committee composed solely of non-employee directors, is responsible for overseeing the integrity and reliability of the Company's accounting and financial reporting practices and the effectiveness of its system of internal controls. Arthur Andersen LLP and Price Waterhouse LLP meet regularly with, and have access to, this committee, with and without management present, to discuss the results of their audit work. James R. Moffett Richard C. Adkerson Chairman of the Board and Senior Vice President and Chief Executive Officer Chief Financial Officer FREEPORT-MCMORAN INC. BALANCE SHEETS December 31, ----------------------- 1994 1993 ---------- ---------- ASSETS (In Thousands) Current assets: Cash and short-term investments $ 41,548 $ 39,785 Accounts receivable: Customers 200,416 174,716 Other 111,848 94,046 Inventories: Products 200,624 158,639 Materials and supplies 223,074 186,694 Prepaid expenses and other 18,331 25,675 ---------- ---------- Total current assets 795,841 679,555 ---------- ---------- Property, plant and equipment 4,906,825 4,210,575 Less accumulated depreciation and amortization 1,540,582 1,436,845 ---------- ---------- Net property, plant and equipment 3,366,243 2,773,730 ---------- ---------- Other assets 211,491 260,782 ---------- ---------- Total assets $4,373,575 $3,714,067 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 571,118 $ 408,289 Current portion of long-term debt and short-term borrowings 24,412 49,256 ---------- ---------- Total current liabilities 595,530 457,545 Long-term debt, less current portion 1,646,882 1,282,424 Accrued postretirement benefits and pension costs 263,137 239,134 Reclamation and mine shutdown reserves 125,702 120,957 Other liabilities and deferred credits 172,722 212,536 Deferred income taxes 292,580 201,553 Minority interests 1,507,489 1,199,269 Stockholders' equity: Preferred stock, par value $1, at liquidation value, authorized 50,000,000 shares: $1.875 Convertible Exchangeable - 6,286 $4.375 Convertible Exchangeable 250,000 250,000 Common stock, par value $1, authorized 300,000,000 shares 166,365 165,293 Capital in excess of par value of common stock - 21,868 Retained earnings (deficit) (221,925) (81,224) Cumulative foreign translation adjustment (2,555) (7,187) Common stock held in treasury - 29,179,000 and 25,334,600 shares, respectively, at cost (422,352) (354,387) ---------- ---------- (230,467) 649 ---------- ---------- Total liabilities and stockholders' equity $4,373,575 $3,714,067 ========== ========== The accompanying notes are an integral part of these financial statements. FREEPORT-MCMORAN INC. STATEMENTS OF OPERATIONS Years Ended December 31, ------------------------------------ 1994 1993 1992 ---------- ---------- ---------- (In Thousands, Except Per Share Amounts) Revenues $1,982,396 $1,610,581 $1,654,911 Cost of sales: Production and delivery 1,297,007 1,141,705 986,274 Depreciation and amortization 132,713 191,938 202,382 ---------- ---------- ---------- Total cost of sales 1,429,720 1,333,643 1,188,656 Exploration expenses 47,052 65,080 37,036 Provision for restructuring charges - 67,145 - Loss on valuation and sale of assets, net - 64,114 - Gain on insurance settlement (32,602) - - General and administrative expenses 167,390 169,059 177,363 ---------- ---------- ---------- Total costs and expenses 1,611,560 1,699,041 1,403,055 ---------- ---------- ---------- Operating income (loss) 370,836 (88,460) 251,856 Interest expense, net (91,834) (79,882) (51,788) Gain on sale of FCX Class A shares - - 100,934 Gain on conversion/distribution of FCX securities 114,750 44,116 33,753 Other income (expense), net (3,830) (2,727) 1,640 ---------- ---------- ---------- Income (loss) before income taxes and minority interests 389,922 (126,953) 336,395 Provision for income taxes (148,388) (17,854) (75,597) Minority interests in net (income) loss of consolidated subsidiaries (168,951) 61,689 (72,987) ---------- ---------- ---------- Income (loss) before extraordinary item and changes in accounting principle 72,583 (83,118) 187,811 Extraordinary loss on early extinguishment of debt, net (9,108) - - Cumulative effect of changes in accounting principle, net - (20,717) - ---------- ---------- ---------- Net income (loss) 63,475 (103,835) 187,811 Preferred dividends (22,032) (22,368) (18,677) ---------- ---------- ---------- Net income (loss) applicable to common stock $ 41,443 $ (126,203) $ 169,134 ========== ========== ========== Primary and fully diluted net income (loss) per share: Before extraordinary item and changes in accounting principle $.37 $(.74) $1.17 Extraordinary loss on early extinguishment of debt (.07) - - Cumulative effect of changes in accounting principle - (.15) - ---- ----- ----- $.30 $(.89) $1.17 ==== ===== ===== Average common and common equivalent shares outstanding: Primary 139,223 141,595 144,515 ======= ======= ======= Fully diluted 139,223 142,099 145,257 ======= ======= ======= Dividends per common share: Cash $ .3125 $1.250 $1.250 Property 1.2946 - .175 ------- ------ ------ $1.6071 $1.250 $1.425 ======= ====== ====== The accompanying notes are an integral part of these financial statements. FREEPORT-MCMORAN INC. STATEMENTS OF STOCKHOLDERS' EQUITY Years Ended December 31, --------------------------------- 1994 1993 1992 --------- -------- -------- (In Thousands) $1.875 Convertible exchangeable preferred stock: Balance at beginning of year $ 6,286 $ 7,453 $ 9,680 Conversions to common stock and redemptions (6,286) (1,167) (2,227) --------- -------- -------- Balance at end of year - 6,286 7,453 --------- -------- -------- $4.375 Convertible exchangeable preferred stock: Balance at beginning of year 250,000 250,000 - Issuance of shares - - 250,000 --------- -------- -------- Balance at end of year 250,000 250,000 250,000 --------- -------- -------- Common stock: Balance at beginning of year 165,293 164,818 81,796 Two-for-one stock split - - 81,796 Conversions to common stock and other 1,072 475 1,226 --------- -------- -------- Balance at end of year 166,365 165,293 164,818 --------- -------- -------- Capital in excess of par value of common stock: Balance at beginning of year 21,868 186,032 352,705 Two-for-one stock split - - (81,796) Dividends on preferred stock - (20,499) - Dividends on common stock (35,600) (131,992) (92,124) Conversions to common stock and other 13,732 (11,673) 7,247 --------- -------- -------- Balance at end of year - 21,868 186,032 --------- -------- -------- Retained earnings (deficit): Balance at beginning of year (81,224) 68,532 163,754 Net income (loss) 63,475 (103,835) 187,811 Dividends on preferred stock (22,032) (1,869) (18,677) Dividends on common stock (182,144) (44,052) (264,356) --------- -------- -------- Balance at end of year (221,925) (81,224) 68,532 --------- -------- -------- Cumulative foreign translation adjustment: Balance at beginning of year (7,187) - - Adjustment 4,632 (7,187) - --------- -------- -------- Balance at end of year (2,555) (7,187) - --------- -------- -------- Common stock held in treasury: Balance at beginning of year (354,387) (330,814) (219,654) Purchase of 3,831,800, 1,326,200 and 5,705,100 shares, respectively (67,747) (22,229) (108,591) Other (218) (1,344) (2,569) --------- -------- -------- Balance at end of year (422,352) (354,387) (330,814) --------- -------- -------- Total stockholders' equity $(230,467) $ 649 $346,021 ========= ======== ======== The accompanying notes are an integral part of these financial statements. FREEPORT-MCMORAN INC. STATEMENTS OF CASH FLOW Years Ended December 31, --------------------------------- 1994 1993 1992 --------- --------- --------- (In Thousands) Cash flow from operating activities: Net income (loss) $ 63,475 $(103,835) $ 187,811 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Cumulative effect of changes in accounting principle - 20,717 - Extraordinary loss on early extinguishment of debt 9,108 - - Depreciation and amortization 137,038 199,506 211,176 Other noncash charges to income - 33,194 - Provision for restructuring charges, net of payments - 23,890 - Loss on valuation and sale of assets, net - 64,114 - Oil and gas exploration expenses 5,231 26,710 18,333 Amortization of debt discount and financing costs 37,128 41,166 51,206 Gain on sale of FCX Class A shares - - (100,934) Gain on conversion/distribution of FCX securities (114,750) (44,116) (33,753) Deferred income taxes 96,065 (39,035) 53,079 Minority interests' share of net income (loss) 168,951 (61,689) 72,987 Cash distribution from IMC-Agrico in excess of capital interest 43,293 - - Reclamation and mine shutdown expenditures (9,837) (9,980) (18,038) (Increase) decrease in working capital, net of effect of acquisitions and dispositions: Accounts receivable (44,614) 2,821 (14,672) Inventories (40,320) 4,475 (20,675) Prepaid expenses and other 7,350 (10,873) (23,037) Accounts payable and accrued liabilities 163,283 (24,590) (43,001) Other (14,574) (5,186) (845) --------- --------- --------- Net cash provided by operating activities 506,827 117,289 339,637 --------- --------- --------- Cash flow from investing activities: Capital expenditures: PT-FI (664,735) (450,854) (367,842) RTM, including acquisition cost (78,735) (12,658) - Main Pass (10,941) (37,427) (117,902) Agricultural minerals (18,740) (14,743) (86,815) Oil and gas (12,493) (35,455) (50,493) Other (20,577) (27,450) (59,557) Sale of assets: Oil and gas - 95,250 - Geothermal 36,910 23,000 - Other 75,092 26,961 - Purchase of indirect interest in PT-FI - - (211,892) Other - 4,375 8,962 --------- --------- --------- Net cash used in investing activities $(694,219) $(429,001) $(885,539) --------- --------- --------- FREEPORT-MCMORAN INC. STATEMENTS OF CASH FLOW Years Ended December 31, --------------------------------- 1994 1993 1992 ---------- -------- -------- (In Thousands) Cash flow from financing activities: Proceeds from sale of: Convertible exchangeable preferred stock $ - $ - $245,700 FRP 8 3/4% Senior subordinated notes 146,125 - - FRP depositary units - - 425,996 FCX Class A common shares - - 174,142 FCX preferred and preference stock 252,985 561,090 217,867 FCX 9 3/4% Senior notes 116,276 - - PT-FI common shares - - 212,485 Purchase of FTX common shares (67,747) (22,229) (108,591) Purchase of FCX Class A common shares (47,596) (16,482) (15,253) Distributions paid to minority interests: FCX (110,312) (74,848) (46,051) FRP (121,184) (121,180) (109,450) Distribution of MOXY and FMPO shares (35,441) - (28,019) Net proceeds from infrastructure financing 110,825 20,000 - Proceeds from debt 1,865,928 635,376 851,447 Repayment of debt (1,715,954) (814,920) (797,735) Purchase of 10 7/8% Senior Debentures (142,919) - - Cash dividends paid: Common stock (44,467) (175,890) (179,677) Preferred stock (22,110) (22,384) (16,882) Other 4,746 1,962 11,322 ---------- -------- -------- Net cash provided by (used in) financing activities 189,155 (29,505) 837,301 ---------- -------- -------- Net increase (decrease) in cash and short-term investments 1,763 (341,217) 291,399 Cash and short-term investments at beginning of year 39,785 381,002 89,603 ---------- -------- -------- Cash and short-term investments at end of year $ 41,548 $ 39,785 $381,002 ========== ======== ======== Interest paid $ 94,631 $ 94,557 $ 95,787 ========== ======== ======== Income taxes paid $ 42,576 $ 15,925 $ 28,123 ========== ======== ======== The accompanying notes, which include information in Notes 1 through 5, 7 and 8 regarding noncash transactions, are an integral part of these financial statements. FREEPORT-MCMORAN INC. NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation. The consolidated financial statements of Freeport- McMoRan Inc. (FTX) include all majority-owned subsidiaries and its publicly traded partnerships (Note 2). Investments in joint ventures and partnerships (other than publicly traded entities) are generally reflected using the proportionate consolidation method in accordance with standard industry practice. All significant intercompany transactions have been eliminated. Certain prior year amounts have been reclassified to conform to the 1994 presentation. Cash and Short-Term Investments. Highly liquid investments purchased with a maturity of three months or less are considered cash equivalents. Cash and short-term investments owned by consolidated entities are not available to FTX until a distribution is paid to all owners of an entity's equity securities. Accounts Receivable. In 1994, IMC-Agrico Company (IMC-Agrico) entered into an agreement whereby it can sell on an ongoing basis up to $75 million of accounts receivable. FTX's accounts receivable at December 31, 1994 were net of $17.9 million of receivables sold. Inventories. Inventories are generally stated at the lower of average cost or market and removed at average cost. Rio Tinto Minera, S.A. (RTM) uses the first-in, first-out (FIFO) cost method. Property, Plant and Equipment. Property, plant and equipment is carried at cost. Mineral exploration costs are expensed as incurred, except in the year the property is deemed to contain a viable mineral deposit, in which case they are capitalized. Development costs, including interest incurred during the construction and development period, are capitalized. Expenditures for replacements and improvements are capitalized. Depreciation for mining and production assets, including mineral interests, is determined using the unit- of-production method based on estimated recoverable reserves. Other assets are depreciated on a straight-line basis over estimated useful lives of 15 to 30 years for buildings and 3 to 25 years for machinery and equipment. Oil and Gas Costs. FTX follows the successful efforts method of accounting for its oil and gas operations. Costs of leases, productive exploratory wells and development activities are capitalized. Other exploration costs are expensed. Depreciation and amortization is determined on a field-by-field basis using the unit-of-production method. Gain or loss is included in income when properties are sold. Environmental Remediation and Compliance. Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures resulting from the remediation of an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recognized for remedial activities when the efforts are probable and the cost can be reasonably estimated. Derivatives. Derivatives have been used by FTX to manage certain market risks resulting from fluctuations in commodity prices (primarily copper and gold), foreign exchange rates and interest rates by creating offsetting market exposures. Costs or premiums and gains or losses on the contracts, including closed contracts, are recognized with the hedged transaction. Also, gains or losses are recognized if the hedged transaction is no longer expected to occur. FTX monitors its credit risk on an ongoing basis and considers this risk to be minimal because its contracts are with a diversified group of financially strong counterparties. Freeport-McMoRan Copper & Gold Inc. (FCX) redeemable preferred stocks and gold and silver denominated loans are treated as hedges of future production and are carried at their original issue value (the acquisition date value for the RTM gold and silver denominated loans). As principal payments occur, differences between the carrying value and the payment are recorded as an adjustment to revenues. Concentrate Sales. Revenues from P.T. Freeport Indonesia Company (PT-FI) concentrate sales are recorded net of royalties, treatment costs and the impact of its price protection program. PT-FI's concentrate sales agreements provide for provisional billings based on world metals prices, primarily the London Metal Exchange, with actual settlement on the copper portion generally based on appropriate future prices. Revenues, recorded initially using provisional prices, are adjusted using current prices. At December 31, 1994, copper sales totaling 192 million pounds remained to be contractually priced in 1995. As a result of PT-FI's hedging activities, it will realize an average of $1.01 per pound on these sales. Gold sales are priced according to individual contract terms. In December 1991, PT-FI and the Government of Indonesia (the Government) signed a contract of work (the COW) with a 30-year term and two 10-year extensions permitted. Under the COW, PT-FI pays the Government a royalty of 1.5 percent to 3.5 percent on the value of copper sold, net of delivery costs and treatment and refining charges, and a 1 percent royalty on gold and silver sales. The royalties totaled $19.4 million in 1994, $9.5 million in 1993 and $15.7 million in 1992. Foreign Translation Adjustment. RTM's assets and liabilities are translated to U.S. dollars using the exchange rate in effect at the balance sheet date, with FTX's share of the translation adjustments recorded as a component of stockholders' equity. Results of operations are translated using the average exchange rates during the period. Net Income Per Share. Primary net income per share is computed by dividing net income applicable to common stock by the average common and common equivalent shares outstanding. Fully diluted net income per share is computed assuming all convertible securities, if dilutive, were converted at the beginning of the period or date of issuance, whichever is later. Changes in Accounting Principle. During 1993, FTX adopted the following changes in accounting principle effective January 1, 1993: Periodic Scheduled Maintenance - These costs are expensed when incurred. Previously, costs were capitalized when incurred and amortized. Deferred Charges - Costs that directly relate to the acquisition, construction and development of assets and to the issuance of debt and related instruments are deferred. Previously, certain other costs that benefited future periods were deferred. Management Information Systems (MIS) - MIS equipment and software that have a material impact on net income are capitalized. Other MIS costs, including equipment and purchased software, that involve immaterial amounts (currently individual expenditures of less than $0.5 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. These changes were adopted to improve the measurement of operating results by expensing cash expenditures when incurred unless they directly relate to long-lived asset additions. The change in accounting for MIS costs also recognizes the rapid rate of technology change in MIS which results in a need for continuing investments. These changes did not have a material impact on 1993 income before changes in accounting principle. 2. PUBLIC SUBSIDIARIES Distribution of FCX Investment. FTX is pursuing a plan to separate its two principal businesses, copper/gold and agricultural minerals, into two independent financial and operating entities. To accomplish this plan, FTX would make a pro-rata distribution of its common stock ownership in FCX to FTX common stockholders. As a result of this distribution, which will require a series of steps to implement, FTX would no longer own any interest in FCX. The proposed distribution, which is expected to take several months to implement, is contingent on a number of factors including completion of a restructuring of the liabilities of FTX including its long-term debt, which will include the use of a portion of the FCX shares currently owned by FTX, and changing the voting rights of FCX stockholders so that the Class B stockholders elect 80 percent of the FCX directors and the Class A stockholders and preferred stockholders elect the balance. The change in voting rights is subject to FCX Class A stockholder approval. There can be no assurances that these contingencies will be met. In an Internal Revenue Service private-letter ruling, FTX has received assurance that the distribution of FCX Class B common shares to FTX common stockholders will be tax-free. Freeport-McMoRan Copper & Gold Inc. FTX's metals operations are conducted through its publicly traded subsidiary, FCX. FTX's ownership of the FCX Class A and Class B common stock combined was 68.3 percent at December 31, 1994 and 71.8 percent at December 31, 1993. FCX's operations are conducted primarily through its subsidiaries, PT-FI which principally operates the Indonesian copper and gold mining facilities and RTM which operates a copper smelter in Spain (Note 3). In December 1992, FCX purchased 49 percent (10.5 million shares) of the capital stock of a publicly traded Indonesian entity which owned 10 percent of PT-FI. The fair market value of FCX Class A common stock at the time of the agreement was the basis for calculating the purchase price. In December 1993 and January 1994, PT-FI issued shares of its stock to FCX in exchange for the conversion of certain intercompany notes. FCX's direct ownership in PT-FI totaled 81.3 percent and 80.8 percent at December 31, 1994 and 1993, respectively. At December 31, 1994, PT-FI's net assets totaled $261.2 million, including $57.6 million of retained earnings. In July 1992, FCX sold publicly 8.6 million shares of its Class A common stock, resulting in an after-tax gain to FTX of $100.9 million, and 9 million depositary shares for net proceeds of $392 million. Each depositary share represents 2 16/17 shares of its 7% Convertible Exchangeable Special Preference Stock, has a cumulative annual cash dividend of $1.75 (payable quarterly) and a $25 liquidation preference, and is convertible at the option of the holder into 1.021 shares of FCX Class A common stock. Beginning August 1995, FCX may redeem these depositary shares for cash at $26.225 per share (declining ratably to $25 per share in March 2002) plus accrued and unpaid dividends. In July 1993, FCX sold publicly 14 million depositary shares representing its Step-Up Convertible Preferred Stock for net proceeds of $340.7 million. Each depositary share has a cumulative annual cash dividend (payable quarterly) of $1.25 through August 1996 and $1.75 thereafter and a $25 liquidation preference, and is convertible at the option of the holder into 0.835 shares of FCX Class A common stock. From August 1996 through August 1999, FCX may redeem these depositary shares for 0.835 shares of FCX Class A common stock per depositary share if the market price of FCX Class A common stock exceeds certain specified levels. Thereafter, FCX may redeem these depositary shares at $25 per share (payable in FCX Class A common stock, cash or a combination of both, at FCX's option) plus accrued and unpaid dividends. In August 1993, FCX sold publicly 6 million depositary shares representing its Gold-Denominated Preferred Stock for net proceeds of $220.4 million. Each depositary share has a cumulative quarterly cash dividend equal to the value of 0.000875 ounces of gold and will be redeemed in August 2003 for the cash value of 0.1 ounces of gold. In January 1994, FCX sold publicly 4.3 million depositary shares representing its Gold-Denominated Preferred Stock, Series II for net proceeds of $158.5 million. Each depositary share has a cumulative quarterly cash dividend equal to the value of 0.0008125 ounces of gold and will be redeemed in February 2006 for the cash value of 0.1 ounces of gold. In July 1994, FCX sold publicly 4.8 million depositary shares representing its Silver-Denominated Preferred Stock for net proceeds of $94.5 million. Each depositary share has a cumulative quarterly cash dividend equal to the value of 0.04125 ounces of silver. Annually, beginning in August 1999, FCX will redeem the underlying Silver-Denominated Preferred Stock in eight equal installments. The FCX redeemable preferred stocks are being reported as a hedge of future gold and silver sales for accounting purposes (Note 1). FTX reports the FCX preferred stock and related dividends as minority interests in its financial statements. PT-FI entered into joint ventures owned one-third by PT-FI and two-thirds by P.T. ALatieF Nusakarya Corporation (ALatieF), an Indonesian investor, to purchase and manage certain PT-FI infrastructure assets for $270 million. The management agreements, which are terminable by either party upon six months written notice after debt repayment, provide ALatieF with a guaranteed minimum rate of return on its investment and result in the joint ventures being consolidated for financial reporting purposes. The joint ventures have purchased $194.9 million of infrastructure assets through December 31, 1994 and are expected to purchase the final $75.1 million of assets in 1995. Funding for the purchases consists of $90 million in equity contributions by the joint venture partners, the ALatieF bank loan and the 9 3/4% Senior Notes (Note 5). In December 1994, PT-FI entered into a joint venture, 30 percent owned by PT-FI, to purchase and manage its power-related assets for an estimated $215 million. A $100 million sale occurred in December 1994 and the remaining sales are expected to take place by the end of 1995. PT-FI guaranteed the joint venture a minimum rate of return and is obligated to make minimum payments sufficient to allow the joint venture to meet its debt service. PT- FI accounts for its investment in the joint venture using the equity method. PT-FI is proceeding with plans to sell other nonoperating assets whereby the purchaser will operate the assets and provide services to PT-FI and its designees. Freeport-McMoRan Resource Partners, Limited Partnership (FRP). FTX's fertilizer and sulphur operations and its Main Pass oil operations are conducted through its publicly traded affiliate, FRP. FTX owned 51.4 percent and 51.3 percent of the FRP units outstanding at December 31, 1994 and 1993, respectively. In July 1993, FRP and IMC Global Inc. (IGL) formed the IMC-Agrico joint venture, operated by IGL, for their respective phosphate fertilizer businesses, including phosphate rock and uranium. FRP's "Current Interest", reflecting cash to be distributed from ongoing operations, initially was 58.6 percent and its "Capital Interest", reflecting the purchase or sale of long- term assets or any required capital contributions, was 46.5 percent. These ownership percentages (55 percent and 45.1 percent, respectively, at December 31, 1994) decline in annual increments to 40.6 percent for the fiscal year ending June 30, 1998 and remain constant thereafter. At December 31, 1994, FRP's investment in IMC-Agrico totaled $399.2 million. IMC-Agrico's assets are not available to FRP until distributions are paid by the joint venture. Publicly owned FRP units have cumulative rights to receive quarterly distributions of 60 cents per unit through the distribution for the quarter ending December 31, 1996 (the Preference Period) before any distributions may be made to FTX. On January 20, 1995, FRP declared a distribution of 60 cents per publicly held unit ($30.2 million) and 26 cents per FTX-owned unit ($13.9 million), bringing the total unpaid distributions to FTX to $353.1 million. During the Preference Period the unpaid FTX distributions will be payable, after a 60 cents per unit quarterly distribution is paid to all unitholders, equal to the lesser of any deficiency or one-half of the amount by which distributable cash exceeds a 60 cents per unit distribution. Remaining distributable cash will be paid to all unitholders according to their percentage interests. After the Preference Period, distribution deficiencies on FTX-owned FRP units will be paid as described above after any deficiencies in the cumulative quarterly distribution to the public are paid and a quarterly distribution of 60 cents per unit has been paid to all unitholders. In February 1992, FRP sold publicly 19.5 million new units, resulting in a gain to FTX of $136.6 million which was deferred because of the FRP public unitholders' distribution priority. Even though FTX had not been receiving its proportionate share of FRP distributions, FTX was able to reflect its proportionate share of FRP's earnings through recognition of portions of the deferred gain ($32.6 million in 1994, $62.2 million in 1993 and $41.8 million in 1992) prior to the third quarter of 1994. However, the remaining deferred gain was utilized and FTX recognized an additional minority interest charge in 1994 of $26.5 million. In future periods, FTX's share of the reported financial results of FRP will depend on the extent to which FTX receives its proportionate share of FRP distributions. To the extent that public unitholders receive a disproportionately large share of FRP distributions, as has been the case since early 1992, FTX will recognize a smaller share of FRP's reported earnings than would be represented by its percentage ownership of FRP. 3. ACQUISITIONS In March 1993, FCX acquired a 65 percent interest in RTM and in December 1993, RTM redeemed the remaining 35 percent. At December 31, 1994, RTM's net assets totaled $80.2 million. The purchase price allocation follows (in thousands): Current assets $101,454 Current liabilities (158,445) Property, plant and equipment 277,170 Other assets 5,358 Long-term debt (38,941) Accrued postretirement benefits and other liabilities (176,206) -------- Net cash investment $ 10,390 ======== In January 1995, FRP acquired essentially all of the domestic assets of Pennzoil Co.'s sulphur division. Pennzoil will receive quarterly payments from FRP over 20 years based on the prevailing price of sulphur. The installment payments may be terminated earlier either by FRP through the exercise of a $65 million call option or by Pennzoil through a $10 million put option. Neither option may be exercised prior to 1999. 4. RESTRUCTURING AND VALUATION CHARGES Restructuring Charges. During 1993, FTX recognized restructuring expenses totaling $67.1 million. The charges consisted of $30.3 million for personnel related costs, $15 million for excess office space and furniture and fixtures resulting from staff reductions, $8.2 million for downsizing its 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 for IMC-Agrico formation costs. 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 $65.1 million, comprised of (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 million for materials and supplies inventory obsolescence and $4.5 million for adjustments in converting accounting systems, (b) $18.7 million of depreciation and amortization consisting of $11.5 million for estimated future abandonment and reclamation costs and $7.2 million for the write-down of miscellaneous properties, (c) $4.4 million of exploration expenses for the write-down of an unproved oil and gas property and (d) $15.8 million of general and administrative expenses consisting of $9.4 million to downsize FTX's MIS structure and $6.4 million for the write- off of miscellaneous assets. Asset Sales/Recoverability. During 1993, FTX sold a nonproducing oil and gas property recognizing a gain of $69.1 million, and FRP sold assets, primarily certain previously mined phosphate rock acreage, recognizing a gain of $11.8 million. FRP also sold its remaining interests in producing geothermal properties for $63.5 million, consisting of $23 million in cash and $40.5 million of interest-bearing notes (included in other assets), recognizing a $31 million charge to expense and recording a $9 million charge for impairment of its undeveloped geothermal properties. In 1994, FRP received prepayment of these notes. FTX charged $105 million to expense during 1993 for the recoverability of certain assets, primarily FRP's Main Pass oil and non-Main Pass sulphur assets. 5. LONG-TERM DEBT December 31, ----------------------- 1994 1993 ---------- ---------- (In Thousands) Notes payable: FTX credit agreement, average rate 5.5% in 1994 and 4.1% in 1993 $ 425,000 $ 388,000 RTM project financing, average rate 8.3% in 1994 110,000 - ALatieF loan, average rate 6.7% in 1994 57,000 60,000 FCX equipment loan 70,000 - Other, primarily RTM borrowings 34,276 57,709 ---------- ---------- Total notes payable 696,276 505,709 ---------- ---------- Publicly traded notes and debentures: 10 7/8% Senior Subordinated Debentures due 2001 - 125,358 6.55% Convertible Subordinated Notes, face amount of $373 million, effective rate of 9.825%, due 2001 318,237 311,863 Zero Coupon Convertible Subordinated Debentures, face amount of $749.7 million, effective rate of 9%, due 2006 270,196 247,427 FRP 8 3/4% Senior Subordinated Notes due 2004 150,000 - FCX 9 3/4% Senior Notes due 2001 120,000 - FCX Zero Coupon Exchangeable Notes - 102,039 ---------- ---------- Total publicly traded notes and debentures 858,433 786,687 ---------- ---------- RTM gold and silver denominated loans, average rate 1.2% in 1994 and 1.3% in 1993 16,585 39,284 PT-FI capital lease obligation, net of $244 million in future interest (Note 2) 100,000 - ---------- ---------- 1,671,294 1,331,680 Less current portion and short-term borrowings 24,412 49,256 ---------- ---------- $1,646,882 $1,282,424 ========== ========== Notes Payable. FTX has a variable rate credit agreement (the Credit Agreement) structured as a revolving line of credit through June 1996 followed by a 3 1/2 year reducing revolver. The Credit Agreement is part of an $800 million committed credit facility and is subject to a borrowing base, redetermined annually by the banks, which establishes maximum consolidated debt for FTX. As of December 31, 1994, $466.7 million was available under the borrowing base and $377 million of borrowings were unused under the credit facility. FTX guarantees any borrowings under the Credit Agreement and is required to retain control of FRP and PT-FI. Under certain circumstances, FTX could be required to pledge a portion of its equity in FCX and FRP. PT-FI also assigned its existing and future sales contracts and pledged its rights under the COW and certain assets as security for its borrowings. The Credit Agreement provides for working capital requirements, specified coverage of fixed charges and restrictions on other borrowings. The proposed spinoff of FCX (Note 2) is expected to occur by mid-1995 and will include a restructuring of the liabilities of FTX which requires the use of a portion of the FCX shares currently owned by FTX. FTX has discussed with several potential investors transactions that which would provide for the recapitalization or refinancing of its debt and guarantees. However, no agreements have been reached with respect to any transaction. Separate bank credit facilities are being arranged for FTX/FRP and FCX/PT-FI. The restructuring plan is expected to provide greater access to credit markets and reduce financing costs for the FTX companies from that which would be available otherwise. In 1994, RTM obtained variable rate project financing (the RTM Facility) consisting of a $225 million term loan facility and a $65 million working capital facility, both nonrecourse to FCX. The term loan facility matures in thirty-six equal quarterly payments starting September 30, 1996. The working capital facility matures June 2005. The RTM Facility requires certain hedging arrangements, restricts other borrowings and specifies certain coverage ratios. Prior to the completion of the expansion, the RTM Facility is secured by RTM's capital stock and thereafter by 51 percent of the capital stock. The ALatieF bank loan, entered into as part of the PT-FI infrastructure sales (Note 2), has a variable interest rate and is guaranteed by PT-FI. Principal payments total $3 million annually with a balloon payment in December 1998. In December 1994, FCX entered into a $70 million variable rate equipment loan secured by certain PT-FI assets. Principal payments total $7 million annually with a balloon payment in December 2001. In February 1994, IMC-Agrico entered into a three-year $75 million variable rate credit facility (the IMC-Agrico Facility). Borrowings under the IMC-Agrico Facility are unsecured with a negative pledge on substantially all of IMC-Agrico's assets. The IMC-Agrico Facility has minimum capital, fixed charge and current ratio requirements for IMC-Agrico; places limitations on debt at IMC-Agrico; and restricts the ability of IMC-Agrico to make cash distributions in excess of distributable cash generated. Publicly Traded Notes and Debentures. During 1994, FTX defeased $125.3 million of its 10 7/8% Senior Subordinated Debentures resulting in a $9.1 million after-tax extraordinary loss. FTX's 6.55% Convertible Subordinated Notes are convertible at the holder's option into 48.55 shares of FTX common stock per $1,000 principal amount (equivalent to a conversion price of $20.60 per FTX share). FTX may redeem these notes for cash at 91.21 percent of principal (increasing ratably to 100 percent over the term of the notes) plus accrued interest. FTX's Zero Coupon Convertible Subordinated Debentures are convertible, at the holder's option, into 14.42 shares of FTX common stock per $1,000 principal amount (subject to adjustment in certain events), with FTX having the right to pay cash in lieu of all or part of such FTX common stock. FTX may redeem these debentures for cash at the issue price plus accrued original issue discount. The debentures have a contingent payment feature (if the market price of FTX common stock exceeds certain specified amounts) payable in FTX common stock, cash or a combination of both, at FTX's option. The debentures contain purchase rights at the holder's option, as of August 1996 or 2001, at the issue price plus accrued original issue discount. In February 1994, FRP sold publicly $150 million of 8 3/4% Senior Subordinated Notes and in April 1994, a wholly owned subsidiary of FCX sold publicly $120 million of 9 3/4% Senior Notes which are guaranteed by FCX. In 1991, FCX sold $1.035 billion face amount of Zero Coupon Exchangeable Notes. Notes with a face amount of $386 million, $322.6 million and $326.4 million were presented for exchange in 1994-1992, respectively, for which FCX issued 5.8 million, 4.8 million and 4.5 million shares of its Class A common stock. FCX also paid $0.3 million in 1994 and $7.9 million in 1992. As a result of these exchanges, FTX recognized a pretax gain of $9.3 million in 1994, $44.1 million in 1993 and $33.8 million in 1992. RTM Gold and Silver Denominated Loans. In December 1994, RTM used borrowings under the RTM facility to in effect defease its two gold and silver denominated loans. RTM retired one of its gold and silver loans and purchased 55,000 ounces of gold at $379.81 per ounce to offset the remaining gold loan (5,000 ounces payable quarterly). The purchased gold is recorded as product inventory or other long-term assets according to the payment terms. Minimum Principal Payments. Payments scheduled for each of the five succeeding years based on the amounts and terms outstanding at December 31, 1994 are $24.4 million in 1995, $82.8 million in 1996, $145.5 million in 1997, $187.9 million in 1998 and $140.6 million in 1999. Capitalized Interest. Capitalized interest totaled $53.3 million in 1994, $62.2 million in 1993 and $84.7 million in 1992. 6. INCOME TAXES Effective January 1, 1992, FTX adopted Statement of Financial Accounting Standards No. 109, the new accounting standard for income taxes. The cumulative adjustment to taxes and the impact on 1992 earnings from operations were not material. The components of FTX's net deferred tax asset (included in other assets) and liability are as follows: 1994 1993 Consolidated Tax Group Consolidated Tax Group ----------------------- ---------------------- FTX FCX FTX FCX --------- --------- --------- --------- (In Thousands) Deferred tax asset: Net operating loss carryforwards $121,248 $ - $ 58,650 $ - Alternative Minimum Tax credits 47,183 26,972 43,242 29,465 Other tax carryforwards 45,637 - 41,814 - Deferred compensation, postretirement and pension benefits 55,039 - 44,820 - Reclamation and shutdown reserve 24,908 - 25,371 - Other 14,440 - 49,332 - Less valuation allowance (45,637) (26,972) (41,814) (29,465) -------- --------- --------- --------- Total deferred tax asset 262,818 - 221,415 - -------- --------- --------- --------- Deferred tax liability: Property, plant and equipment (116,215) (290,259) (100,499) (199,956) Basis in subsidiaries (39,380) - (21,554) - Other (42,155) (2,321) (10,527) (1,597) -------- --------- --------- --------- Total deferred tax liability (197,750) (292,580) (132,580) (201,553) -------- --------- --------- --------- Net deferred tax asset (liability) $ 65,068 $(292,580) $ 88,835 $(201,553) ======== ========= ========= ========= The net deferred tax asset is from FTX's domestic operations and the net deferred tax liability relates to PT-FI's operations. Recognition of a deferred tax asset is dependent upon FTX's evaluation that it is more likely than not that it will ultimately be realized from future domestic operating income. FTX believes that no valuation allowance is needed for its net operating loss (NOL) carryforwards and alternative minimum tax (AMT) credits because historically it has been able to use substantially all of its tax benefits and tax-planning strategies are available that would enable it to use these deferred tax assets. The NOL carryforwards do not expire until the years 2007-2009 and the AMT credits can be carried forward indefinitely. FTX has provided a valuation allowance for the other tax credit and charitable contribution carryforwards as they can only be used subsequent to the NOL carryforwards and AMT credits and substantially all expire between 1995 and 2000. A valuation allowance has been provided at FCX for all AMT credits, as these would only be used should FCX be required to pay regular U.S. tax, which is unlikely. RTM is subject to taxation in Spain. FCX has provided a valuation allowance equal to the future tax benefits resulting from RTM's approximately $122 million of additional tax basis and for $5.5 million of net operating losses because RTM has not generated taxable income in recent years. FTX does not provide deferred taxes for certain financial and income tax reporting differences related to FCX and FRP which are considered permanent in duration. These differences resulted primarily from gains recognized for financial reporting purposes upon the sale of FCX shares and FRP units. As of December 31, 1994, these basis differences were approximately $185 million for FCX and $330 million for FRP. If ownership in these subsidiaries were to fall below 50 percent, FTX would be required to charge earnings for taxes on the difference between the book and tax basis of its investment. During 1994, FTX requested and received a ruling from the Internal Revenue Service that a spinoff of the FCX shares currently held by FTX to its common shareholders would qualify as a tax-free reorganization, provided certain conditions are met. FTX has announced its intention to enter into this transaction during 1995 (Note 2). If the transaction is consummated the basis difference relating to FCX shares described above would be eliminated. The provision for income taxes consists of the following: 1994 1993 1992 -------- ------- -------- (In Thousands) Current income taxes: Federal $ 12,612 $(2,497) $(24,565) Foreign 26,829 54,994 45,996 State (638) 4,391 1,087 -------- ------- -------- 38,803 56,888 22,518 -------- ------- -------- Deferred income taxes: Federal 13,174 (54,730) (10,359) Foreign 91,027 4,600 63,438 State 480 - - -------- ------- -------- 104,681 (50,130) 53,079 -------- ------- -------- $143,484 $ 6,758 $ 75,597 ======== ======= ======== Reconciliations of the differences between income taxes computed at the federal statutory tax rate and income taxes recorded follow:
1994 1993 1992 ---------------- ----------------- ------------------ Amount Percent Amount Percent Amount Percent -------- ------- -------- ------- -------- ------- (Dollars In Thousands) Income taxes computed at the federal statutory tax rate $131,363 35% $(61,193) 35% $114,374 34% Increase (decrease) attributable to: FCX dividend 6,453 2 6,456 (3) 5,799 2 Statutory depletion (1,780) (1) (2,016) 1 (5,126) (2) Partnership minority interests (25,342) (7) 45,057 (26) (3,253) (1) Sale of subsidiary interests - - - - (45,794) (14) Minimum, state and foreign taxes 10,963 3 18,462 (11) 13,855 4 Sales of assets and other 21,827 6 (8) - (4,258) (1) -------- -- -------- -- -------- -- Provision for income taxes $143,484 38% $ 6,758 (4)% $ 75,597 22% ======== == ======== == ======== ==
7. STOCKHOLDERS' EQUITY Preferred Stock. In March 1992, FTX issued 5 million shares of its $4.375 Convertible Exchangeable Preferred Stock, each with a $50 liquidation value, convertible into FTX common stock at a conversion price of $21.57 per share. Beginning March 1997, FTX may redeem this preferred stock for cash at $52.1875 per share (declining ratably to $50 per share in March 2002) plus accrued and unpaid dividends. Common Stock. In June 1994, FTX changed its dividend policy and distributed quarterly one FCX common share for each 80 FTX common shares owned in lieu of paying a $0.3125 quarterly cash dividend to its stockholders. FTX recorded pretax gains totaling $105.5 million in 1994 related to these property dividends. Subsequent to the FTX restructuring, FTX's Board of Directors will determine a new dividend policy. Stock Options. FTX's stock option plans provide for the issuance of stock options and stock appreciation rights (SARs) at no less than market value at time of grant. Under the 1992 stock option plans, FTX can grant options to employees to purchase up to 9.5 million shares, including SARs and stock incentive units (SIUs), which are similar to SARs. The 1988 Stock Option Plan for Non-Employee Directors authorizes FTX to grant options to purchase up to 1.5 million shares. Under certain options, FTX will pay cash to the optionee equal to an amount based on the maximum individual federal income tax rate in effect at the time of exercise. In connection with the distribution of FCX and McMoRan Oil & Gas Co. (MOXY) shares, each option was adjusted to preserve the economic value of the option and similar adjustments will occur for future FCX share distributions. Additionally, the FCX spin-off would result in an adjustment to the average option price based on the value of the distribution. Generally, stock options terminate ten years from the date of grant. A summary of stock options outstanding, including SARs and SIUs, follows: 1994 1993 ---------------------- ----------------------- Average Average Number of Option Number of Option Options Price Options Price ---------- ------- ---------- ------- Beginning of year 13,742,990 $17.69 13,386,365 $17.58 Granted 1,787,200 19.42 1,358,800 18.37 Adjustments 954,161 - Exercised (689,446) 15.90 (416,639) 14.35 Expired (113,377) 17.90 (585,536) 18.87 ---------- ---------- End of year 15,681,528 16.46 13,742,990 17.69 ========== ========== At December 31, 1994, stock options representing 10.7 million shares were exercisable at an average option price of $15.92 per share. Options for 1.6 million shares and 0.6 million shares were available for new grants under the 1992 and 1988 Stock Option Plans, respectively, as of December 31, 1994. 8. PROPERTY DISTRIBUTIONS FM Properties Inc. (FMPO). In June 1992, FTX transferred substantially all of its domestic oil and gas properties and real estate held for development by it and certain of its subsidiaries, excluding FRP, to a partnership which is currently 99.8 percent owned by FMPO. FTX owns a 0.2 percent interest in the partnership and serves as its managing general partner. In May 1992, FTX declared a distribution of one FMPO common share for each ten FTX common shares owned. Selected financial information of FMPO follows: 1994 1993 May 31, 1992 -------- -------- ------------ (In Thousands) Balance Sheets: Current assets $ 6,857 $ 99,839 $ 42,103 Current liabilities, excluding current portion of long-term debt 18,671 37,968 13,302 Oil and gas properties, net - - 444,676 Investment in real estate 198,453 286,459 248,647 Total assets 214,365 392,865 741,618 Long-term debt (guaranteed by FTX) 132,075 173,796 493,305 Stockholders' equity 59,370 145,660 176,588 Statements of Operations: Revenues 40,435 26,027 Operating loss (123,739) (17,722) Net loss (86,290) (18,814) Cash Flow: Operating activities 11,968 103,920 Investing activities 29,019 196,372 Financing activities (42,270) (300,517) During recent months, FMPO has been engaged in discussions with third parties regarding obtaining new financing for its existing debt, which has significant maturities beginning in January 1996 when $74 million becomes due. The new financing may involve issuing new debt, common or preferred equity investments or sales of assets. An objective in arranging new financing for FMPO will be to eliminate the FTX guarantee of FMPO's debt. In the event that FMPO's refinancing is not complete at the time of the FCX spinoff, an arrangement is being considered that would involve FCX's guaranteeing a significant portion of FMPO's debt pending completion of FMPO's refinancing. Based on an analysis, using generally accepted accounting principles, of the carrying amount in its financial statements of its investment in real estate assets, FMPO concluded that it should reduce these amounts through a $115 million pretax, noncash write-down in 1994. During 1993, FMPO sold all of its producing oil and gas properties and used the proceeds, a portion of which was received in 1994, to reduce its long-term debt. McMoRan Oil & Gas Co. (MOXY). In May 1994, FTX's Board of Directors declared a special distribution of one common share of its newly formed, wholly owned subsidiary, MOXY for each ten FTX common shares. MOXY was organized for the purpose of carrying on substantially all of the oil and gas exploration activities previously conducted by FTX. The net assets transferred to MOXY at FTX's historical cost follow (in thousands): Cash and short-term investments $35,441 Property, plant and equipment 13,052 Other assets 10,113 Current liabilities (1,138) ------- $57,468 ======= 9. PENSION AND OTHER EMPLOYEE BENEFITS The FTX pension plan covers substantially all United States and certain overseas employees. Employees covered by collective bargaining agreements and most nonresident aliens, many of whom are covered by other plans, are not included. Benefits are based on compensation levels and years of service. FTX funds its pension liability in accordance with Internal Revenue Service guidelines. Additionally, for those participants in the qualified defined benefit plan whose benefits are limited under federal income tax laws, FTX sponsors an unfunded, nonqualified plan. Information on the two plans follows: December 31, ---------------------- 1994 1993 --------- --------- (In Thousands) Actuarial present value of benefit obligations (projected unit credit method): Vested $ 90,396 $ 93,609 Nonvested 1,643 2,236 -------- --------- Accumulated benefit obligations $ 92,039 $ 95,845 ======== ========= Projected benefit obligations (projected unit credit method) $(114,599) $(130,585) Less plan assets at fair value 108,326 107,917 --------- --------- Projected benefit obligations in excess of plan assets (6,273) (22,668) Unrecognized net (gain) loss from past experience different from that assumed (5,179) 16,518 Unrecognized prior service costs 4,340 4,833 Unrecognized net asset at January 1, 1986, being recognized over 19 years (3,763) (4,142) --------- --------- Accrued pension cost $ (10,875) $ (5,459) ========= ========= In determining the present value of benefit obligations for 1994 and 1993, FTX used a 8.25 percent and 7 percent discount rate, respectively, a 5 percent annual increase in future compensation levels and a 9 percent average expected rate of return on assets. Net pension cost includes the following: 1994 1993 1992 ------ ------- ------- (In Thousands) Service cost $5,668 $ 8,573 $ 7,376 Interest cost on projected benefit obligations 9,008 9,739 8,609 Actual return on plan assets 126 (9,388) (10,220) Net amortization and deferral (8,814) 1,423 3,689 Termination benefits 2,404 26 1,813 ------ ------- ------- Net pension cost $8,392 $10,373 $11,267 ====== ======= ======= RTM has an unfunded contractual obligation to supplement the amounts paid to retired employees. Based on a discount rate of 8 percent, the accrued liability totaled $84.7 million at December 31, 1994. RTM expensed $6.8 million in 1994 and $5.2 million since its acquisition in 1993 for interest on this obligation. Cash payments were $7.8 million in 1994 and $8 million in 1993. The operator of IMC-Agrico maintains non-contributory pension plans that cover substantially all of its employees. As of July 1, 1994, FRP's share of the actuarial present value of the vested projected benefit obligation was $7.5 million based on a discount rate of 8.4 percent and a 5 percent annual increase in future compensation levels. As of December 31, 1994, these plans are unfunded. FRP's share of the expense related to these plans totaled $3.6 million in 1994 and $1.5 million in 1993. FTX provides certain health care and life insurance benefits for retired employees. The related expense totaled $13.9 million in 1994 ($1.5 million for service cost and $12.4 million in interest for prior period services), $12.4 million in 1993 ($1.9 million and $10.5 million, respectively) and $12.5 million in 1992 ($1.6 million and $10.9 million, respectively). Summary information of the plan follows: December 31, ------------------- 1994 1993 -------- -------- Actuarial present value of accumulated (In Thousands) postretirement obligation: Retirees $121,077 $118,418 Fully eligible active plan participants 9,750 14,066 Other active plan participants 5,105 14,083 -------- -------- Total accumulated postretirement obligation 135,932 146,567 Unrecognized net gain (loss) 4,470 (14,237) -------- -------- Accrued postretirement benefit cost $140,402 $132,330 ======== ======== The initial health care cost trend rate used was 11.5 percent for 1993, decreasing 0.5 percent per year until reaching 6 percent. A one percent increase in the trend rate would increase the amounts by approximately 10 percent. The discount rate used was 8.25 percent in 1994 and 7 percent in 1993. FTX has the right to modify or terminate these benefits. The operator of IMC-Agrico provides certain health care benefits for retired employees. At July 1, 1994, FRP's share of the accumulated postretirement obligation was $3.6 million, which was unfunded, with FRP's share of expense being $0.5 million in 1994 and $0.4 million in 1993. The initial health care cost trend rate used was 10.4 percent, decreasing gradually to 5.5 percent in 2003. The discount rate used was 8.4 percent. Employees are not vested and benefits are subject to change. FTX has an Employee Capital Accumulation Program which permits eligible employees to defer a portion of their pretax earnings. FTX also has an unfunded excess benefits plan for employees to defer amounts in excess of the limitations imposed by the Internal Revenue Code. FTX matches employee deferrals up to 5 percent of basic earnings through an investment in FTX common shares. FTX has other employee benefits plans, certain of which are related to its performance, which costs are recognized currently in general and administrative expense. The cost of these plans totaled $20.6 million in 1994, $7.6 million in 1993 and $15.9 million in 1992. As a result of the proposed FCX spinoff, FCX is currently in the process of establishing its own employee benefit and stock option plans and will assume certain liabilities associated with FTX's employee benefits and stock option plans. 10. COMMITMENTS AND CONTINGENCIES Litigation. While FTX is a defendant in various lawsuits incurred in the ordinary course of its businesses, management believes the potential liability in such lawsuits is not material or is adequately covered by insurance, third party indemnity agreements or reserves previously established. FTX maintains liability and other insurance customary in its businesses, with coverage limits deemed prudent. Environmental. FTX makes expenditures at its operations for protection of the environment. FTX is subject to contingencies as a result of environmental laws and regulations. The related future cost is indeterminable due to such factors as the unknown timing and extent of the corrective actions that may be required and the application of joint and several liability. However, FTX believes that such costs will not have a material adverse effect on its operations or financial position. Estimated future expenditures to restore properties and related facilities to a state required to comply with environmental and other regulations are accrued over the life of the properties. The future expenditures are estimated based on current costs, laws and regulations. As of December 31, 1994, FRP had accrued $55 million for abandonment and restoration of its non-Main Pass sulphur assets, approximately one-half of which will be reimbursed by third parties, and $42.8 million for reclamation of land relating to mining and processing phosphate rock. FRP estimates that its share of abandonment and restoration costs of the Main Pass sulphur mine will approximate $35 million, $1.4 million of which had been accrued at December 31, 1994, with essentially all costs to be incurred after mine closure in approximately 30 years. Additionally, at December 31, 1994 FCX had an accrual of $12.9 million related to RTM's impending mine closure. These estimates are by their nature imprecise and can be expected to be revised over time due to changes in government regulations, operations, technology and inflation. In June 1994, a sinkhole was found at a phosphogypsum storage area at IMC-Agrico's New Wales, Florida facility. In addition, there was an earthen dam breach at two of its phosphate rock facilities in late 1994. IMC-Agrico accrued $10.8 million ($4.9 million net to FRP) during 1994 for costs to rectify these situations. While there is no evidence indicating underground water contamination in areas away from the facilities, this issue continues to be monitored. If there were contamination, which IMC-Agrico considers unlikely, the costs that would be required are uncertain and cannot be estimated at the present. If significant costs were incurred it would be necessary to determine the applicability of insurance coverage maintained by IMC-Agrico, and separately by FRP, and for the sharing of costs between the joint venture partners. FRP has an indemnification for environmental remediation costs in excess of an aggregate $5 million on certain identified sites (FRP has previously accrued the $5 million). The third party has assumed management of these sites. Based on FRP's review of the potential liabilities and the third party's financial condition, FRP concluded that it is remote that FRP would have any additional liability. FTX believes its exposure on other domestic abandoned environmental sites will not exceed amounts accrued and expects that any costs would be incurred over a period of years. FTX believes it is in compliance with all applicable Indonesian environmental laws, rules and regulations. Based on current Indonesian environmental regulations, eventual mine closure and reclamation costs for Irian Jaya mining operations are not expected to be material. RTM's expansion costs include approximately $18 million to modify and expand its sulphuric acid plants. Subsequent to expansion, RTM believes its facilities will be in compliance with all existing Spanish and European environmental standards. Long-Term Contracts and Operating Leases. In June 1994, RTM signed a turnkey contract to expand its smelter capacity to 270,000 metric tons of metal per year by early 1996 at a cost of approximately $215 million, of which $154 million had not been incurred at December 31, 1994. In addition, RTM has commitments to purchase concentrate (excluding PT-FI) of 338,750 metric tons in 1995, 285,000 metric tons in 1996, 330,000 metric tons in 1997, 280,000 metric tons in 1998 and a total of 280,000 metric tons from 1999-2000, at market prices. In January 1995, FCX agreed in principle to form a joint venture, 20 percent owned by FCX, to develop a 200,000 metric tons of metal per year copper smelter in Gresik, Indonesia. Design is under way and construction is expected to begin in 1995, with operations commencing as soon as the second half of 1998. Alternatives for financing the estimated $550 million aggregate project cost, which excludes approximately $100 million of working capital, are being reviewed. It is contemplated that PT-FI would provide all of the smelter's concentrate requirements at market rates; however, for the first fifteen years of operations the treatment and refining charges would not fall below a certain minimum rate. FCX has also agreed to assign its earnings in the joint venture to support an after-tax return of 13 percent to the 70 percent partner, if necessary, for the first twenty years of commercial operations. Additionally, the 10 percent partner has an option, exercisable on the third anniversary of commercial operations, to require FCX to purchase its interest at a 10 percent annual return. FTX's minimum annual contractual charges under noncancellable long-term contracts and operating leases which extend to 2009 total $385.2 million, with $40 million in 1995, $38.5 million in 1996, $35.5 million in 1997, $32.9 million in 1998 and $31.9 million in 1999. Total rental expense under long- term contracts and operating leases amounted to $41.7 million in 1994, $43 million in 1993 and $31.4 million in 1992. 11. FINANCIAL INSTRUMENTS Summarized below are the financial instruments (including all derivative instruments) whose carrying amount is not equal to its fair value at December 31, 1994. Fair values are based on quoted market prices and other available market information. Carrying Fair Amount Value ---------- ---------- (In Thousands) Price protection program: Open contracts in asset position $ 25,165 $ 84,602 Open contracts in liability position (98,900) (234,134) Debt: Long-term debt (Note 5) (1,671,294) (1,677,087) Foreign exchange contracts: $U.S./Deutsche marks - 2,750 $U.S./Spanish pesetas - 2,459 Interest rate swaps - (6,409) Redeemable preferred stocks (Note 2) (500,007) (437,999) Price Protection Program. PT-FI has forward and option contracts to hedge the market risk associated with fluctuations in commodity prices. At December 31, 1994, PT-FI had sold forward 608.5 million pounds of copper at an average price of $0.92 per pound for delivery at various dates through March 1996. PT-FI also has call option contracts for 218.3 million pounds of copper from January-June 1995 with an average price of $0.98 per pound and put option contracts for 993.7 million pounds of copper from October 1995 to December 1996 at an average price of $0.87 per pound. Deferred gains on closed contracts at December 31, 1994 totaled $36.2 million. At December 31, 1994, RTM had sold forward 56,280 ounces of gold at $394.75 per ounce and 1,106,520 ounces of silver at $4.82 per ounce for 1995. RTM had also bought forward 2.5 million pounds of copper at $1.36 per pound to eliminate the copper price risk of its concentrate inventory. Additionally, RTM has written call option contracts on 19.8 million pounds of copper at an average price of $1.18 per pound to assure minimum price participations on a portion of its estimated 1995 concentrate purchases. A deferred loss of $1.6 million was recorded in 1994 resulting from RTM's repayment of one of its gold and silver loans. Debt. Portions of RTM's smelter expansion contract are denominated in Deutsche marks and Spanish pesetas while the related financing is denominated in U.S. dollars. To eliminate exposure to fluctuations in foreign exchange rates, RTM entered foreign exchange contracts which mature through March 1996, totaling $73.8 million on 117 million Deutsche marks and $85.8 million on 11.8 billion Spanish pesetas at December 31, 1994. FTX and its affiliates entered into interest rate swaps to manage exposure to interest rate changes on a portion of its variable rate debt. Under 1986 interest rate exchange agreements, FTX pays an average fixed rate of 8.2 percent on $150.1 million of financing until April 1996. FTX and FRP pay an average fixed rate of 10.2 percent on interest rate exchange agreements entered into in late 1987 and early 1988 on $66.3 million of financing at December 31, 1994, reducing annually through 1999. PT-FI pays 8.3 percent on a 1991 agreement covering $71.4 million of financing at December 31, 1994, reducing annually through 1999. Under these interest swaps, FTX and its subsidiaries received an average interest rate of 4.4 percent in 1994, 3.4 percent in 1993 and 4.2 percent in 1992, resulting in additional interest costs of $13.1 million, $17.6 million and $12.2 million, respectively. 12. SEGMENT FINANCIAL INFORMATION FTX's business segments consist of the following: Metals, which includes FCX's Indonesian copper/gold operations and the RTM smelting operations in Spain; Agricultural Minerals, which includes FRP's fertilizer and sulphur businesses; and Energy, which includes the oil and gas operations of FTX and FRP. FTX's foreign operations are primarily conducted by FCX.
Agricultural Metals a Minerals Energy Other Total 1994 --------- ----------- ------- --------- ---------- ---- (In Thousands) Revenues $1,212,284 $ 730,391 $35,636 $ 4,085 $1,982,396b Production and delivery 740,261 534,650 10,896 11,200 1,297,007 Depreciation and amortization 75,100 33,811 20,755 3,047 132,713 Exploration expenses 40,380 - 5,231 1,441 47,052 Gain on insurance settlement (32,602) - - - (32,602) General and administrative expenses 109,011 38,148 7,810 12,421 167,390 ---------- ---------- ------- ------- ---------- Operating income (loss) $ 280,134 $ 123,782 $(9,056) $(24,024) $ 370,836 ========== ========== ======= ======== ========== Capital expenditures $ 737,714 $ 20,278 $21,897 $ 20,576 $ 800,465 ========== ========== ======= ======== ========== Total assets $3,040,197 $1,083,375 $42,830 $207,173 $4,373,575 ========== ========== ======= ======== ========== 1993 ---- Revenues $ 925,932 $ 619,332 $ 56,680 $ 8,637 $1,610,581b Production and delivery 566,765 544,448 13,012 17,480 1,141,705 Depreciation and amortization 67,906 70,803 42,000 11,229 191,938 Exploration expenses 33,748 2,261 26,708 2,363 65,080 Provision for restructuring charges 20,795 33,947 12,403 - 67,145 Loss on valuation and sale of assets, net - 14,802 (9,107) 58,419 64,114 General and administrative expenses 81,399 58,091 13,169 16,400 169,059 ---------- ---------- -------- --------- ---------- Operating income (loss) $ 155,319 $ (105,020) $(41,505) $ (97,254)$ (88,460) ========== ========== ======== ========= ========== Capital expenditures $ 453,122 $ 46,270c $ 40,394 $ 28,411 $ 568,197 ========== ========== ======== ========= ========== Total assets $2,116,653 $1,194,304 $ 68,062 $ 335,048 $3,714,067 ========== ========== ======== ========= ========== 1992 ---- Revenues $ 714,315 $ 799,032 $127,799 $ 13,765 $1,654,911b Production and delivery 308,948 638,503 28,861 9,962 986,274 Depreciation and amortization 48,272 66,299 79,942 7,869 202,382 Exploration expenses 12,185 4,777 18,394 1,680 37,036 General and administrative expenses 68,481 72,828 25,155 10,899 177,363 ---------- ---------- -------- -------- ---------- Operating income (loss) $ 276,429 $ 16,625 $(24,553) $(16,645) $ 251,856 ========== ========== ======== ======== ========== Capital expenditures $ 367,842 $ 170,224c $ 55,580 $ 48,160 $ 641,806 ========== ========== ======== ======== ========== Total assets $1,694,005 $1,233,085 $180,987 $438,634 $3,546,711 ========== ========== ======== ======== ========== a. Includes the operations of RTM (Note 3) since its acquisition. RTM revenues totaled $536.7 million with operating income at breakeven during 1994 and identifiable assets of $536.6 million at December 31, 1994. Revenues totaled $288.4 million with an operating loss of $6.4 million during 1993 and identifiable assets of $352 million at December 31, 1993. b. Export sales to Asia, Australia, Latin America and Canada approximated 15 percent, 13 percent and 20 percent of total revenues for 1994-1992, respectively. Sales to Japanese companies by FCX were 12 percent, 19 percent and 15 percent of total revenues for 1994-1992, respectively. c. Includes Main Pass Sulphur development costs ($16.6 million in 1993 and $20.8 million in 1992) and capitalized interest ($11.1 million in 1993 and $17.7 million in 1992) prior to becoming operational for accounting purposes in 1993.
13. SUPPLEMENTARY MINERAL RESERVE, PRODUCTION AND SALES INFORMATION (UNAUDITED) Proved and probable mineral reserves, including proved oil reserves, follow: December 31, -------------------------------------------- 1994 1993 1992 1991 1990 ------- ------- ------- ------- ------- (In Thousands) Copper-thousands of recoverable pounds a 28,000 26,800 20,900 21,800 13,900 Gold-recoverable ouncesa 39,700b 39,500b 32,100 32,400 19,500 Silver-recoverable ounces a 84,000b 85,200b 44,700 50,000 34,700 Sulphur-long tons c 41,018 38,637 41,570 42,780 44,125 Phosphate rock-short tons d 206,661 215,156 208,655 206,183 205,752 Oil-barrelse 7,279 9,962 13,861 18,496 18,785 a. Recoverable content reflects an estimated recovery rate of 90 percent for copper, 80 percent for gold and 70 percent for silver, less normal smelting and refining allowances. b. Includes 0.1 million ounces of gold and 3.2 million ounces of silver for 1994, and 0.4 million ounces of gold and 8.5 million ounces of silver for 1993 attributable to RTM. c. Includes 41 million tons in 1994, 38.6 million tons in 1993, 39 million tons in 1992 and 39.1 million tons in 1991 and 1990, net to FRP before royalties, at Main Pass, subject to a 12.5 percent federal royalty based on net mine revenues. d. For 1994 and 1993, represents FRP's share, based on its Capital Interest ownership, of the IMC-Agrico reserves. Contains an average of 68 percent bone phosphate of lime. e. Reflects only Main Pass reserves. Production, sales and average realized prices follow. 1994 1993 1992 1991 1990 METALS ------- ------- ------- ------- ------- PT-FI (In Thousands, Except Average Realizations) Copper (recoverable pounds) Production 710,300 658,400 619,100 466,700 361,800 Sales 700,800 645,700 651,800 439,700 348,000 Average realized price a $1.02 $.90 $1.03 $1.01 $1.20 Gold (recoverable ounces) Production 784 787 641 421 284 Sales 795 763 679 398 273 Average realized price $381.13 $361.74 $340.11 $358.76 $378.30 Silver (recoverable ounces) Production 1,305 1,541 1,643 1,568 1,749 Sales 1,335 1,481 1,804 1,621 1,664 Average realized price $5.08 $4.15 $3.72 $3.87 $4.61 RTM (since acquisition) Smelter operations Concentrate treated (metric tons) 485 330 Anode production (pounds) 347,500 299,300 Cathode production (pounds)312,100 227,300 Gold operations Production (recoverable ounces)173 133 Average realized price $363.05 $337.33 AGRICULTURAL MINERALS Phosphate fertilizers (short tons)b Diammonium phosphate Sales: Florida 1,081 Louisiana 970 Other 217 ------ Total sales 2,268 2,303 2,760 2,841 2,568 Average realized price:c Florida $146.53 Louisiana 152.48 Monoammonium phosphate Sales: Granular 298 423 509 476 438 Powdered 162 55 Average realized price:c Granular $158.54 Powdered 129.24 Granular triple superphosphate Sales 465 Average realized pricec $114.76 565 715 710 717 Phosphate rock (short tons)b Sales 4,373 Average realized price c $21.38 3,840 3,441 2,247 1,455 Sulphur (long tons) Sales d 2,088 1,973 2,346 2,528 2,491 ENERGY Oil (barrels) Sales 2,534 3,443 4,884 351 - Average realized price $13.74 $14.43 $15.91 $13.34 - a. Excludes adjustments for prior year concentrate sales or price protection program costs. Excluding amounts recognized under PT-FI's price protection program, the realization for 1994 and 1993 would have been $1.15 and $0.82 per pound, respectively. b. Certain information prior to the formation of IMC-Agrico was not recorded on a basis consistent with that currently being presented and therefore is not available. Reflects FRP's 46.5 percent share of the IMC-Agrico assets for the year ended June 30, 1994, while FRP received 58.6 percent of the cash flow generated during such period. FRP's share of the IMC-Agrico assets for the year ended June 30, 1995 is 45.1 percent, while FRP will receive 55 percent of the cash flow. c. Represents average realization f.o.b. plant/mine. d. Includes 739,900 tons, 1,138,800 tons, 1,654,300 tons, 1,612,400 tons and 1,564,000 tons for 1994-1990, respectively, which represent internal consumption and Main Pass start-up sales that are not included in sales for accounting purposes. 14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Net Income (Loss) Net Income Per Common Share (Loss) ----------------- Operating Applicable To Fully Revenues Income (Loss) Common Stock Primary Diluted ---------- ------------- ------------- ------- ------- (In Thousands, Except Per Share Amounts) 1994 1st Quartera $ 449,594 $ 65,522 $ 12,373 $ .09 $ .09 2nd Quarterb 468,398 72,304 4,634 .03 .03 3rd Quarterc 503,187 88,289 6,044 .04 .04 4th Quarterd 561,217 144,721 18,392 .13 .13 ---------- -------- --------- $1,982,396 $370,836 $ 41,443 .30 .30 ========== ======== ========= 1993 1st Quartere $ 300,821 $(45,516) $ (55,346) $(.39) $(.39) 2nd Quarterf 421,818 (158,439) (77,379) (.54) (.54) 3rd Quarterg 402,353 101,335 26,786 .19 .19 4th Quarterh 485,589 14,160 (20,264) (.14) (.14) ---------- -------- --------- $1,610,581 $(88,460) $(126,203) (.89) (.89) ========== ======== ========= a. Includes a $44 million gain ($28.6 million to net income or $0.20 per share) on the conversion of FCX securities and a $5.5 million charge to net income ($0.04 per share) related to early extinguishment of debt. b. Includes a $26 million gain ($16.9 million to net income or $0.12 per share) on the distribution of FCX securities and a $3.6 million charge to net income ($0.03 per share) related to early extinguishment of debt. c. Includes a $25.8 million gain ($16.7 million to net income or $0.12 per share) on the distribution of FCX securities and a $10.9 million minority interest charge ($7.1 million to net income or $0.05 per share) because FTX did not receive its proportionate share of FRP distributions. d. Includes gains of $19 million ($12.4 million or $0.09 per share) on the distribution of FCX securities and $32.6 million ($11.9 million to net income or $0.09 per share) from an insurance settlement on the June 1993 ore pass cave-in, net of a $15.6 million minority interest charge ($10.1 million to net income or $0.07 per share) because FTX did not receive its proportionate share of FRP distributions. e. Includes a $47.4 million charge ($18.5 million to net income or $0.13 per share) related to administrative restructuring costs and the sale of FRP's producing geothermal assets, and an $8 million gain ($5.3 million to net income or $0.04 per share) related to the conversion of FCX notes. Also includes a $20.7 million charge ($0.15 per share), net of taxes and minority interests, for the cumulative effect of changes in accounting principle. f. Includes a $165.6 million charge ($74.6 million to net income or $0.52 per share) related to restructuring, asset recoverability and other related charges. Also includes a $25.3 million gain ($16.7 million to net income or $0.12 per share) related to the conversion of FCX notes. g. Includes a $70.2 million gain ($46.1 million to net income or $0.32 per share) primarily from the sale of an oil and gas property. h. Includes a $64.3 million charge ($22.8 million to net income or $0.16 per share) primarily related to the recoverability of FRP's Main Pass oil investment, a $10.7 million gain ($3.6 million to net income or $0.03 per share) from FRP's sale of certain previously mined phosphate rock acreage and a $13.7 million gain ($8.9 million to net income or $0.06 per share) related to the conversion of FCX notes. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF FREEPORT-McMoRan INC.: We have audited the accompanying balance sheets of Freeport-McMoRan Inc. (the Company), a Delaware Corporation, and consolidated subsidiaries as of December 31, 1994 and 1993, and the related statements of operations, cash flow and stockholders' equity for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of IMC-Agrico Company (the Joint Venture). The Company's share of the Joint Venture constitutes 12 percent and 16 percent of assets and 33 percent and 15 percent of revenues of the Company's totals as of December 31, 1994 and 1993 and the years then ended, respectively. Those statements were audited by other auditors whose report has been furnished to us and our opinion, insofar as it relates to the amounts included for the Company's interest in the Joint Venture, is based solely on the report of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Freeport-McMoRan Inc. and consolidated subsidiaries as of December 31, 1994 and 1993 and the results of its operations and its cash flow for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. As discussed in Notes 6 and 1 to the consolidated financial statements, effective January 1, 1992, the Company changed its method of accounting for income taxes, and effective January 1, 1993, changed its method of accounting for periodic scheduled maintenance costs, deferred charges, and costs of management information systems. Arthur Andersen LLP New Orleans, Louisiana, January 24, 1995 Common Shares. Our common shares trade on the New York Stock Exchange (NYSE) under the symbol FTX. The FTX share price is reported daily in the financial press under "FrptMc" in most listings of NYSE securities. At year-end 1994 the number of holders of record of our common stock was 25,076. Common share price ranges on the NYSE composite tape during 1994 and 1993: 1994 1993 ------------------- ------------------ High Low High Low ------ ------ ------ ------ First Quarter $21.75 $18.75 $22.63 $17.00 Second Quarter 19.75 16.25 22.25 18.13 Third Quarter 20.00 16.13 19.38 17.50 Fourth Quarter 19.88 16.75 19.88 15.75 Restructuring Plan/Common Share Dividends. On May 3, 1994 FTX announced a restructuring plan to separate its two principal businesses, copper/gold and agricultural minerals, into two independent financial and operating entities. At the same time, FTX announced that during the interim period it would distribute common shares of FCX to FTX common shareholders in lieu of cash dividends. Each FTX shareholder entitled to receive a fractional share was paid cash in lieu of the fractional share. Subsequent to the completion of the restructuring plan, the FTX Board of Directors will determine a new dividend policy for FTX which will depend on the financial performance of FRP. For the first quarter of 1994 and for 1993 our Board of Directors fixed the amount of the regular quarterly common stock cash dividend at $0.3125 per common share. On May 12, 1994, the Board of Directors declared a special pro-rata distribution of one share of MOXY common stock for each 10 shares of FTX common stock. Each shareholder entitled to receive a fractional share was paid cash in lieu of the fractional share. Cash and property dividends paid during 1994 and 1993: 1994 ---------------------------------------------------------------------- DIVIDEND PER FTX SHARE RECORD DATE PAYMENT DATE ---------------------- ------------- ------------ $.3125 Feb. 15, 1994 Mar. 1, 1994 1/80 FCX share* May 16, 1994 Jun. 1, 1994 1/10 MOXY share* May 20, 1994 May 20, 1994 1/80 FCX share* Aug. 15, 1994 Sep. 1, 1994 1/80 FCX share* Nov. 15, 1994 Dec. 1, 1994 * Below is a summary of the cost basis of shares for the property dividends. Cost Basis Cash in Lieu Rate For Record Date Share Per Share Fractional Share ------------ ----- ---------- --------------------- May 16, 1994 FCX $24.1875 $24.4375 May 20, 1994 MOXY 4.5000 5.4933 Aug. 15, 1994 FCX 22.7500 21.0625 Nov. 15, 1994 FCX 20.0625 22.0625 1993 ----------------------------------------------------------------------- DIVIDEND PER FTX SHARE RECORD DATE PAYMENT DATE ---------------------- ------------- ------------ $.3125 Feb. 15, 1993 Mar. 1, 1993 .3125 May 14, 1993 Jun. 1, 1993 .3125 Aug. 16, 1993 Sep. 1, 1993 .3125 Nov. 15, 1993 Dec. 1, 1993
EX-21 10 EXHIBIT 21.1 List of Subsidiaries of FREEPORT-McMoRan INC. Name Under Which Entity Organized It Does Busines -------------------------------- --------- ---------------- Freeport-McMoRan Copper & Gold Inc. Delaware Same P.T. Freeport Indonesia Company Indonesia and Delaware Same Rio Tinto Metal, S.A. Spain Same Freeport-McMoRan Resource Partners, Limited Partnership Delaware Same IMC-Agrico Company Delaware Same EX-23 11 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our reports included herein or incorporated by reference in this Form 10-K, into Freeport- McMoRan Inc.'s previously filed Registration Statements on Forms S-3 (File Nos. 33-37716 and 33-41547) and the Registration Statements on Forms S-8 (File Nos. 2-85000, 33-14641, 33-29580, 33-30417 and 33-62170). /s/ Arthur Andersen LLP ------------------------- Arthur Andersen LLP New Orleans, Louisiana March 24, 1995 EX-24 12 Exhibit 24.1 FREEPORT-McMoRan INC. Certificate of Secretary ------------------------ I, Michael C. Kilanowski, Jr., Secretary of Freeport- McMoRan Inc. (the "Corporation"), a Delaware corporation, do hereby certify that the following resolution was duly adopted by the Board of Directors of the Corporation at a meeting held on February 29, 1984, and that such resolution has not been amended, modified or rescinded and is in full force and effect: RESOLVED, That any report, registration statement or other form filed on behalf of this corporation pursuant to the Securities Exchange Act of 1934, or any amendment to any such report, registration statement or other form, may be signed on behalf of any director or officer of this corporation pursuant to a power of attorney executed by such director or officer. IN WITNESS WHEREOF, I have hereunto set my name and the seal of the Corporation this 10th day of March, 1995. /s/ Michael C. Kilanowski, Jr. (Seal) ----------------------------- Michael C.Kilanowski, Jr. Secretary EX-24 13 Exhibit 24.2 POWER OF ATTORNEY ----------------- BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation ("the Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS, and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1994, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 31st day of January, 1995. /s/ John T. Eads ------------------------ John T. Eads POWER OF ATTORNEY ----------------- BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation ("the Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS, and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1994, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 31st day of January, 1995. /s/ Robert W. Bruce III ------------------------ Robert W. Bruce III POWER OF ATTORNEY ----------------- BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation ("the Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS, and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1994, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 31st day of January, 1995. /s/ Thomas B. Coleman ------------------------ Thomas B. Coleman POWER OF ATTORNEY ----------------- BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation ("the Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS, and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1994, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 31st day of January, 1995. /s/ William H. Cunningham -------------------------- William H. Cunningham POWER OF ATTORNEY ----------------- BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation ("the Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS, and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1994, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 31st day of January, 1995. /s/ Robert A. Day ------------------------ Robert A. Day POWER OF ATTORNEY ----------------- BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation ("the Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS, and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1994, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 31st day of January, 1995. /s/ William B. Harrison, Jr. ----------------------------- William B. Harrison, Jr. POWER OF ATTORNEY ----------------- BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation ("the Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS, and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1994, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 31st day of January, 1995. /s/ Henry A. Kissinger ------------------------ Henry A. Kissinger POWER OF ATTORNEY ----------------- BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation ("the Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS, and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1994, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 31st day of January, 1995. /s/ Bobby Lee Lackey ------------------------ Bobby Lee Lackey POWER OF ATTORNEY ----------------- BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation ("the Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS, and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1994, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 13th day of February, 1995. /s/ Gabrielle K. McDonald -------------------------- Gabrielle K. McDonald POWER OF ATTORNEY ----------------- BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation ("the Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS, and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1994, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 31st day of January, 1995. /s/ George Putnam ------------------------ George Putnam POWER OF ATTORNEY ----------------- BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation ("the Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS, and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1994, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 31st day of January, 1995. /s/ B. M. Rankin, Jr. ------------------------ B. M. Rankin, Jr. POWER OF ATTORNEY ----------------- BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation ("the Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS, and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1994, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 31st day of January, 1995. /s/ Benno C. Schmidt ------------------------ Benno C. Schmidt POWER OF ATTORNEY ----------------- BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation ("the Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS, and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1994, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 31st day of January, 1995. /s/ J. Taylor Wharton ------------------------ J. Taylor Wharton POWER OF ATTORNEY ----------------- BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation ("the Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS, and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1994, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 31st day of January, 1995. /s/ Ward W. Woods, Jr. ------------------------ Ward W. Woods, Jr. POWER OF ATTORNEY ----------------- BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation ("the Company"), does hereby make, constitute and appoint JAMES R. MOFFETT and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1994, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 31st day of January, 1995. /s/ Rene L. Latiolais ------------------------ Rene L. Latiolais POWER OF ATTORNEY ----------------- BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation ("the Company"), does hereby make, constitute and appoint JAMES R. MOFFETT and RENE L. LATIOLAIS, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1994, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 31st day of January, 1995. /s/ Richard C. Adkerson ------------------------ Richard C. Adkerson EX-27 14
5 This schedule contains summary financial information extracted from Freeport-McMoRan Inc. and subsidiaries consolidated financial statements at December 31, 1994 and for the 12 months then ended, and is qualified in its entirety by reference to such financial statements. 0000351116 FREEPORT-MCMORAN INC. 1,000 12-MOS DEC-31-1994 DEC-31-1994 41,548 0 200,416 0 423,698 795,841 4,906,825 1,540,582 4,373,575 595,530 1,646,882 166,365 0 250,000 (646,832) 4,373,575 1,982,396 1,982,396 1,429,720 1,429,720 14,450 0 91,834 389,922 148,388 72,583 0 (9,108) 0 63,475 .30 .30
EX-99 15 Exhibit 99.1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1994 Commission file number 1-9164 FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP Organized in Delaware I.R.S. Employer Identification No. 72-1067072 1615 Poydras Street, New Orleans, Louisiana 70112 Registrant's telephone number, including area code: (504) 582-4000 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of Each Class Which Registered ------------------- ---------------- Depositary Units New York Stock Exchange 8 3/4% Senior Subordinated Notes due 2004 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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 ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the Depositary Units held by non-affiliates of the registrant was approximately $754,133,000 on March 10, 1995. Documents Incorporated by Reference Portions of the registrant's Annual Report to unitholders for the year ended December 31, 1994 (Parts I, II, III and IV). TABLE OF CONTENTS Page Part I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Items 1 and 2. Business and Properties . . . . . . . . . . . . . . 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . 1 Management . . . . . . . . . . . . . . . . . . . . . . . . . 2 Agricultural Minerals. . . . . . . . . . . . . . . . . . . . 2 Fertilizer Business . . . . . . . . . . . . . . . . . . . 2 Sulphur Business. . . . . . . . . . . . . . . . . . . . . 6 Oil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Competition. . . . . . . . . . . . . . . . . . . . . . . . 9 Research and Development . . . . . . . . . . . . . . . . . . 10 Environmental Matters. . . . . . . . . . . . . . . . . . . . 10 Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . 11 Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . 11 Part II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. . . . . . . . . . . . . . 12 Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . . 12 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . 12 Item 8. Financial Statements and Supplementary Data. . . . . . . . 12 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . . . . . 12 Part III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . 13 Item 11. Executive Compensation. . . . . . . . . . . . . . . . . . 14 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . 14 Item 13. Certain Relationships and Related Transactions. . . . . . . . . . . . . . . . . . . 17 Part IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . . . . . . . 17 Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Index to Financial Statements . . . . . . . . . . . . . . . . . . . . F-1 Report of Independent Public Accountants. . . . . . . . . . . . . . . F-1 Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1 PART I Items 1 and 2. Business and Properties. ---------------------------------------- INTRODUCTION Freeport-McMoRan Resource Partners, Limited Partnership ("FRP"), a Delaware limited partnership organized in 1986, participates in one of the largest and lowest cost phosphate fertilizer producers in the world through its joint venture interest in IMC-Agrico Company, a Delaware general partnership ("IMC-Agrico"). IMC-Agrico's business includes the mining and sale of phosphate rock, the production, distribution and sale of phosphate fertilizers, and the extraction of uranium oxide from phosphoric acid. FRP's business also includes the mining, purchase, transportation, terminaling and sale of sulphur, and the production of oil reserves at Main Pass Block 299 ("Main Pass"), offshore Louisiana in the Gulf of Mexico. For information with respect to industry segments, including export sales and major customers, reference is made to Note 8 to the financial statements of FRP referred to on page F-1 hereof (the "FRP Financial Statements"). In January 1995, FRP acquired essentially all of the domestic assets of Pennzoil Sulphur Co. ("Pennzoil"), a division of Pennzoil Company, including the Culberson mine in Texas, sulphur terminals and loading facilities in Galveston, Texas and Tampa, Florida, land and marine transportation equipment and associated commercial contracts and obligations. Pennzoil will receive quarterly payments from FRP over 20 years based on the prevailing price of sulphur. In October 1994, FRP announced that it had agreed in principle to acquire Fertiberia, S.L. ("Fertiberia"), the restructured nitrogen and phosphate fertilizer business of Ercros, S.A. ("Ercros"), a Spanish conglomerate. Since September 1993, FRP has managed this company with the goal of establishing Fertiberia as a financially viable concern. FRP intends to continue to work with the Spanish authorities on improving the operations of Fertiberia and eventually to acquire substantially all of Fertiberia's outstanding stock in return for agreeing to make a capital contribution of $11.5 million upon closing of the acquisition and a further contingent payment of $10 million in January 1998. As part of the agreement, $38.5 million of nonrecourse financing has been arranged at Fertiberia with payment terms dependent upon its financial performance. The acquisition of Fertiberia, one of the largest fertilizer manufacturers in Europe, is subject to a number of conditions. The Managing General Partners and the Special General Partners of FRP are Freeport-McMoRan Inc. ("FTX"*) and FMRP Inc. ("FMRP"), a wholly owned subsidiary of FTX. The current capitalization of FRP consists of an aggregate 1% basic general partnership interest (the "FRP Basic Interest"), units of limited partnership interest ("FRP Units") of which a portion is deposited with Mellon Bank, N.A., as depositary units ("FRP Depositary Units"), and -------------- *The term "FTX", as used in this report, means Freeport-McMoRan Inc., its divisions, and its direct and indirect subsidiaries and affiliates other than FRP, or any one or more of them, unless the context requires Freeport-McMoRan Inc. only. additional units of general partnership interest ("FRP Unit Equivalents"). FRP Depositary Units are listed and publicly traded on the New York Stock Exchange ("NYSE"). Unless otherwise indicated, FRP Units, FRP Depositary Units and FRP Unit Equivalents are sometimes hereinafter referred to, individually and collectively, as "Partnership Units". Including the FRP Basic Interest, FTX and FMRP, as of March 10, 1995, held Partnership Units representing an approximate 51.4% interest in FRP, with the remaining interest being publicly owned and traded on the NYSE. The public unitholders are entitled, through the cash distribution for the fourth quarter of 1996, to receive minimum quarterly distributions prior to any distribution on the partnership units held by FTX and FMRP. For additional information with respect to FRP distributions, reference is made to Note 3 to the FRP Financial Statements. MANAGEMENT As provided in the FRP partnership agreement, limited partners may not take part in the management of FRP. FTX, as Administrative Managing General Partner, exercises all management powers over the business and affairs of FRP. FRP does not have directors. Instead, directors and officers of FTX, along with FRP's elected officers, perform all FRP management functions and carry out the activities of FRP. Such elected officers of FRP continue to be employees or officers of FTX or its subsidiaries, but, subject to certain exceptions, are employed principally for the operation of FRP's businesses. Pursuant to the FRP partnership agreement, FTX also furnishes general executive, administrative, financial, accounting, legal, environmental, tax, research and development, sales and certain other services to FRP and is reimbursed by FRP for all direct and indirect costs in connection therewith. FTX and FMRP do not receive any compensation as general partners of FRP. For additional information with respect to management, reference is made to Note 6 to the FRP Financial Statements. AGRICULTURAL MINERALS FRP's agricultural minerals segment consists of FRP's interest in the IMC-Agrico fertilizer business and FRP's sulphur business. Fertilizer Business ------------------- IMC-Agrico Company In July 1993, FRP and IMC Fertilizer, Inc., now IMC Global Inc. ("IGL"), contributed their respective phosphate fertilizer businesses, including the mining and sale of phosphate rock and the production, distribution and sale of phosphate chemicals, uranium oxide and related products, to IMC-Agrico. At the time, FRP and IGL were among the largest integrated phosphate fertilizer producers in the world and both were among the lowest cost producers. As a result of the formation of IMC-Agrico, FRP expects that it and IGL together will be able to achieve beginning in the 1995/1996 fertilizer year approximately $135 million per year of savings in aggregate production costs and selling, general and administrative expenses. FRP estimates that it and IGL actually realized $90 million of savings in the 1993/1994 fertilizer year. Under the IMC-Agrico Partnership Agreement (the "Partnership Agreement"), IMC- Agrico will distribute quarterly to the Partners Distributable Cash, as defined in the Partnership Agreement, based on sharing ratios that vary from year to year for the first five fiscal years ending June 30, 1998. The sharing ratios are based on the parties' initial projections of their respective contributions to the cash flow of IMC-Agrico and on an equal sharing of the anticipated synergistic savings. For further information, see Note 2 to the FRP Financial Statements. IMC-Agrico is governed by a policy committee (the "Policy Committee") with equal representation from FRP and IGL, which establishes policies relating to the strategic direction of IMC-Agrico and assures that such policies are implemented. The Policy Committee has the sole authority to make certain Major Decisions, as defined in the Partnership Agreement, including the creation of major indebtedness, major acquisitions and dispositions, and approval of budgets, subject to the authority of the Chief Executive Officers of FRP and IGL to resolve disputes. Phosphate Rock IMC-Agrico's phosphate mining operations and production plants are located in Polk, Hillsborough, Hardee and Manatee Counties in central Florida. IMC-Agrico mines phosphate rock for both internal production of phosphoric acid at plants in Florida and Louisiana and phosphate rock sales to external customers under long-term contracts and in the spot market. The rock is reacted with sulphuric acid, produced in part from sulphur from Main Pass, to provide phosphoric acid which is then further processed at IMC-Agrico's fertilizer plants. IMC-Agrico's annual phosphate rock capacity is approximately 31.5 million tons per year and accounts for approximately 54% of U.S. phosphate rock capacity and 18% of world capacity. IMC-Agrico's phosphate rock mines produced 20.9 million tons of phosphate rock in the year ended December 31, 1994, compared to a total production by U.S. phosphate mines of 41.5 million tons of phosphate rock. Production was at less than full capacity in 1994 because of actions to control inventory. As of December 31, 1994, FRP, through IMC-Agrico, had proved and probable reserves of 206.7 million short tons, plus an additional 190.2 million short tons of phosphate rock deposits. (Deposits are ore bodies which require additional economic and mining feasibility studies before they can be classified as reserves.) For information with respect to FRP's phosphate rock reserves, reference is made to Note 10 to the FRP Financial Statements. For information concerning FRP's sales of phosphate rock, see "Selected Financial and Operating Data" on page 13 of FRP's 1994 Annual Report to unitholders, which is incorporated herein by reference. Phosphate Fertilizers IMC-Agrico manufactures fertilizer and related products, including sulphuric acid, phosphoric acid, granulated phosphates (principally diammonium phosphate ("DAP"), monoammonium phosphate ("MAP") and granular triple superphosphate ("GTSP")), anhydrous ammonia and urea. IMC-Agrico's fertilizer operations consist of six plants, three in central Florida and three on the Mississippi River in Louisiana. Although certain plants were temporarily idled in 1994 due to weak market conditions, all of the plants were in operation by early 1995. IMC-Agrico's plants located in Florida consist of New Wales, Nichols and South Pierce. The New Wales plant, located near Mulberry, Florida, has facilities for the production of sulphuric acid, phosphoric acid, DAP, MAP and GTSP. The Nichols facility, located at Nichols, Florida, has facilities for the production of sulphuric acid, phosphoric acid and DAP. South Pierce, located at Bartow, Florida, has facilities for the production of sulphuric acid, phosphoric acid, GTSP and technical grade DAP and MAP for industrial uses. IMC-Agrico's Faustina, Uncle Sam and Taft plants are located in Louisiana. The Faustina plant, located at Donaldsonville, Louisiana, has facilities for the production of anhydrous ammonia, urea, sulphuric acid, phosphoric acid, DAP and MAP. The Uncle Sam plant, located at Uncle Sam, Louisiana, has facilities for the production of sulphuric acid and phosphoric acid. The Taft plant, located at Taft, Louisiana, has facilities for the manufacture of DAP and MAP. IMC-Agrico's plants have an estimated annual sustainable capacity to produce 530,000 tons of anhydrous ammonia, 260,000 tons of urea, approximately 10.4 million tons of sulphuric acid, and approximately 8.2 million tons of granulated phosphates. IMC-Agrico's phosphoric acid capacity is approximately 4.0 million tons of contained P2O5*, approximately 32% of U.S. production capacity and 11% of world capacity. In 1994 IMC-Agrico produced approximately 10.2 million tons of sulphuric acid, 3.7 million tons of phosphoric acid, and 7.1 million tons of granulated phosphates. For information concerning FRP's sales of phosphate fertilizers, see "Selected Financial and Operating Data" on page 13 of FRP's 1994 Annual Report to unitholders, which is incorporated herein by reference. Phosphate rock, sulphur and ammonia are the three principal raw materials used in the production of phosphate fertilizers. Phosphate rock is supplied by IMC-Agrico's Florida mines. FRP and IGL both have interests in a joint venture which began mining sulphur reserves at Main Pass in April 1992. FRP continues to operate the Main Pass joint venture through Freeport Sulphur Company ("FSC"), its sulphur division. FRP and IGL entered into an agreement to supply IMC-Agrico with its sulphur requirements. FRP supplies its share of the requirements through FSC. IGL supplies its share of the requirements through its share of Main Pass production and purchases from third parties. IMC-Agrico's ammonia needs are fulfilled primarily by third party domestic suppliers under long-term contracts and by internal production at its Faustina plant. --------------- *P2O5 is an industry term indicating a product's phosphate content measured chemically in units of phosphorous pentoxide. Marketing Since July 1993, all fertilizer marketing functions for FRP have been handled by IGL on behalf of IMC-Agrico. IMC-Agrico markets products throughout the eastern two-thirds of the United States in the domestic market and, primarily through the American Phosphate Export Association ("Amphos"), a Webb-Pomerene association, overseas. Phoschem and Phosrock, the primary units of Amphos, market phosphate chemical fertilizers and phosphate rock, respectively, for IMC-Agrico and other U.S. firms. Effective January 1995, the marketing activities of Phoschem have been consolidated into those of its member companies with IMC-Agrico marketing DAP, MAP and GTSP for the members. This change will allow IMC-Agrico to interface directly with its major international customers and better pursue growth and marketing opportunities. In 1994 IMC-Agrico used approximately 59% of its phosphate rock shipments at its plants in Florida and Louisiana, with most of the balance being sold in the domestic market. Approximately half of IMC-Agrico's phosphate fertilizer shipments in 1994 were sold in the domestic market, with the balance sold abroad. Although phosphate fertilizer sales do not vary significantly from month to month, the largest sales periods occur prior to the fall and spring planting of crops. Historically, domestic sales decline somewhat after the spring planting season but this drop in domestic sales occurs at a time when major international buyers purchase product for mid-year delivery. World phosphate prices declined to a nearly 20 year low during mid-1993, due to a number of factors, including a significant decline in import demand by China; a sharp increase to record levels of U.S. producer held stocks of finished phosphate fertilizers; intense competition in offshore markets traditionally served by U.S. producers, particularly MAP from the former Soviet Union; unsettled import policies in other key overseas markets such as China and India and continued lower demand in Europe. Prices significantly improved during 1994 as China returned to the market purchasing record volumes. FRP believes that the price outlook for phosphate fertilizers has improved substantially based in part on this return by China to the marketplace at more traditional volume levels, a significant reduction in the stocks of finished phosphate materials held by producers (in spite of near maximum industry operating rates) and stable domestic demand. Uranium The phosphate rock used in the production of phosphoric acid contains small amounts of uranium. At its uranium extraction facilities, IMC-Agrico extracts and processes uranium oxide ("yellowcake") as a by-product of phosphoric acid. Production of yellowcake is dependent on the quantity and uranium content of phosphoric acid produced by its host plants. Yellowcake, after further processing, is used as a fuel by electric utilities. Although IMC-Agrico has the capacity to extract yellowcake at several phosphoric acid plants, production has been suspended at certain of the plants because of the depressed market price of yellowcake and, at present, uranium does not significantly contribute to IMC-Agrico's revenues. Operating and Environmental Hazards The production of fertilizers involves the handling of chemicals, some of which may have the potential, if released in sufficient quantities, to expose IMC-Agrico to certain liabilities. However, IMC-Agrico has a program in place to minimize the potential for such releases. FRP, through FTX, and IMC-Agrico carry insurance for certain of these risks, and management believes that the types and limits of such insurance coverages are adequate and consistent with prudent business practices. Sulphur Business ---------------- FRP, through FSC, is involved in the mining, purchase, transportation, terminaling and sale of sulphur. In January 1995, FRP acquired essentially all of the domestic assets of Pennzoil, including the Culberson mine in Texas, sulphur terminals and loading facilities in Galveston, Texas and Tampa, Florida, land and marine transportation and equipment and associated commercial contracts and obligations. As a result, substantially all of FRP's sulphur mining assets are located in the Gulf of Mexico offshore Louisiana and in Culberson County, Texas. Production In January 1994, production ceased at FRP's Caminada sulphur mine, leaving at that time the Main Pass sulphur mine, located in federal waters in the Gulf of Mexico, as FRP's only producing sulphur mine. The Main Pass mine utilizes the Frasch Mining process, which involves the drilling of wells and the injection of superheated water into the underground sulphur deposit to melt the solid sulphur, which is then brought to the surface in liquid form. FRP has been using the Frasch process for over 80 years. FRP has also developed technology which allows it to use sea water in the Frasch process. FRP is not aware of any other company that has developed Frasch sulphur mines using superheated sea water. Main Pass, discovered by FRP in 1988, currently has the highest production rate of any sulphur mine in the world and the largest existing Frasch sulphur reserve in North America. The Main Pass offshore complex, more than a mile in length, is one of the largest structures of its type in the world and the largest in the Gulf of Mexico. The Main Pass mine, which began initial production at minimal levels in the second quarter of 1992, is estimated to contain proved recoverable sulphur reserves totaling 70.3 million long tons (41.0 million long tons net to FRP) at December 31, 1994. The mine is owned 58.3% by FRP, 25% by IGL and 16.7% by Homestake Sulphur Company ("Homestake"). The development and production of the Main Pass reserves are being conducted by FTX, through FSC, on behalf of FRP, as operator of the Main Pass joint venture, pursuant to a management services agreement. FTX completed development of Main Pass in 1993. Sulphur production reached design production capacity of 5,500 long tons per day (approximately 2 million long tons per year) on schedule in December 1993 and has since sustained production above that level. During 1994 production averaged 6,200 long tons per day as FTX focused on increasing and sustaining production of Main Pass while implementing new strategies to strengthen operating efficiencies and lower costs. Main Pass is subject to a 12.5% federal royalty based on net mine revenues. For additional information with respect to FRP's sulphur reserves, reference is made to Note 10 to the FRP Financial Statements. The primary fuel source at Main Pass is natural gas. A contract with an initial term of 20 years, effective from April 1992, was executed for the purchase of natural gas at market based prices. FRP currently supplements its sulphur production by purchasing from third party sources. This sulphur is purchased from companies which recover sulphur in the production of oil and natural gas and the refining of petroleum products. Marketing Sulphur produced by FRP at Main Pass is transported by barge to its storage, handling and shipping facilities located at Port Sulphur, Louisiana. Sulphur production from FRP's Culberson mine is transported in liquid form by unit train to Galveston. At both Port Sulphur and Galveston, sulphur purchased from others or transported for others may also be received. Sulphur is transported from Port Sulphur by barge to IMC-Agrico and customer plants on the Mississippi River. Molten sulphur is also transported from Galveston and Port Sulphur by tanker to FRP's terminals at Tampa. Similar facilities at Pensacola, Florida are used for storage, handling and shipping of sulphur purchased from others or transported for others. FRP also processes and transports for a fee both IGL's and Homestake's share of Main Pass sulphur and serves as marketing agent for Homestake. FRP's sulphur is used in the manufacture of sulphuric acid, which, in turn, is primarily used to produce phosphoric acid, the basic material for the production of phosphate fertilizers. The phosphate fertilizer industry, including the IMC-Agrico phosphate facilities, accounts for approximately 92% of FRP's total sulphur sales. A small number of companies consume a large portion of the total sulphur consumed in the United States. Substantially all of the sulphur sold by FRP is supplied under contracts having a term of one to three years. FRP has entered into a long-term contract to supply IMC-Agrico with sulphur. For additional information with respect to FRP's sales of sulphur, reference is made to "Selected Financial and Operating Data" appearing on page 13 of FRP's 1994 Annual Report to unitholders. Globally, approximately 62% of annual sulphur demand arises from the production of fertilizers, principally phosphate fertilizers. Improved phosphate fertilizer operating rates, coupled with reduced imports, resulted in sulphur price increases in Tampa, Florida since mid-1994. To the extent U.S. phosphate fertilizer production remains strong, improved sulphur demand is expected to continue, although the availability of Canadian sulphur limits the potential for significant price increases. OIL The Main Pass project also contains oil* reserves associated with the same caprock reservoir at Main Pass as the sulphur reserves. The development and production of these Main Pass reserves are being conducted by FTX on behalf of FRP, as operator of the joint venture, pursuant to a management services agreement. Oil production commenced in the fourth quarter of 1991 and averaged approximately 14,400 barrels of oil per day ("BOPD") during 1994. As of December 31, 1994, FRP estimates that remaining proved recoverable oil reserves at Main Pass are 15.5 million barrels (7.3 million barrels net to FRP). FRP is engaged in oil operations only at Main Pass and does not currently intend to pursue oil operations that are not related to Main Pass. For information relating to estimates of FRP's net interests in proved oil reserves as of December 31, 1994, reference is made to Note 10 to the FRP Financial Statements. No favorable or adverse event or major discovery has occurred since December 31, 1994, that FRP believes would cause a significant change in estimated proved reserves. Production and Marketing Conditions Since completion of development drilling in mid-April 1993, oil production for the Main Pass joint venture has increased significantly and averaged over 15,000 BOPD for December 1994. Because of the complexities of producing sour crude in an offshore environment, periodic curtailments down to 5,500 BOPD may be required to perform maintenance repairs. The Company's share of oil production was approximately 2.5 million barrels for 1994. Production in 1995 is expected to approximate that of 1994, with the anticipated drilling of additional wells expected to partially offset declining reservoir production. Production is expected to decline thereafter. For information concerning FRP's sales of oil during the year ended December 31, 1994, reference is made to "Selected Financial and Operating Data" appearing on page 13 of FRP's 1994 Annual Report to unitholders, incorporated herein by reference. For information concerning the interaction between concurrent oil and sulphur production, see "Sulphur Business" above. Oil prices have historically exhibited, and can be expected to continue to exhibit, volatility as a result of such factors as political uncertainty in the Middle East, actions of the Organization of Petroleum Exporting Countries and changes in worldwide weather and economic conditions. Main Pass oil contains sulphur and is generally heavier than other Gulf Coast crude oils. As a result, it sells at a discount relative to Gulf Coast crude oils containing less sulphur and to lighter grade crude oils. Acreage FRP's interest in Main Pass, in federal waters offshore Louisiana, constitutes the only oil property owned by FRP. The property consists of ------------- *As used in this portion of the report, "oil" refers to crude oil, condensate and natural gas liquids. 1,125 gross acres (656 acres net to FRP) and is fully developed within the meaning of governmental reporting requirements. FRP possesses a leasehold interest in its Main Pass oil property which is maintained by production and will remain in effect until production and drilling and development operations cease. FRP believes that the lease terms are sufficient to allow for reasonable development of the reserves. Operating Hazards FRP's oil activities are subject to all of the risks normally incident to the development and production of sour oil, including blowouts, cratering and fires, each of which could result in injury to personnel and/or damage to property. Additionally, offshore operations are subject to marine perils, including hurricanes and other adverse weather conditions. FRP, through FTX, carries insurance for certain of these risks, and management believes that the types and limits of such insurance coverages are adequate and consistent with prudent business practices. Government Regulation Domestic oil operations are subject to extensive state and federal regulation. Compliance is often burdensome, and failure to comply carries substantial penalties. The heavy and increasing regulatory burden on the oil industry increases the cost of doing business and, consequently, affects profitability. Federal laws and regulations impose liability upon the lessee under a federal lease for the cost of cleanup of pollution resulting from a lessee's operations, and such lessee could be subject to liability for pollution damages. A serious incident of pollution may also result in a requirement to suspend or cease operations in the particular area. FRP, through FTX, carries insurance against some, but not all, of these risks. For further information with respect to environmental risks and FRP's responses thereto, see "Environmental Matters" below. COMPETITION The fertilizer and phosphate rock mining industries are highly competitive. In these global businesses, IMC-Agrico faces stiff competition from overseas producers, most of which are state supported, especially those in North Africa, and most recently those in the former Soviet Union. In the United States, IMC-Agrico competes against a number of major phosphate fertilizer producers, including large cooperatives. FRP, through IMC-Agrico, is one of the largest and lowest cost producers of phosphate rock and the largest integrated producer of phosphate fertilizers in the world. FRP's significant phosphate rock and sulphur reserves and production, through IMC- Agrico and FSC, substantially reduce the sensitivity of its phosphate fertilizer costs to changes in raw material prices. The strategic location of fertilizer operations on the Mississippi River system reduces transportation costs for finished products sold in the Midwest farmbelt. FRP believes that its internal production of raw materials, through FSC and IMC-Agrico, and the strategic location of IMC-Agrico's operations provide it with a competitive advantage over other United States based producers. The acquisition of the Pennzoil sulphur assets enhances FRP's competitive position with regard to the raw material requirements of its phosphate fertilizer operations and to the reduction of operating costs. In 1994, two companies operating domestic Frasch sulphur mines accounted for approximately 24% of total domestic consumption of sulphur in all forms. Domestic recovered sulphur, produced by more than 50 companies at more than 130 refineries and gas treatment plants, supplied approximately 50%, while imported sulphur, primarily from Canada and Mexico, accounted for approximately 12% of domestic sulphur consumption. The remaining 14% of domestic sulphur consumption was met in the form of sulphuric acid produced in metals smelting operations and from imported sulphuric acid. FRP's production of sulphur accounts for approximately 22% of domestic and 6% of world elemental sulphur production for the year ended December 31, 1994. With the achievement of full operations at Main Pass at the end of 1993, FRP became the largest Frasch sulphur producer in the world. A large number of companies and individuals are engaged in the development and production of oil. Many of these companies possess financial resources equal to or greater than those of FRP. RESEARCH AND DEVELOPMENT In 1993, FTX contracted with Crescent Technology, Inc. ("Crescent") to furnish engineering consulting, research and development, environmental and safety services to FTX. Crescent owns and operates laboratory and pilot plant facilities at Belle Chasse, Louisiana, where mineral analyses, metallurgical work and other research and testing are conducted which contribute to FTX's commercial operations, including those of FRP. Additionally, Crescent maintains engineering consulting and mine development groups in New Orleans, Louisiana, which provide the engineering consulting, environmental services and design and construction supervision activities required to implement new ventures and apply improvements to existing operations of FRP. ENVIRONMENTAL MATTERS FTX and FRP have a history of commitment to environmental responsibility. Since the 1940s, long before the general public recognized the importance of maintaining environmental quality, FTX has conducted preoperational, bioassay, marine ecological and other environmental surveys to ensure the environmental compatibility of its operations. FTX's Environmental Policy commits its operations to full compliance with applicable laws and regulations. FTX has contracted with Crescent to develop and implement corporatewide environmental programs that include the activities of FRP and to study and implement methods to reduce discharges and emissions. FRP's operations are subject to federal, state and local laws and regulations relating to the protection of the environment. Exploration, mining, development and production of natural resources, and the chemical processing operations of IMC-Agrico, like similar operations of other companies, may affect the environment. Moreover, such operations may involve the extraction, handling, production, processing, treatment, storage, transportation and disposal of materials and waste products which, under certain conditions, may be toxic or hazardous and expressly regulated under environmental laws. Present and future environmental laws and regulations applicable to the operations of FRP or IMC-Agrico may require substantial capital expenditures or affect their operations in other ways that cannot now be accurately predicted. FRP has made, and continues to make, expenditures at its operations for protection of the environment. In 1992, at a cost of $35.7 million, FRP completed the replacement of two sulphuric acid production units at an existing fertilizer plant thereby substantially reducing air emissions and increasing plant efficiency. As successor to FRP, IMC-Agrico completed at the end of 1993, at a cost of $27 million, an innovative drainage and cover plan for phosphogypsum storage areas in Louisiana to substantially reduce substances in wastewater discharged from its fertilizer operations, while at the same time increasing the capacity of these storage areas. Continued government and public emphasis on environmental matters can be expected to result in increased future investments for environmental controls. On analyzing its operations and those of IMC-Agrico in relation to current and anticipated environmental requirements, FRP does not expect that these investments will have a significant impact on its future operations or financial condition. For additional information concerning environmental matters, reference is made to "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 8 through 11 and 14 through 16, of FRP's 1994 Annual Report to unitholders, which is incorporated herein by reference. Item 3. Legal Proceedings. -------------------------- Although FRP may be from time to time involved in various legal proceedings of a character normally incident to the ordinary course of its businesses, FRP believes that potential liability in any such pending or threatened proceedings would not have a material adverse effect on the financial condition or results of operations of FRP. FRP, through FTX, maintains liability insurance to cover some, but not all, potential liabilities normally incident to the ordinary course of its businesses as well as other insurance coverages customary in its businesses, with such coverage limits as management deems prudent. Item 4. Submission of Matters to a Vote of Security Holders. ------------------------------------------------------------ Not applicable. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder ----------------------------------------------------------------------------- Matters. ------- The information set forth under the captions "FRP Units" and "Cash Distributions", on the inside back cover of FRP's 1994 Annual Report to unitholders is incorporated herein by reference. As of March 10, 1995, there were 17,453 record holders of FRP Units. Item 6. Selected Financial Data. -------------------------------- The information set forth under the caption "Selected Financial and Operating Data" on page 13 of FRP's 1994 Annual Report to unitholders is incorporated herein by reference. FRP's ratio of earnings to fixed charges for each of the years 1990 through 1994 inclusive, was 16.5x, 4.4x, 1.0x, a shortfall of $233.5 million and 3.2x, respectively. For purposes of this calculation, earnings are income from continuing operations before fixed charges. Fixed charges are interest and that portion of rent deemed representative of interest. Item 7. Management's Discussion and Analysis of Financial Condition and ------------------------------------------------------------------------------- Results of Operations. --------------------- The information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations", on pages 8 through 11 and 14 through 16, of FRP's 1994 Annual Report to unitholders, is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data. ---------------------------------------------------- The financial statements of FRP, the notes thereto and the report thereon of Arthur Andersen LLP, appearing on pages 17 through 27 inclusive, of FRP's 1994 Annual Report to unitholders, are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and -------------------------------------------------------------------------------- Financial Disclosure. -------------------- Not applicable. PART III Item 10. Directors and Executive Officers of the Registrant. ------------------------------------------------------------ FRP has no directors; instead, the general partners in FRP, FTX and FMRP, perform comparable functions for FRP. In addition to the elected executive officers of FRP (the "Elected FRP Executive Officers"), certain employees of the general partners have management responsibilities with respect to FRP and are thus deemed by FRP to be executive officers of FRP (the "Designated FRP Executive Officers") for purposes of the federal securities laws. The following table shows, as of March 15, 1995, the names, ages, positions with the general partners and principal occupations of the Elected FRP Executive Officers and the Designated FRP Executive Officers (collectively, the "FRP Executive Officers"): Name Age Positions and Principal Occupations ---- --- ----------------------------------- Richard C. Adkerson 48 Senior Vice President of FTX. John G. Amato 51 General Counsel of FRP. General Counsel of FTX. Director of FMRP. Richard H. Block 44 Senior Vice President - Fertilizer Operations of FRP. Senior Vice President of FTX. Thomas J. Egan 50 Senior Vice President of FTX. Robert B. Foster 51 Senior Vice President - Sulphur Operations of FRP. Charles W. Goodyear 37 Senior Vice President - Finance and Accounting and Chief Financial Officer of FRP. Senior Vice President of FTX. Director of FMRP. W. Russell King 45 Senior Vice President of FTX. Rene L. Latiolais 52 President and Chief Executive Officer of FRP. Director, President, and Chief Operating Officer of FTX. Director, Chairman of the Board, and President of FMRP. George A. Mealey 61 Executive Vice President of FTX. Director, President, and Chief Executive Officer of Freeport-McMoRan Copper & Gold Inc., a subsidiary of FTX. James R. Moffett 56 Director, Chairman of the Board, and Chief Executive Officer of FTX. All of the individuals above have served FTX or FRP in various executive capacities for at least the last five years. All Elected FRP Executive Officers and all officers of FTX serve at the pleasure of the Board of Directors of FTX. All officers of FMRP serve at the pleasure of the Board of Directors of FMRP. According to (i) the Forms 3 and 4 and any amendments thereto filed pursuant to Section 16(a) of the Securities Exchange Act of 1934 ("Section 16") and furnished to FRP during 1994 by persons subject to Section 16 at any time during 1994 with respect to securities of FRP ("FRP Section 16 Insiders"), (ii) the Forms 5 with respect to 1994 and any amendments thereto filed pursuant to Section 16 and furnished to FRP by FRP Section 16 Insiders, and (iii) the written representations from certain FRP Section 16 Insiders that no Form 5 with respect to the securities of FRP was required to be filed by such FRP Section 16 Insider, respectively, with respect to 1994, no FRP Section 16 Insider failed to file altogether or timely any Forms 3, 4, or 5 required by Section 16 with respect to the securities of FRP or to disclose on such Forms transactions required to be reported thereon. Item 11. Executive Compensation. -------------------------------- FRP does not employ any of the FRP Executive Officers, nor does it compensate them for their services. The FRP Executive Officers are either employed or retained by FTX. The President and Chief Executive Officer of FRP, Rene L. Latiolais, is employed by FTX. The four most highly compensated FRP Executive Officers other than Mr. Latiolais are James R. Moffett, Richard C. Adkerson, Charles W. Goodyear, and Robert B. Foster; they are also employed by FTX. The determination as to which FRP Executive Officers were the most highly compensated was made by reference to the total annual salary and bonus for 1994 of each of the FRP Executive Officers employed by FTX that was allocated to FRP by FTX pursuant to the FRP partnership agreement on the basis of time devoted to FRP activities. The services of all the FRP Executive Officers and the services of the other officers of FRP are provided to FRP by FTX under the FRP partnership agreement. FRP reimburses FTX at FTX's cost, including allocated overhead, for such services. All the FRP Executive Officers are compensated exclusively by FTX for their services to FRP. All the FRP Executive Officers are eligible to participate in certain FTX benefit plans and programs. The total costs to FTX for the FRP Executive Officers, including the costs borne by FTX with respect to such plans and programs, are allocated to FRP, to the extent practicable, in proportion to the time spent by such FRP Executive Officers on FRP affairs. No other payment is made by FRP to FTX for providing such compensation and benefit plans and programs to the FRP Executive Officers. Reference is made to the information set forth under the caption "Management" above and to the information set forth in Note 6 to the FRP Financial Statements. Item 12. Security Ownership of Certain Beneficial Owners and Management. ------------------------------------------------------------------------ According to information furnished by each of the persons known to FRP to be a beneficial owner of more than 5% of Partnership Units, the number of Partnership Units beneficially owned by each of them as of December 31, 1994, was as follows: Number of Partnership Units Percent Beneficially of Name and Address of Person Owned Class -------------------------- ----- ----- Freeport-McMoRan Inc. 52,167,657(a) 50.9% 1615 Poydras Street New Orleans, Louisiana 70112 Vanguard/Windsor Fund, Inc. 5,798,300(b) 5.7% Post Office Box 2600 Valley Forge, Pennsylvania 19482-2600 --------------- (a) These Partnership Units consist of 17,741 FRP Depositary Units and 52,149,916 FRP Unit Equivalents. FTX has sole voting and investment power with respect to such Partnership Units. (b) Vanguard/Windsor Fund, Inc. has sole voting power and shared investment power as to all 5,798,300 Partnership Units. The other general partner in FRP, FMRP, did not own beneficially any Partnership Units as of December 31, 1994. According to information furnished by each of the Elected FRP Executive Officers and the Designated FRP Executive Officers (collectively, the "FRP Executive Officers"), the number of FRP Depositary Units and shares of FTX common stock ("FTX Shares") beneficially owned by each of them as of December 31, 1994, was as follows: Number of Number of FRP Depositary Units FTX Shares Name of Individual Beneficially Beneficially or Identity of Group Owned(a) Owned(a) -------------------- -------- -------- Richard C. Adkerson 0 289,170(b)(c) Robert B. Foster 41 118,308(b) Charles W. Goodyear 0 284,893(b)(d) Rene L. Latiolais 617(e) 640,893(b) James R. Moffett 65,439(f) 3,551,945(b)(f) 10 FRP Executive Officers as a group, including those persons named above 76,546(g) 5,971,120(g) --------------- (a) Except as otherwise noted, the individuals referred to have sole voting and investment power with respect to such FRP Depositary Units and FTX Shares. With the exception of Mr. Moffett, who beneficially owns 2.6% of the outstanding FTX Shares, each of the individuals referred to holds less than 1% of the outstanding FRP Depositary Units and FTX Shares, respectively. (b) Includes FTX Shares held by the trustee under the Employee Capital Accumulation Program of FTX, as follows: Mr. Adkerson, 3,423 FTX Shares; Mr. Foster, 711 FTX Shares; Mr. Goodyear, 2,742 FTX Shares; Mr. Latiolais, 16,022 FTX Shares; Mr. Moffett, 23,742 FTX Shares; all FRP Executive Officers as a group (9 persons), 86,084 FTX Shares. Also includes FTX Shares that could be acquired within 60 days after December 31, 1994 upon the exercise of options granted pursuant to the employee stock option plans of FTX, as follows: Mr. Adkerson, 282,087 FTX Shares; Mr. Foster, 100,747 Shares; Mr. Goodyear, 282,087 FTX Shares; Mr. Latiolais, 454,898 FTX Shares; Mr. Moffett, 2,016,805 FTX Shares; all FRP Executive Officers as a group (10 persons), 4,024,586 FTX Shares. (c) Includes 776 FTX Shares that may be acquired upon the conversion of 6.55% Convertible Subordinated Notes due January 15, 2001 of FTX held in trust for the benefit of Mr. Adkerson and 2,884 FTX Shares that may be acquired upon the conversion of Zero Coupon Convertible Subordinated Debentures due 2006 of FTX held in trust for the benefit of Mr. Adkerson. (d) Includes 64 FTX Shares held in a retirement account for the benefit of Mr. Goodyear. (e) Includes 483 FRP Depositary Units held for the benefit of Mr. Latiolais by the custodian under FRP's Depositary Unit Reinvestment Plan. (f) Includes a total of 39,600 FRP Depositary Units and 214,648 FTX Shares held for the benefit of a trust with respect to which Mr. Moffett and an FRP Executive Officer, as co-trustees of such trust, have sole voting and investment power but have no beneficial interest therein. Mr. Moffett and such FRP Executive Officer disclaim beneficial ownership of such FRP Depositary Units and FTX Shares held for the benefit of such trust. Includes a total of 25,839 FRP Depositary Units and 85,140 FTX Shares held for the benefit of two trusts created by Mr. Moffett for the benefit of his two children, who are adults. An FRP Executive Officer and another individual, as co-trustees of the two trusts, have sole voting and investment power with respect to such FRP Depositary Units and FTX Shares held for the benefit of such trusts but have no beneficial interest therein. Mr. Moffett and such FRP Executive Officer disclaim beneficial ownership of such FRP Depositary Units and FTX Shares held for the benefit of such trusts. Includes a total of 88,000 FTX Shares held for the benefit of a trust created by Mr. Moffett for the benefit of an educational fund and his two children, who are adults. An FRP Executive Officer and another individual, as co-trustees of such trust, have sole voting and investment power with respect to such FTX Shares held for the benefit of such trust but have no beneficial interest therein. Mr. Moffett and such FRP Executive Officer disclaim beneficial ownership of such FTX Shares held for the benefit of such trust. (g) See notes (b) through (f) above. Includes 6 FRP Depositary Units and 1,516 FTX Shares held in trust for the benefit of one of the FRP Executive Officers, 92 FTX Shares held in trust for the benefit of the spouse of such FRP Executive Officer as to which beneficial ownership is disclaimed, and a total of 2,300 FTX Shares held by such FRP Executive Officer as custodian as to which beneficial ownership is disclaimed. These total numbers of FRP Depositary Units and FTX Shares represent less than 1% of the outstanding FRP Depositary Units and approximately 4.2% of the outstanding FTX Shares, respectively. Item 13. Certain Relationships and Related Transactions. -------------------------------------------------------- Reference is made to the information set forth under the caption "Management" above, to the information set forth in Item 11 above and to the information set forth in Note 6 to the FRP Financial Statements. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. -------------------------------------------------------------------------- (a)(1), (a)(2), and (d). Financial Statements. Reference is made to the Index to Financial Statements appearing on page F-1 hereof. (a)(3) and (c). Exhibits. Reference is made to the Exhibit Index beginning on page E-1 hereof. (b). Reports on Form 8-K. No reports on Form 8-K were filed by the registrant during the fourth quarter of 1994. SIGNATURES ---------- Pursuant to the requirements of Section 13 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, on March 22, 1995. FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP By: FREEPORT-McMoRan INC., Its Administrative Managing General Partner By: /s/ James R. Moffett --------------------- James R. Moffett Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 22, 1995. /s/ Rene L. Latiolais President and Chief Executive Officer --------------------- Rene L. Latiolais of Freeport-McMoRan Resource Partners, Limited Partnership and Director of Freeport-McMoRan Inc. (Principal Executive Officer) /s/ Charles W. Goodyear Senior Vice President and Chief ----------------------- Charles W. Goodyear Financial Officer of Freeport-McMoRan Resource Partners, Limited Partnership (Principal Financial Officer) /s/ Nancy D. Bonner Vice President and Controller of ------------------- Nancy D. Bonner Freeport-McMoRan Resource Partners, Limited Partnership (Principal Accounting Officer) Robert W. Bruce III* Director of Freeport-McMoRan Inc. Thomas B. Coleman* Director of Freeport-McMoRan Inc. William H. Cunningham* Director of Freeport-McMoRan Inc. Robert A. Day* Director of Freeport-McMoRan Inc. William B. Harrison, Jr.* Director of Freeport-McMoRan Inc. Henry A. Kissinger* Director of Freeport-McMoRan Inc. Bobby Lee Lackey* Director of Freeport-McMoRan Inc. Gabrielle K. McDonald* Director of Freeport-McMoRan Inc. /s/ James R. Moffett Director, Chairman of the Board -------------------- James R. Moffett and Chief Executive Officer of Freeport-McMoRan Inc. George Putnam* Director of Freeport-McMoRan Inc. B. M. Rankin, Jr.* Director of Freeport-McMoRan Inc. Benno C. Schmidt* Director of Freeport-McMoRan Inc. J. Taylor Wharton* Director of Freeport-McMoRan Inc. Ward W. Woods, Jr.* Director of Freeport-McMoRan Inc. *By: /s/ James R. Moffett -------------------- James R. Moffett Attorney-in-Fact INDEX TO FINANCIAL STATEMENTS ----------------------------- The financial statements of FRP, the notes thereto, and the report thereon of Arthur Andersen LLP, appearing on pages 17 through 27, inclusive, of FRP's 1994 Annual Report to unitholders are incorporated by reference. The financial statement schedules listed below should be read in conjunction with such financial statements contained in FRP's 1994 Annual Report to unitholders. Page ---- Report of Independent Public Accountants...................... F-1 III-Condensed Financial Information of Registrant............. F-2 VIII-Valuation and Qualifying Accounts........................ F-5 Schedules other than those listed above have been omitted, since they are either not required, not applicable or the required information is included in the financial statements or notes thereof. * * * REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ---------------------------------------- We have audited, in accordance with generally accepted auditing standards, the financial statements as of December 31, 1994 and 1993 and for each of the three years in the period ended December 31, 1993 included in Freeport-McMoRan Resource Partners, Limited Partnership's annual report to unitholders incorporated by reference in this Form 10-K, and have issued our report thereon dated January 24, 1995. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in the index above are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. The schedules for the years ended December 31, 1994, 1993 and 1992 have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Arthur Andersen LLP New Orleans, Louisiana, January 24, 1995 FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT BALANCE SHEETS December 31, ------------------------ 1994 1993 ---------- ---------- (In Thousands) ASSETS Current assets: Cash and short-term investments $ 8,409 $ 5,300 Accounts receivable: Customers 9,359 6,193 Other 12,134 12,811 Inventories: Products 25,443 31,458 Materials and supplies 6,150 7,877 Prepaid expenses and other 273 273 ---------- ---------- Total current assets 61,768 63,912 Property, plant and equipment-net 506,590 530,568 Investment in IMC-Agrico 397,937 494,883 Other assets 43,256 91,174 ---------- ---------- Total assets $1,009,551 $1,180,537 ========== ========== LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Accounts payable and accrued liabilities $ 29,877 $ 37,175 Current portion of long-term debt - - ---------- ---------- Total current liabilities 29,877 37,175 Long-term debt, less current portion 355,000 475,900 Reclamation and mine shutdown reserves 58,762 58,896 Accrued postretirement benefits and other liabilities 118,252 116,162 Partners' capital 447,660 492,404 ---------- ---------- Total liabilities and partners' capital $1,009,551 $1,180,537 ========== ========== The footnotes contained in FRP's 1994 Annual Report to unitholders are an integral part of these statements. FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF OPERATIONS Years Ended December 31, --------------------------------- 1994 1993 1992 -------- --------- -------- (In Thousands) Revenues $111,185 $ 424,717 $877,058 Cost of sales: Production and delivery 61,211 344,944 652,169 Depreciation and amortization 38,825 81,521 119,259 -------- --------- -------- Total cost of sales 100,036 426,465 771,428 Exploration expenses - 3,092 5,814 Provision for restructuring charges - 33,947 - Loss on valuation and sale of assets, net - 114,802 - General and administrative expenses 28,949 58,660 79,073 -------- --------- -------- Total costs and expenses 128,985 636,966 856,315 -------- --------- -------- Operating income (loss) (17,800) (212,249) 20,743 Interest expense, net (32,297) (12,293) (869) Equity in earnings of IMC-Agrico 136,671 1,037 - Other income, net (2,608) 1,094 337 -------- --------- ------- Income (loss) before changes in accounting principle 83,966 (222,411) 20,211 Cumulative effect of changes in accounting principle - (23,700) - -------- --------- -------- Net income (loss) $ 83,966 $(246,111) $ 20,211 ======== ========= ======== The footnotes contained in FRP's 1994 Annual Report to unitholders are an integral part of these statements. FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF CASH FLOW Years Ended December 31, ------------------------------- 1994 1993 1992 -------- --------- -------- (In Thousands) Cash flow from operating activities: Net income (loss) $ 83,966 $(246,111) $ 20,211 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Cumulative effect of changes in accounting principle - 23,700 - Depreciation and amortization 38,825 81,521 119,259 Other noncash charges to income 6,495 7,150 - Provision for restructuring charges, net of payments - 3,143 - Loss on valuation and sale of assets, net - 114,802 - Equity in (earnings) of IMC-Agrico (136,671) (1,037) - Cash distributions received from IMC- Agrico 233,617 - - (Increase) decrease in working capital, net of effect of acquisitions and dispositions: Accounts receivable (2,311) (1,552) 18,317 Inventories 7,058 (4,750) (9,983) Prepaid expenses and other - 1,933 (9,995) Accounts payable and accrued liabilities (389) 1,561 (3,011) Reclamation and mine shutdown expenditures (5,270) (9,980) (18,038) Other 5,056 2,935 3,301 --------- --------- -------- Net cash provided by (used in) operating activities 230,376 (26,685) 120,061 --------- --------- -------- Cash flow from investing activities: Capital expenditures: Main Pass (10,941) (37,427) (117,902) Other (290) (10,152) (86,815) Sale of assets 36,919 49,961 - Other 530 4,711 (5,219) -------- --------- -------- Net cash provided by (used in) investing activities 26,218 7,093 (209,936) -------- --------- -------- Cash flow from financing activities: Distributions to partners (127,368) (121,180) (151,210) Proceeds from debt 85,400 572,137 639,891 Repayment of debt (356,300) (433,164) (826,095) Purchase of partnerhsip units (1,342) - - Proceeds from sale of 8 3/4% Senior Subordinated Notes 146,125 - - Proceeds from sale of partnership units - - 430,534 -------- --------- -------- Net cash provided by (used in) financing activities (253,485) 17,793 93,120 -------- --------- -------- Net increase (decrease) in cash and short- term investments 3,109 (1,799) 3,245 Cash and short-term investments at beginning of year 5,300 7,099 3,854 -------- --------- -------- Cash and short-term investments at end of year $ 8,409 $ 5,300 $ 7,099 ======== ========= ======== Interest paid $ 25,094 $ 22,997 $ 19,818 ======== ========= ======== The footnotes contained in FRP's 1994 Annual Report to unitholders are an integral part of these statements. FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS for the years ended December 31, 1994, 1993 and 1992 Col. A Col. B Col. C Col. D Col. E ----------------- ------------ ----------------------- --------- ---------- Additions ---------------------- Balance at Charged toCharged to Balance at Beginning of Costs and Other Other-Add End Description Period Expenses Accounts (Deduct) of Period ----------------- ------------ --------------------- --------- ---------- (In Thousands) Reserves and allowances deducted from asset accounts: Reclamation and mine shutdown reserves: 1994: Sulphur $57,287 $ 1,041 $ - $(3,223) $55,105 Fertilizer 38,437 2,310 - (3,064) 37,683 Oil 1,609 2,385 - (337) 3,657 ------- ------- ----- ------- ------- $97,333 $ 5,736 $ - $(6,624)(a) $96,445 ======= ======= ===== ======= ======= 1993: Sulphur $35,200 $27,562 $ - $(5,475) $57,287 Fertilizer 18,543 5,365 - 14,529 (b) 38,437 Oil 1,409 1,021 - (821) 1,609 ------- ------- ----- ------- ------- $55,152 $33,948 $ - $ 8,233 (c) $97,333 ======= ======= ===== ======= ======= 1992: Sulphur $29,715 $ 4,335 $ - $ 1,150 $35,200 Fertilizer 21,772 7,123 - (10,352) 18,543 Oil - 1,443 - (34) 1,409 ------- ------- ----- ------- ------- $51,487 $12,901 $ - $(9,236)(d) $55,152 ======= ======= ===== ======= ======= a. Includes expenditures of $11.2 million, net of a $4.6 million decrease in short-term payables. b. Includes $19.7 million which represents FRP's proportionate share of IMC-Agrico liabilities (see Note 2 to the Financial Statements) in excess of the FRP contributed amounts. c. Includes expenditures of $13.2 million, net of a $1.7 million decrease in short-term payables and the item discussed in Note b. d. Includes expenditures of $21.2 million, net of a $12 million decrease in short-term payables. Freeport-McMoRan Resource Partners, Limited Partnership Exhibit Index ------------- Sequentially Exhibit Numbered Number Page ------ ---- 3.1 Amended and Restated Agreement of Limited Partnership of FRP dated as of May 29, 1987 (the "FRP Partnership Agreement") among FTX, Freeport Phosphate Rock Company and Geysers Geothermal Company, as general partners, and Freeport Minerals Company ("FMC"), as general partner and attorney-in-fact for the limited partners, of FRP. Incorporated by reference to Exhibit B to the Prospectus dated May 29, 1987 included in FRP's Registration Statement on Form S-1, as amended, as filed with the Commission on May 29, 1987 (Registration No. 33-13513). 3.2 Amendment to the FRP Partnership Agreement dated as of December 16, 1988 effected by FMC, as Administrative Managing General Partner, and FTX, as General Partner of FRP. 3.3 Amendment to the FRP Partnership Agreement dated as of March 29, 1990 effected by FMC, as Administrative Managing General Partner, and FTX, as Managing General Partner, of FRP. Incorporated by reference to Exhibit 19.2 to the Quarterly Report on Form 10-Q of FRP for the quarter ended March 31, 1990 (the "FRP 1990 First Quarter Form 10-Q"). 3.4 Amendment to the FRP Partnership Agreement dated as of April 6, 1990 effected by FTX, as Administrative Managing General Partner of FRP. Incorporated by reference to Exhibit 19.3 to the FRP 1990 First Quarter Form 10-Q. 3.5 Amendment to the FRP Partnership Agreement dated as of January 27, 1992 between FTX, as Administrative Managing General Partner, and FMRP, as Managing General Partner, of FRP. Incorporated by reference to Exhibit 3.3 to the Annual Report on Form 10-K of FRP for the fiscal year ended December 31, 1991 (the "FRP 1991 Form 10-K"). 3.6 Amendment to the FRP Partnership Agreement dated as of October 14, 1992 between FTX, as Administrative Managing General Partner, and FMRP, as Managing General Partner, of FRP. Incorporated by reference to Exhibit 3.4 to the Annual Report on Form 10-K of FRP for the fiscal year ended December 31, 1992 (the "FRP 1992 Form 10-K"). 3.7 Amended and Restated Certificate of Limited Partnership of FRP dated June 12, 1986 (the "FRP Partnership Certificate"). Incorporated by reference to Exhibit 3.3 to FRP's Registration Statement on Form S-1, as amended, as filed with the Commission on June 20, 1986 (Registration No. 33- 5561). 3.8 Certificate of Amendment to the FRP Partnership Certificate dated as of January 12, 1989. Incorporated by reference to Exhibit 3.6 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (the "FRP 1993 Form 10-K"). 3.9 Certificate of Amendment to the FRP Partnership Certificate dated as of December 29, 1989. Incorporated by reference to Exhibit 19.1 to the FRP 1990 First Quarter Form 10-Q. 3.10 Certificate of Amendment to the FRP Partnership Certificate dated as of April 12, 1990. Incorporated by reference to Exhibit 19.4 to the FRP 1990 First Quarter Form 10-Q. 4.1 Deposit Agreement dated as of June 27, 1986 (the "Deposit Agreement") among FRP, The Chase Manhattan Bank, N.A. ("Chase") and Freeport Minerals Company ("Freeport Minerals"), as attorney-in-fact of those limited partners and assignees holding depositary receipts for units of limited partnership interests in FRP ("Depositary Receipts"). Incorporated by reference to Exhibit 28.4 to the Current Report on Form 8-K of FTX dated July 11, 1986. 4.2 Resignation dated December 26, 1991 of Chase as Depositary under the Deposit Agreement and appointment dated December 27, 1991 of Mellon Bank, N.A. ("Mellon") as successor Depositary, effective January 1, 1992. Incorporated by reference to Exhibit 4.5 to the FRP 1991 Form 10-K. 4.3 Service Agreement dated as of January 1, 1992 between FRP and Mellon pursuant to which Mellon will serve as Depositary under the Deposit Agreement and Custodian under the Custodial Agreement. Incorporated by reference to Exhibit 4.6 to the FRP 1991 Form 10-K. 4.4 Amendment to the Deposit Agreement dated as of November 18, 1992 between FRP and Mellon. Incorporated by reference to Exhibit 4.4 to the FRP 1992 Form 10-K. 4.5 Form of Depositary Receipt. Incorporated by reference to Exhibit 4.5 to the FRP 1992 Form 10-K. 4.6 Custodial Agreement regarding the FRP Depositary Unit Reinvestment Plan among FTX, FRP and Chase, effective as of April 1, 1987 (the "Custodial Agreement"). Incorporated by reference to Exhibit 19.1 to the Quarterly Report on Form 10-Q of FRP for the quarter ended June 30, 1987. 4.7 FRP Depositary Unit Reinvestment Plan. Incorporated by reference to Exhibit 4.4 to the FRP 1991 Form 10-K. 4.8 Credit Agreement dated as of June 1, 1993 (the "FTX/FRP Credit Agreement") among FTX, FRP, the several banks which are parties thereto (the "FTX/FRP Banks") and Chemical Bank, as Agent (the "FTX/FRP Bank Agent"). Incorporated by reference to Exhibit 4.8 to the FRP 1993 Form 10-K. 4.9 First Amendment dated as of February 2, 1994 to the FTX/FRP Credit Agree- ment among FTX, FRP, the FTX/FRP Banks and the FTX/FRP Bank Agent. Incorporated by reference to Exhibit 4.9 to the FRP 1993 Form 10-K. 4.10 Second Amendment dated as of March 1, 1994 to the FTX/FRP Credit Agreement among FTX, FRP, the FTX/FRP Banks and the FTX/FRP Bank Agent. Incorporated by reference to Exhibit 4.10 to the FRP 1993 Form 10-K. 4.11 Third Consent and Waiver dated as of October 18, 1994 to the FTX/FRP Credit Agreement among FTX, FRP, the FTX/FRP Banks and the FTX/FRP Bank Agent. 4.12 Fourth Amendment, Consent and Limited Waiver dated as of November 23, 1994 to the FTX/FRP Credit Agreement among FTX, FRP, the FTX/FRP Banks and the FTX/FRP Bank Agent. 4.13 Subordinated Indenture as of October 26, 1990 between FRP and Manufacturers Hanover Trust Company ("MHTC") as Trustee, relating to $150,000,000 principal amount of 8 3/4% Senior Subordinated Notes due 2004 of FRP (the "Subordinated Indenture"). Incorporated by reference to Exhibit 4.11 to the FRP 1993 Form 10-K. 4.14 First Supplemental Indenture dated as of February 15, 1994 between FRP and Chemical Bank, as Successor to MHTC, as Trustee, to the Subordinated Indenture. Incorporated by reference to Exhibit 4.12 to the FRP 1993 Form 10-K. 10.1 Contribution Agreement dated as of April 5, 1993 between FRP and IGL (the "FRP-IGL Contribution Agreement"). Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of FRP dated July 15, 1993 (the "FRP July 15, 1993 Form 8-K"). 10.2 First Amendment dated as of July 1, 1993 to the FRP-IGL Contribution Agreement. Incorporated by reference to Exhibit 2.2 to the FRP July 15, 1993 Form 8-K. 10.3 Amended and Restated Partnership Agreement dated as of July 1, 1993 among IMC-Agrico GP Company, Agrico, Limited Partnership and IMC-Agrico MP Inc. Incorporated by reference to Exhibit 2.3 to the FRP July 15, 1993 Form 8-K. 10.4 Parent Agreement dated as of July 1, 1993 among IGL, FRP, FTX and IMC- Agrico. Incorporated by reference to Exhibit 2.4 to the FRP July 15, 1993 Form 8-K. 10.5 Asset Purchase Agreement dated as of October 22, 1994 between FRP and Pennzoil Company (the "Asset Purchase Agreement"). Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of FRP dated January 18, 1995 (the "FRP January 18, 1995 8-K"). 10.6 Amendment No. 1 dated as of January 3, 1995 to the Asset Purchase Agreement. Incorporated by reference to Exhibit 2.2 to the FRP January 18, 1995 8-K. 12.1 FRP Computation of Ratio of Earnings to Fixed Charges. 13.1 Those portions of the 1994 Annual Report to unitholders of FRP which are incorporated herein by reference. 21.1 Subsidiaries of FRP. 23.1 Consent of Arthur Andersen LLP dated March 22, 1995. 24.1 Powers of Attorney pursuant to which this report has been signed on behalf of certain directors of FTX. 27.1 FRP Financial Data Schedule EX-99 16 Exhibit 99.2 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1994 Commission file number 1-9916 FREEPORT-McMoRan COPPER & GOLD INC. Organized in Delaware I.R.S. Employer Identification No. 74-2480931 First Interstate Bank Building, One East First Street, Suite 1600, Reno, Nevada 89501 Registrant's telephone number, including area code: (702) 688-3000 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered ------------------- ------------------ Class A Common Stock Par Value $0.10 per Share New York Stock Exchange and Australian Stock Exchange Depositary Shares Representing 2-16/17 shares of New York Stock Exchange Special Preference Stock Par Value $0.10 per Share Depositary Shares Representing 0.05 shares of Step-Up New York Stock Exchange Convertible Preferred Stock Par Value $0.10 per Share Depositary Shares Representing 0.05 shares of Gold- New York Stock Exchange Denominated Preferred Stock Par Value $0.10 per Share Depositary Shares, Series II, Representing 0.05 shares New York Stock Exchange of Gold-Denominated Preferred Stock, Series II, Par Value $0.10 per Share Depositary Shares Initially Representing 0.025 shares New York Stock Exchange of Silver-Denominated Preferred Stock Par Value $0.10 per Share 9-3/4% Senior Notes Due 2001 of P.T. ALatieF Freeport New York Stock Exchange Finance Company B.V. guaranteed by the registrant Securities registered pursuant to Section 12(g) of the Act: None 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 --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $1,352,817,000 on March 10, 1995. On March 10, 1995, there were issued and outstanding 65,972,568 shares of Class A Common Stock, par value $0.10 per share, of which 1,859,660 shares were held by the registrant's parent, Freeport-McMoRan Inc., and 139,980,763 shares of Class B Common Stock, par value $0.10 per share, all of which were held by Freeport-McMoRan Inc. Documents Incorporated by Reference Portions of the registrant's Annual Report to stockholders for the year ended December 31, 1994 (Parts I, II and IV) and portions of the Proxy Statement dated March 23, 1995, submitted to the registrant's stockholders in connec- tion with its 1995 Annual Meeting to be held on May 4, 1995 (Part III). TABLE OF CONTENTS Page Part I................................................................ 1 Items 1 and 2. Business and Properties.............................. 1 Introduction...................................................... 1 P.T. Freeport Indonesia Company................................... 2 Contract of Work.................................................. 3 Ore Reserves...................................................... 4 Mining Operations................................................. 5 Exploration....................................................... 5 Milling and Production............................................ 7 Transportation and Other Infrastructure........................... 8 Marketing......................................................... 10 Republic of Indonesia............................................. 10 Rio Tinto Minera, S.A............................................. 11 P.T. Irja Eastern Minerals Corporation............................ 11 Research and Development.......................................... 12 Environmental Matters............................................. 12 Employees......................................................... 13 Competition....................................................... 13 Item 3. Legal Proceedings.......................................... 14 Item 4. Submission of Matters to a Vote of Security Holders........ 14 Executive Officers of the Registrant................................ 14 Part II............................................................... 15 Item 5. Market for Registrant's Common Equity and Related Stockholder Matters..................................... 15 Item 6. Selected Financial Data.................................... 15 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..................... 16 Item 8. Financial Statements and Supplementary Data................ 16 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................... 16 Part III.............................................................. 16 Items 10, 11, 12, and 13. Directors and Executive Officers of the Registrant, Executive Compensation, Security Ownership of Certain Beneficial Owners and Management, and Certain Relationships and Related Transactions............................................ 16 Part IV............................................................... 16 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..................................... 16 Signatures............................................................ 17 Index to Financial Statements......................................... F-1 Report of Independent Public Accountants.............................. F-1 Exhibit Index......................................................... E-1 PART I Items 1 and 2. Business and Properties. --------------------------------------- INTRODUCTION Freeport-McMoRan Copper & Gold Inc., a Delaware corporation formed in 1987 ("FCX"), is a subsidiary of Freeport-McMoRan Inc. ("FTX"*). FCX's principal operating subsidiary is P.T. Freeport Indonesia Company ("PT-FI"), a limited liability company organized under the laws of the Republic of Indonesia and domesticated in Delaware. PT-FI engages in the exploration for and development, mining, and processing of copper, gold and silver in Indonesia and in the marketing of concentrates containing such metals worldwide. FCX believes that PT-FI has one of the lowest cost copper producing operations in the world, taking into account customary credits for related gold and silver production. At March 10, 1995, FTX owned approximately 68.9% of FCX's common stock, and FCX owned 81.28% of the outstanding common stock of PT-FI. Of the remaining 18.72% of the outstanding PT-FI common stock, 9.36% is owned by the Government of the Republic of Indonesia (the "Government") and 9.36% is owned by an Indonesian limited liability company, P.T. Indocopper Investama Corporation ("PT-II"), in which FCX owns a 49% interest. In 1993 FCX acquired the Spanish company Rio Tinto Minera, S.A. ("RTM") which is principally engaged in the smelting and refining of copper concentrates in Spain through wholly owned subsidiaries. RTM provides an additional market for a portion of PT-FI's copper concentrates. FCX's wholly owned subsidiary, Eastern Mining Company, Inc. ("EMI"), owns 80% of the outstanding common stock of P.T. Irja Eastern Minerals Corporation ("Eastern Mining"), an Indonesian limited liability company, which signed a Contract of Work (the "Eastern Mining COW") with the Government in August 1994 covering approximately 2.5 million acres in Indonesia. PT-II owns 10% of the outstanding common stock of Eastern Mining, and P.T. Setdco Ganesha, an Indonesian limited liability company, owns the remaining 10% of the outstanding common stock. In May 1994, FTX announced a plan to separate its two principal businesses, metals and agricultural minerals, into two independent financial and operating entities. To accomplish this plan, FTX will effect a pro rata distribution (the "Distribution") to its common stockholders of all of the Class B common stock of FCX which it owns at the time of the Distribution on a tax-free basis. As a result of the Distribution, FTX will no longer own any interest in FCX. The Distribution is contingent on a number of factors, including the recapitalization of FCX and FTX. In order for FTX to make the Distribution on a tax-free basis, the FCX stockholders recently approved ----------------- *The term "FTX", as used in this report, means Freeport-McMoRan Inc., its divisions, and its direct and indirect subsidiaries and affiliates other than FCX, or any one or more of them, unless the context requires Freeport- McMoRan Inc. only. certain changes to FCX's capital structure and the voting rights of its common stock and preferred stock. Prior to the Distribution, the voting rights of FCX stockholders will be amended so that holders of Class B common stock elect 80% of the FCX directors and holders of Class A common stock and holders of preferred stock elect the balance. The Distribution is expected to occur by June 30, 1995. In March 1995, FCX, FTX, The RTZ Corporation PLC ("RTZ") and RTZ America Inc. ("RTZ America") signed letters of intent to establish a strategic alliance. Pursuant to the proposed transactions, RTZ America will acquire from FTX approximately 21.5 million shares of FCX Class A common stock (approximately 10.4% of the outstanding common stock of FCX). RTZ America also will receive an option to acquire from FTX approximately 3.5 million shares of FCX Class A common stock. In connection with FTX's recapitalization, if requested by FTX, RTZ America will make a cash tender offer for certain of FTX's convertible debt, and convert any such debt to FTX common stock. If RTZ America acquires such convertible debt and exercises its option, after completion of the Distribution, RTZ America will own over 18% of the outstanding common stock of FCX. However, as the total number of shares of FCX will not change as a result of these transactions, RTZ America's acquisition of FCX common stock from FTX will not result in any dilution to the current holders of FCX Class A common stock. The transactions with RTZ America will enable FTX to complete its recapitalization and the Distribution. In addition to RTZ America's acquisition of FCX stock, FCX, PT-FI and Eastern Mining will enter into joint venture arrangements with subsidiaries of RTZ pursuant to which RTZ's subsidiaries intend to invest up to $850 million on exploration and development projects on lands controlled by PT-FI and Eastern Mining. These transactions are further described below under "Contract of Work." RTZ also will acquire 25% of RTM's Spanish smelter operations, and a 25% interest in RTM's Spanish mineral exploration program. All of the transactions with RTZ and RTZ America are subject to, among other things, certain regulatory approvals. The transactions are expected to be completed by June 30, 1995. In January 1994, FCX redeemed its Zero Coupon Exchangeable Notes due 2011 (the "Zero Coupon Notes"). Of the $118.6 million principal amount of Zero Coupon Notes outstanding at the initiation of the call for redemption, $118.3 million principal amount was converted into an aggregate of 6.7 million shares of FCX's Class A common stock prior to the redemption of the Zero Coupon Notes. The balance was redeemed for cash. Also in January 1994, FCX sold 4.3 million depositary shares, each representing 0.05 shares of its Gold- Denominated Preferred Stock, Series II to the public for net proceeds of $158.5 million. In April 1994, P. T. ALatieF Freeport Finance Company B.V., a wholly owned subsidiary of FCX, completed a public offering of $120 million of 9-3/4% Senior Notes Due 2001, for net proceeds of $116.3 million. In July 1994, FCX sold 4.8 million depositary shares, each initially representing 0.025 shares of its Silver-Denominated Preferred Stock, to the public for net proceeds of $94.5 million. P.T. FREEPORT INDONESIA COMPANY PT-FI's operations are located in the rugged highlands of the Sudirman Mountain Range in the province of Irian Jaya, Indonesia, located on the western half of the island of New Guinea. Over the last 26 years, PT-FI has met an extraordinary combination of engineering and construction challenges to develop its mining and milling complex and supporting infrastructure in one of the least explored areas in the world. PT-FI's largest mine, Grasberg, discovered in 1988, contains the largest single gold reserve and one of the three largest open-pit copper reserves of any mine in the world. In order to develop the Grasberg deposit, PT-FI undertook an expansion program in stages, initially from 20,000 metric tons of ore per day ("MTPD") to 57,000 MTPD. Expansion from 57,000 MTPD to 66,000 MTPD was completed in 1993 ahead of schedule and within budget. PT-FI is currently expanding its production capacity from 66,000 MTPD to 115,000 MTPD, which is expected to be completed during the second half of 1995 and to almost double annual production to approximately 1.1 billion pounds of copper and approximately 1.5 million ounces of gold from the 1993 levels of 658 million pounds of copper and 787 thousand ounces of gold, respectively. CONTRACT OF WORK In 1967, PT-FI's predecessor, Freeport Indonesia, Incorporated, a Delaware corporation ("FII"), and the Government entered into a Contract of Work (the "1967 COW"), pursuant to which FII operated as the Government's sole contractor for the production and marketing of certain minerals from a 24,700 acre area (the "1967 Mining Area") from 1967 until the end of 1991. On December 30, 1991, FII was merged into PT-FI in Delaware, and PT-FI and the Government signed a new Contract of Work (the "New COW"), which superseded the 1967 COW and has a 30-year term, with provisions for two 10-year extensions under certain conditions. The New COW covers both the 1967 Mining Area and a contiguous 6.5 million acre exploration area (the "New COW Area"). Pursuant to a provision in the New COW, PT-FI must progressively relinquish its rights to the nonprospective parts of the New COW Area in amounts equal to 25% of the 6.5 million acres at the end of each of three specified periods. PT-FI relinquished approximately 1.7 million acres in December 1994. In light of these relinquishment provisions, PT-FI has implemented an active exploration program with a focus on both what it believes to be the most promising exploration opportunities in the New COW Area as well as identification of areas which appear to hold the least promise. The next relinquishment will occur at the end of 1995, unless extended by the Government. The New COW also 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 by PT-FI, if such facility is deemed to be economically viable by PT- FI and the Government. In January 1995, FCX announced that it would form a joint venture with Mitsubishi Materials Corporation and Fluor Daniel Wright Ltd. to build, own and operate a copper smelter/refinery in Gresik, East Java, Indonesia. This project remains subject to the execution of definitive agreements among the joint venture participants, the confirmation of the feasibility of the project, financing and certain Government approvals. For further information with respect to the proposed smelter/refinery project, reference is made to Note 10 to the financial statements of FCX referred to on page F-1 hereof (the "FCX Financial Statements"). Pursuant to the proposed transactions with RTZ, subsidiaries of RTZ will acquire a 40% beneficial interest in the Eastern Mining COW and a portion of the New COW covering the New COW Area. In addition, a subsidiary of RTZ will acquire a 40% beneficial interest in future expansion projects in the 1967 Mining Area. Under joint venture arrangements, RTZ and FCX will establish an Exploration Committee to approve exploration expenditures, and subsidiaries of RTZ will pay for all further exploration approved by the committee until RTZ has paid an aggregate of $100 million. The parties will pay, ratably in proportion to their ownership, additional exploration costs and the costs to develop projects mutually agreed upon in the New COW Area and the Eastern Mining COW Area. For further expansion projects in the 1967 mining Area, subsidiaries of RTZ will provide up to a maximum of $750 million for 100% of defined costs to develop such projects. RTZ will receive 100% of incremental cash flow attributed to the expansion projects until it has received an amount equal to the funds it had provided plus interest based on RTZ's costs of borrowing. Subsequently, the parties will share incremental cash flow ratably in proportion to their ownership. Future expansion projects in the 1967 Mining Area will exclude any interest in future production equivalent to FCX's expanded 115,000 MTPD milling operations. ORE RESERVES Based upon published reports, FCX believes that PT-FI's Grasberg deposit contains the largest single gold reserve and one of the three largest open-pit copper reserves of any mine in the world. Proved and probable ore reserves at December 31, 1994 were 1,125.6 million tons** of ore at an average grade of 1.30% copper, 1.42 grams of gold per ton and 4.06 grams of silver per ton compared with 1,074.1 million tons of ore with an average grade of 1.31% copper, 1.47 grams of gold per ton and 4.04 grams of silver per ton at December 31, 1993. Primarily as a result of the drilling operations at the Grasberg mine (see "Mines in Production" below), PT-FI's proved and probable copper and gold reserves as of December 31, 1994 have increased, net of production, since December 31, 1989 by approximately 237% and 389%, respectively, and from year-end 1993 by 4.5% and 1.3%, respectively. This increase in proved and probable reserves, net of production, is largely the result of a drilling program that includes data obtained from the surface down to approximately the 3,060 meter elevation at the Grasberg ore body. PT-FI's proved and probable reserves at Grasberg do not include reserves below the 3,060 meter level. PT-FI has begun driving an adit (the "Amole adit") from the mill site to a point below the currently delineated Grasberg ore body at the 2,900 meter level. The Amole adit, expected to be completed in 1996, will facilitate further deep exploration to delineate the extent of the Grasberg deposit below the 3,060 meter level. Preliminary drilling from the existing 3,700 meter adit indicates significant additional mineralization below the existing proved and probable reserves. There can be no assurance, however, that PT-FI's exploration programs will result in the delineation of additional reserves in commercial quantities. For further information with respect to the copper, gold and silver content of proved and probable ore reserves of PT-FI, reference is made to Note 12 to the FCX Financial Statements. ------------------- **As used herein, "ton" refers to a metric ton, which is equivalent to 2,204.62 pounds on a dry weight basis. MINING OPERATIONS Mines in Production PT-FI currently has two mines in operation: the Grasberg and the Intermediate Ore Zone (the "IOZ"), both within the 1967 Mining Area. Open pit mining of the Grasberg ore body commenced in January 1990. In 1994 Grasberg mine output totaled approximately 27.2 million tons of ore, providing approximately 95% of total PT-FI ore production. The IOZ is an underground block cave operation which came into production in the first half of 1994. The production level is at the 3550 meter elevation, which is 150 meters below the Ertsberg East deposit, which was depleted in the second half of 1994. In 1994 mine output from the IOZ totaled approximately 0.7 million tons of ore. Mines in Development Three other significant ore bodies are currently at various stages of mine development. All are carried as proved and probable reserves, and are intended to augment or replace other underground production areas as they become depleted. These deposits include the Deep Ore Zone ("DOZ"), the DOM (from the Dutch word meaning "cathedral") and the Big Gossan. The DOZ ore body lies within the 1967 Mining Area, vertically below the IOZ. This underground mine was originally developed for mining using a variety of stoping methods and is currently capable of production. Initial production from the DOZ ore body commenced in 1989 but was suspended in favor of production from the Grasberg. Production by the block cave mining method is anticipated to begin after depletion of the overlying IOZ reserve, sometime after 1998. The DOM ore body's production level is 380 meters above and approximately 1,200 meters southeast of the now depleted Ertsberg East mining operation. The DOM ore body was developed as an underground mine, employing the block cave mining method. Pre-production development was completed just as the Grasberg began production from the open pit in 1990. All maintenance, warehouse and service facilities are in place. Like the DOZ ore body, production at the DOM ore body was deferred as a result of the increasing reserves and production capabilities of the Grasberg. The Big Gossan ore body lies approximately 1,000 meters southwest of the original Ertsberg deposit/pit and within the 1967 Mining Area. Initial underground development of the ore body began in 1993 when tunnels were driven from the mill area, into the ore zone at approximately the 2900 meter elevation. A variety of stoping methods will be used to mine the deposit, with production expected by 1998. EXPLORATION In addition to continued delineation of the Grasberg deposit and other deposits discussed under "Mining Operations" above, PT-FI is continuing its ongoing exploration program for copper and gold mineralization within the 1967 Mining Area. Three anomalous zones in the vicinity of PT-FI's current mining activities are under investigation. The Big Gossan and Wanagon mineralizations are located west of the Erstberg open pit, southwest of the Grasberg ore body and anchor the ends of a clearly defined mineralized structure trending roughly east-west for 4.5 kilometers. The Big Gossan mineralization, as drilled to date, extends approximately 1,100 meters westward from just east of the intersection of the Amole adit. The Amole adit is being driven at the 2,900 meter level for approximately 4 kilometers from the mill to the deep levels of the Grasberg deposit, providing a platform from which to explore deeper mineral potential in a significant portion of the 1967 Mining Area. The Lembah Tembaga prospect described below is located approximately one kilometer southwest of the Grasberg deposit. At the Big Gossan mineralization, nearly 200 holes have been drilled from the Amole adit and from an exploration drift being driven in a westwardly direction parallel to the Big Gossan structure. This drilling resulted in the inclusion of 31.8 million tons of ore at an average grade of 2.5% copper and 0.7 grams of gold per ton to PT-FI's total proved and probable reserves at December 31, 1994. During the first quarter of 1993, PT-FI initiated helicopter-supported surface drilling of the Wanagon gold/silver/copper prospect. Seven holes were drilled during 1993 at Wanagon, located approximately 2 kilometers northwest of Big Gossan and approximately 3 kilometers southwest of Grasberg. Significant copper values have been encountered below the 2,900 meter elevation. Additional holes were drilled during 1994 to explore the area near the surface for gold potential. Evaluation of this prospect and similar potential mineral sites along the Big Gossan-Wanagon structure will be undertaken as the Big Gossan exploration drift is extended west toward the Wanagan prospect. PT-FI has intercepted porphyry copper mineralization in several holes at its Lembah Tembaga prospect. The holes were drilled from the surface and intersected copper mineralization at considerable depth below the surface. Three rigs are currently drilling at Lembah Tembaga to further evaluate the prospect. Target evaluation in other parts of the 1967 Mining Area is also continuing. Preliminary exploration of the New COW Area has indicated many promising targets. Extensive stream sediment sampling within the new acreage has generated analytical results which are being evaluated. This sampling program, when coupled with regional mapping completed on the ground and from aerial photographs and air-magnetometer surveys, has led to the outlining of over 70 exploration targets. Detailed follow-up exploration of these anomalies by additional mapping and sampling and through the use of both aerial and ground magnetic surveys is now in progress. Systematic drilling of these targets has already commenced with mineralization being discovered at several prospects. Additional drilling is required to determine if any of these are commercially viable. PT-FI has focused its initial drilling in the New COW Area in an area 35 kilometers north of Grasberg, an area called the Hitalipa District, that displays anomalous geochemical and magnetic characteristics. Although this area requires additional exploratory drilling, initial results indicate a large mineralized district that covers three times the aerial extent or approximately 75,000 acres when compared to the original 24,700-acre Ertsberg District that contained the Ertsberg, Grasberg, Ertsberg East, IOZ, DOZ, Big Gossan and DOM ore bodies. The discovery of widespread igneous activity, including volcanic rocks, in the Hitalipa District indicates the potential for Grasberg-type stockwork and porphyry deposits as well as skarn-type copper/gold/silver deposits similar to the ore bodies of the Ertsberg District. Because of its size and number of geologic leads, the Hitalipa District is likely to be explored for many years. PT-FI has also initiated drilling programs on other prospects. Drilling results are being interpreted, and no assurance can be given that any of these new areas contain commercially exploitable mineral deposits. Site specific work within the Hitalipa District continues where the drilling of over 100 holes at the Wabu prospect has been completed. Within a 200 acre area at the Wabu prospect, drilling has indicated a potential resource of between 700,000 and 1.7 million ounces of gold. The variation is dependent upon a 25 to 50 meter radius area of influence around the drill holes, respectively. This area is open to the east and west and also at depth. Further drilling will be required to determine the extent and commercial potential of this resource. PT-FI has initiated drilling programs on other prospects within the Hitalipa District, and drilling results are being interpreted. PT-FI's exploration expenditures were $27.7 million in 1994, compared to $31.7 million in 1993. MILLING AND PRODUCTION Milling Most of the ore from PT-FI's mines moves by a conveyor system to an ore pass through which it drops to the mill site. At the mill site, which is located approximately 2,900 meters above sea level, the ore is crushed and ground. The powdered ore is then mixed in tanks with chemical reagents and continuously agitated with air. At this stage the copper-bearing concentrate rises to the top of the tanks from which it is removed and thickened. The product leaves the mill site as a thickened concentrate slurry, consisting of approximately 65% solids by weight. During 1994, the recovery rates for the milling facilities averaged 83.7% of the copper content, 72.8% of the gold content and 64.7% of the silver content of the ore processed, compared to 87.0%, 76.2% and 67.2%, respectively, during 1993. Production In 1994 PT-FI achieved record copper production of 710.3 million recoverable pounds, approximately 8% more than in 1993. Gold production was 784,000 recoverable ounces, approximately the same as 1993. For a summary of PT-FI's production, sales and average product realizations for 1994 and the previous four years, reference is made to "Selected Financial and Operating Data" appearing on page 16 of FCX's 1994 Annual Report to stockholders, which is incorporated herein by reference. In 1993 PT-FI completed, within budget and ahead of schedule, the expansion of its production facilities, increasing its mining and milling capacity from 57,000 MTPD to 66,000 MTPD. Average mill throughput was 72,500 MTPD in 1994, compared to 62,300 MTPD in 1993. PT-FI is currently expanding its overall mining and milling rate to 115,000 MTPD, which is expected to be completed during the second half of 1995. Once the expansion is complete, PT-FI expects annual production of 1.1 billion pounds of copper, 1.5 million ounces of gold and 2.4 million ounces of silver. TRANSPORTATION AND OTHER INFRASTRUCTURE Transportation From the mill site, the thickened concentrate is pumped through two 115 kilometer pipelines to the port-site facility at Amamapare. At the port-site the slurry is filtered, dried and stored for shipping. When ships arrive, they are loaded at the dock facilities at the port-site until they draw their maximum water. The ships then normally move to deeper water, where loading is completed from shuttling barges. Other Infrastructure The location of PT-FI's operations in a remote and undeveloped area requires that such operations be virtually self-sufficient. The facilities, in addition to those described above, include an airport, a heliport, a 119 kilometer road with bridges and tunnels, an aerial service tramway to transport personnel, equipment and supplies to the mines, a hospital and two town sites with schools, housing and other required facilities sufficient to support approximately 14,000 persons, including approximately 360 who are located at the port-site. In conjunction with the expansion of ore throughput to 115,000 MTPD, the first phase of the Enhanced Infrastructure Project ("EIP") is being implemented. The EIP is a long term program created (1) to provide certain infrastructure facilities needed for PT-FI's operations, (2) to enhance the quality of conditions for PT-FI's employees and (3) to develop and promote the growth of local and other third party activities and enterprises in Irian Jaya through the construction of certain required physical support facilities. The full EIP includes plans for various commercial, residential, educational, retail, medical, recreational, environmental and other infrastructure facilities to be constructed during the next ten to twenty years. Depending on the long-term growth of PT-FI's operations, the total cost of the EIP could range between $500 million and $600 million. The first phase of the EIP is needed to support the 115,000 MTPD expansion. FCX anticipates that the first phase, which includes various residential, community and commercial facilities, increases in electric generating capacity and an extension of the principal road which will enable vehicle traffic to travel all the way to the port-site, will be completed by mid-1996. Pursuant to a joint venture agreement which PT-FI entered into with P.T. ALatieF Nusakarya Corporation ("ALatieF"), an Indonesian investor, in 1993, PT-FI has sold approximately $195 million of existing infrastructure assets, of which approximately $105 million of assets were sold in 1994, to P.T. ALatieF Freeport Infrastructure Corporation ("AFIC") and to P.T. ALatieF Freeport Hotel Corporation ("AFHC"). AFIC and AFHC are each owned one-third by PT-FI and two-thirds by ALatieF. AFIC is expected to purchase an additional $75 million of infrastructure assets during 1995 subject to certain Government approvals. The funding for the AFIC and AFHC purchases is provided by equity contributions from the shareholders ($90 million) and debt financing ($180 million). Debt financing has been secured by a $60 million bank loan, guaranteed by PT-FI, and a $120 million bond issue, guaranteed by FCX, completed during the second quarter of 1994. See "Introduction" above. The acquired assets will be made available to PT-FI and its employees and designees under arrangements which will provide ALatieF with a guaranteed minimum rate of return on its investment. In December 1993, PT-FI announced the execution of a Letter of Intent with Duke Energy Corp. ("DE") and PowerLink Corporation ("PL"), pursuant to which PT-FI would sell its existing and to be constructed power generation and transmission assets and certain other power-related assets to a joint venture company. In December 1994, P.T. Puncakjaya Power ("PJP"), an Indonesian limited liability company, was formed, whose ownership consists of DE (30%), PL (30%), PT-FI (30%) and P.T. Austindo Nusantara Jaya ("ANJ"), an Indonesian limited liability company, (10%). The first sale, representing the majority of the existing assets, was completed in December 1994, for a price of $100 million. The final two sales are expected to occur during 1995. The total value of these transactions is estimated at $215 million. Pursuant to these transactions, PJP will own these assets and be responsible for providing the electrical power services required by PT-FI at its mining, milling and support operations in Irian Jaya, Indonesia, including the power services required for the expansion of ore throughput to 115,000 MTPD. These transactions will provide DE, PL and ANJ with a guaranteed minimum rate of return on their investments. PT-FI has also entered into two separate letters of intent with respect to the sale to joint ventures of certain construction equipment, certain port facilities and related marine, logistics and related assets (the "Port Joint Venture") and certain aircraft, airport and related operations (the "Airport Joint Venture"). The Port Joint Venture is expected to be owned by P & O Australia Ltd. and ALatieF. PT-FI would not have an equity interest in the Port Joint Venture. PT-FI would enter into one or more agreements with the Port Joint Venture for use of the transferred assets. It is expected that the purchase price of the assets transferred to the Port Joint Venture will not exceed $100 million. PT-FI would have a 25% equity interest in the Airport Joint Venture, with certain Indonesian investors owning the remainder. PT-FI would enter into one or more agreements with the Airport Joint Venture for air transport services for both passengers and cargo. It is expected that the purchase price of the assets transferred to the Airport Joint Venture will be approximately $45 million. The foregoing letters of intent are not binding and are subject to the execution of definitive agreements, financing, and certain Government approvals. No assurance can be given that any of these transactions will be consummated. MARKETING PT-FI's copper concentrates, which contain significant gold and silver components, are sold primarily under long-term, U.S. dollar-denominated contracts, pursuant to which the selling price is based on world metals prices, generally the London Metal Exchange ("LME") settlement prices for Grade A copper metal, less certain allowances. PT-FI supplies copper concentrates to Asian, European and North American smelters and international trading companies under long-term sales agreements and pursuant to "spot" sales contracts. Substantially all of PT-FI's 1994 production of copper concentrates was sold under prior commitments with the balance sold in the spot market. PT-FI has commitments from various parties to purchase virtually all of its estimated 1995 production of copper concentrates. For further information with respect to sales of concentrates, reference is made to Note 8 to the FCX Financial Statements. For average realizations per recoverable pound of copper, reference is made to "Selected Financial and Operating Data" on page 16 of FCX's 1994 Annual Report to stockholders, which is incorporated herein by reference. For information with respect to PT-FI's price protection program, reference is made to "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 11 through 14 and 17 through 20, of FCX's 1994 Annual Report to stockholders, which is incorporated herein by reference. REPUBLIC OF INDONESIA The economy of Indonesia is based on export commodity agriculture, the extraction of petroleum, natural gas and other mineral resources, wholesale and retail trade and, to an increasing extent, manufacturing. Indonesia has a presidential republic system of government. President Suharto assumed power in 1966 following an attempted communist coup and has been in power since then. The Government has maintained a high degree of stability for the past 27 years. President Suharto was re-elected in March 1993 to serve a sixth consecutive five-year term. The Government has promoted policies designed to help develop Indonesia economically and has encouraged foreign investment in numerous areas where such investment would benefit the Indonesian economy. Indonesia's foreign investment policy is expressed in the 1967 Foreign Capital Investment Law. It provides basic guarantees of remittance rights and protection against nationalization, a framework for incentives and some basic rules as to the other rights and obligations of foreign investors. PT-FI's rights and obligations relating to taxes, exchange controls, repatriation and other matters are governed by the New COW, which was concluded pursuant to the 1967 Foreign Capital Investment Law. PT-FI has had and continues to enjoy a good working relationship with the Government. PT-FI's mining complex was Indonesia's first copper mining project and was the first major foreign investment made in Indonesia following the new economic development program instituted by the Suharto administration in 1967. PT-FI works closely with the various levels of the Government in development efforts in the vicinity of its operations. PT-FI incurs significant costs associated with providing health and educational assistance, job training, employment opportunities, agricultural assistance and other community development services and facilities for the Indonesian people living in the areas of its operations. In 1990 PT-FI established a foundation to provide educational and work opportunities for the benefit of the people of Irian Jaya. Over the next several years, PT-FI will contribute at least $10 million to the foundation for community projects. PT-FI also has in place a long-term business development program to provide financing and support for new and emerging businesses, many of which are expected to be suppliers of goods and services for PT-FI's operations. Over time, PT-FI anticipates investing $25 million in this program. FCX has the benefit of political risk insurance from the Overseas Private Investment Corporation, the Multilateral Investment Guaranty Agency and other insurers, where available, which covers a portion of its interest in PT-FI. The insurance is primarily designed to cover certain breach of contract risks. RIO TINTO MINERA, S.A. In 1993 FCX acquired RTM, which is principally engaged in the smelting and refining of copper concentrates in Spain through wholly owned subsidiaries. RTM is expanding its smelter production capacity to approximately 270,000 tons of metal per year by early 1996, which will enable RTM's operations to achieve significant unit cost efficiencies and is expected to bring RTM's cash costs into the smelter industry's lowest quartile worldwide. During 1994, PT-FI supplied RTM with approximately 173,000 tons of copper concentrate and is expected to supply approximately 150,000 tons in 1995, providing for approximately 38% and 30%, respectively, of RTM's requirements in those years. Beginning in 1996, PT-FI is expected to provide the RTM smelter with approximately one-half of its copper concentrate requirements. For further information concerning RTM, reference is made to "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 11 through 14 and 17 through 20 of FCX's 1994 Annual Report to stockholders, which is incorporated herein by reference. P.T. IRJA EASTERN MINERALS CORPORATION FCX owns 84.9% of Eastern Mining, which entered into the Eastern Mining COW with the Government in August 1994 covering 2.5 million acres adjacent to the New COW Area in Irian Jaya, Indonesia. The Eastern Mining COW provides for a 30-year term and for two 10-year extensions under certain circumstances. Reconnaissance activity, including air-magnetometer analysis has indicated a number of interesting magnetic anomalies, one of which is located near sea level in an area known as Etna Bay. It is believed that this expansive magnetic anomaly indicates igneous material intruding sedimentary rocks and appears to be on trend with and contains geologic characteristics similar to those exhibited in the 1967 Mining Area. FCX is currently drilling with three rigs at its Etna Bay prospect areas. Eastern Mining's exploration expenditures totaled $8.3 million in 1994. RESEARCH AND DEVELOPMENT In 1993 FTX contracted with Crescent Technology, Inc. ("Crescent") to furnish engineering consulting, research and development, environmental and safety services to FTX. Crescent maintains engineering consulting, analytical laboratory and mine development groups in New Orleans, Louisiana, which provide engineering consulting, environmental services and design and construction supervision activities required to implement new ventures and apply improvements to existing operations of PT-FI and RTM. ENVIRONMENTAL MATTERS FTX and its affiliates, including FCX, have a history of commitment to environmental responsibility. Since the 1940s, long before the general public recognized the importance of maintaining environmental quality, FTX has conducted, and continues to conduct, preoperational, bioassay, marine ecological and other environmental surveys to determine the environmental compatibility of its operations. FTX's Environmental Policy commits its operations to full compliance with applicable laws and regulations. FTX has contracted with Crescent whose environmental specialists develop and implement environmental programs that include the activities of PT-FI and RTM. FCX believes that it is in compliance with Indonesian environmental laws, rules and regulations. PT-FI had a team of environmental scientists from a leading Indonesian scientific institution conduct a study to update its 1984 Environmental Evaluation Study, with particular focus on its 66,000 MTPD expansion program, and which addressed the anticipated effect of PT-FI's expansion to 66,000 MTPD on the environment within the study area including water quality, aquatic and terrestrial biology, hydrology, geomorphology, oceanography, sociology and economics. The study was submitted to the Government, and a formal hearing was held on the document. The Government then requested PT-FI to update the document to include future expansion plans. An additional environmental evaluation study was submitted in late 1993 with respect to the proposed expansion of production to 115,000 MTPD, and it was approved in February 1994. In February 1995 the Government approved PT-FI's Environmental Management Plan (RKL) and Environmental Monitoring Plan (RPL). These plans addressed all PT-FI environmental programs, including sustainable development, reaffirming its long-term commitment to manage its operations in an environmentally responsible manner. RTM's smelter production capacity expansion costs include approximately $18 million for environmental optimization. Subsequent to expansion, FCX believes RTM's facilities will be in compliance with all standards in Spain. PT-FI and RTM, through FTX, maintain insurance coverage in amounts deemed prudent for certain types of damages associated with environmental liabilities which arise from sudden, unexpected and unforeseen events. FCX has made, and continues to make, expenditures at its operations for protection of the environment. On the basis of an analysis of its operations in relation to current and anticipated environmental requirements, FCX does not anticipate that these investments will have a significant adverse impact on its future operations, liquidity, capital resources or financial position. EMPLOYEES In order to allow access to the FTX employee benefit plans for United States citizens employed full time in PT-FI's and RTM's businesses, such persons are formally employed by certain United States subsidiaries of FTX. For all operational purposes, however, such individuals are regarded as employees of PT-FI or RTM, respectively, and references herein to PT-FI or RTM employees include such individuals. FCX, PT-FI and FTX are parties to a Management Services Agreement (the "Management Agreement") pursuant to which FTX furnishes general executive, administrative, financial, accounting, legal, environmental, tax, research and development, sales and certain other services to FCX and PT-FI. The term of the Management Agreement is unlimited, subject to termination by any of the parties on December 31 of any year and subject to at least six months prior written notice. FCX and PT-FI reimburse FTX monthly at FTX's cost, including allocated overhead, for such services. For further information with respect to the Management Agreement, including costs reimbursed to FTX, and the effect of the Distribution, reference is made to Note 9 to the FCX Financial Statements. As of December 31, 1994, PT-FI had a total of 6,074 employees (approximately 94% Indonesian), compared with 6,054 employees (approximately 94% Indonesian) at year-end 1993. In addition, as of December 31, 1994, PT-FI had approximately 9,600 contract workers, most of whom were Indonesian. Approximately 40% of PT-FI's Indonesian employees are members of the All Indonesia Workers' Union, which operates under Government supervision, with which a labor agreement covering PT-FI's hourly paid Indonesian employees runs until September 30, 1995. PT-FI experienced no work stoppages in 1994, and relations with the union have generally been good. As of December 31, 1994, RTM had a total of 1,250 employees, of which approximately 95% are covered by union contracts. RTM experienced limited work stoppages in 1994, but relations with these unions have also generally been good. COMPETITION PT-FI competes with other mining companies in connection with the sale of its mineral concentrates and the recruitment and retention of qualified personnel. Some competing companies possess financial resources equal to or greater than those of PT-FI. The management of FCX believes that PT-FI is one of the lowest cost copper producers in the world, taking into account credits for related gold and silver production. Item 3. Legal Proceedings. -------------------------- Although FCX may be from time to time involved in various legal proceedings of a character normally incident to the ordinary course of its business, the management of FCX believes that potential liability in any such pending or threatened proceedings would not have a material adverse effect on the financial condition or results of operations of FCX. FCX, through FTX, maintains liability insurance to cover some, but not all, potential liabilities normally incident to the ordinary course of its business as well as other insurance coverages customary in its business, with such coverage limits as management deems prudent. Item 4. Submission of Matters to a Vote of Security Holders. ------------------------------------------------------------ Not applicable. Executive Officers of the Registrant. ------------------------------------ In addition to the elected executive officers of FCX (the "Elected FCX Executive Officers"), one officer of PT-FI is deemed by FCX to be an executive officer of FCX (the "Designated FCX Executive Officer") for purposes of the federal securities laws. Listed below are the names and ages, as of March 15, 1995, of each of the Elected FCX Executive Officers and the Designated FCX Executive Officer, together with the principal positions and offices with FCX, FTX, and PT-FI held by each. All officers of FCX, FTX, and PT-FI are elected or appointed for one year terms, subject to death, resignation or removal. Name Age Position or Office ---- --- ------------------- Richard C. Adkerson 48 Senior Vice President of FCX. Senior Vice President of FTX. Commissioner of PT-FI. John G. Amato 51 General Counsel of FCX. General Counsel of FTX. Commissioner of PT-FI. Richard H. Block 44 Senior Vice President of FCX. Senior Vice President of FTX. Thomas J. Egan 50 Senior Vice President of FCX. Senior Vice President of FTX. Charles W. Goodyear 37 Senior Vice President of FCX. Senior Vice President of FTX. Commissioner of PT-FI. Hoediatmo Hoed*** 55 President Director of PT-FI. W. Russell King 45 Senior Vice President of FCX. Senior Vice President of FTX. Rene L. Latiolais 52 Director and Vice Chairman of the Board of FCX. Director, President, and Chief Operating Officer of FTX. Commissioner of PT-FI. George A. Mealey 61 Director, President, and Chief Executive Officer of FCX. Executive Vice President of FTX. Director and Executive Vice President of PT-FI. James R. Moffett 56 Director and Chairman of the Board of FCX. Director, Chairman of the Board, and Chief Executive Officer of FTX. President Commissioner of PT-FI. The individuals listed above have served FCX, FTX, or PT-FI in various executive capacities for at least the last five years. PART II Item 5. Market for Registrant's Common Equity and Related ----------------------------------------------------------------- Stockholder Matters. ------------------- The information set forth under the caption "FCX Class A Common Shares" and "Class A Common Share Dividends", on the inside back cover of FCX's 1994 Annual Report to stockholders, is incorporated herein by reference. As of March 10, 1995, there were 19,844 record holders of FCX's Class A common stock. ----------------- ***This individual is a Designated FCX Executive Officer and not an Elected FCX Executive Officer. He is deemed by FCX to be a Designated FCX Executive Officer solely for purposes of the federal securities laws in view of his position and responsibilities as an officer of PT-FI; he holds no actual position as an officer of FCX. Item 6. Selected Financial Data. -------------------------------- The information set forth under the caption "Selected Financial and Operating Data", on page 16 of FCX's 1994 Annual Report to stockholders, is incorporated herein by reference. FCX's ratio of earnings to fixed charges for each of the years 1990 through 1994, inclusive, was 9.2x, 4.5x, 6.5x, 3.6x and 7.5x respectively. For this calculation, earnings consist of income from continuing operations before income taxes, minority interest and fixed charges. Fixed charges include interest and that portion of rent deemed representative of interest. Item 7. Management's Discussion and Analysis of Financial Condition and ------------------------------------------------------------------------------- Results of Operations. --------------------- The information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations", on pages 11 through 14 and 17 through 20, of FCX's 1994 Annual Report to stockholders, is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data. ---------------------------------------------------- The financial statements of FCX, the notes thereto and the report thereon of Arthur Andersen LLP, appearing on pages 21 through 34, inclusive, and the report of management on page 15 of FCX's 1994 Annual Report to stockholders, are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting ---------------------------------------------------------------------------- and Financial Disclosure. ------------------------ Not applicable. PART III Items 10, 11, 12, and 13. Directors and Executive Officers of the --------------------------------------------------------------------- Registrant, Executive Compensation, Security Ownership of ------------------------------------------------------------ Certain Beneficial Owners and Management, and Certain --------------------------------------------------------- Relationships and Related Transactions. -------------------------------------- The information set forth under the captions "Voting Procedure" and "Election of Directors", beginning on pages 1 and 4, respectively, of the Proxy Statement dated March 23, 1995, submitted to the stockholders of FCX in connection with its 1995 Annual Meeting to be held on May 4, 1995, is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. -------------------------------------------------------------------------- (a)(1), (a)(2), and (d). Financial Statements. See Index to Financial Statements appearing on page F-1 hereof. (a)(3) and (c). Exhibits. See Exhibit Index beginning on page E-1 hereof. (b). Reports on Form 8-K. No reports on Form 8-K were filed by the registrant during the fourth quarter of 1994. SIGNATURES ---------- Pursuant to the requirements of Section 13 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, on March 23, 1995. FREEPORT-McMoRan COPPER & GOLD INC. BY: /s/ James R. Moffett -------------------------------- James R. Moffett Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 23, 1995. /s/ James R. Moffett Chairman of the Board ---------------------- Director James R. Moffett George A. Mealey* President, Chief Executive Officer and Director (Principal Executive Officer) Richard C. Adkerson* Senior Vice President and Chief Financial Officer (Principal Financial Officer) John T. Eads* Controller - Financial Reporting (Principal Accounting Officer) Leland O. Erdahl* Director Ronald Grossman* Director Rene L. Latiolais* Director Wolfgang F. Siegel* Director Elwin E. Smith* Director Eiji Umene* Director *By: /s/ James R. Moffett -------------------------- James R. Moffett Attorney-in-Fact INDEX TO FINANCIAL STATEMENTS ------------------------------ The financial statements of FCX, the notes thereto, and the report thereon of Arthur Andersen LLP appearing on pages 21 through 34, inclusive, of FCX's 1994 Annual Report to stockholders are incorporated by reference. The financial statement schedules listed below should be read in conjunction with such financial statements contained in FCX's 1994 Annual Report to stockholders. Page ---- Report of Independent Public Accountants........................F-1 III-Condensed Financial Information of Registrant...............F-2 Schedules other than those schedules listed above have been omitted since they are either not required or not applicable or the required information is included in the financial statements or notes thereof. * * * REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ---------------------------------------- We have audited, in accordance with generally accepted auditing standards, the financial statements as of December 31, 1994 and 1993 and for each of the three years in the period ended December 31, 1994 included in Freeport-McMoRan Copper & Gold Inc.'s annual report to shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated January 24, 1995. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in the index above is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Arthur Andersen LLP New Orleans, Louisiana, January 24, 1995 FREEPORT-McMoRan COPPER & GOLD INC. SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT Balance Sheets December 31, ------------------------ 1994 1993 ---------- ---------- (In Thousands) Assets Cash and short-term investments $ 171 $ 427 Interest receivable 12,676 7,582 Receivable from Government of Indonesia - 2,247 Notes receivable from PT-FI 1,338,611 1,064,888 Investment in PT-FI 195,258 145,959 Investment in PTII 76,081 75,601 Investment in RTM 81,386 43,254 Other assets 14,988 2,011 ---------- ---------- Total assets $1,719,171 $1,341,969 ========== ========== Liabilities and Stockholders' Equity Accounts payable and accrued liabilities $ 27,270 $ 32,468 Long-term debt 190,000 102,039 Amount due to FTX 800 12,270 RTM stock subscription payable - 12,644 Other liabilities and deferred credits 6,119 2,001 Mandatory redeemable preferred stock 500,007 232,620 Stockholders' equity 994,975 947,927 ---------- ---------- Total liabilities and stockholders' equity $1,719,171 $1,341,969 ========== ========== Statements of Income Years Ended December 31, -------------------------------- 1994 1993 1992 -------- -------- -------- (In Thousands) Income from investment in PT-FI and PTII, net of PT-FI tax provision $111,822 $ 53,861 $128,220 Net loss from investment in RTM (6,309) (15,666) - Elimination of intercompany profit 3,005 (6,610) - General and administrative expenses (7,253) (5,207) (4,802) Depreciation and amortization (3,711) (2,397) (200) Interest expense (10,259) (8,017) (16,518) Interest income on PT-FI notes receivable: Zero coupon exchangeable notes 352 19,175 18,326 Promissory notes 21,094 9,292 11,097 8.235% convertible 14,033 14,036 - Step-up perpetual convertible 26,256 12,785 - Gold and silver production payment loans 20,222 4,055 - Other income (expense), net (7,424) (406) 5,561 Provision for income taxes (31,587) (24,085) (11,791) -------- -------- -------- Net income 130,241 50,816 129,893 Preferred dividends (51,838) (28,954) (7,025) -------- -------- -------- $ 78,403 $ 21,862 $122,868 ======== ======== ======== FREEPORT-McMoRan COPPER & GOLD INC. SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued) Statements of Cash Flow Years Ended December 31, ----------------------------- 1994 1993 1992 -------- -------- -------- (In Thousands) Cash flow from operating activities: Net income $130,241 $ 50,816 $129,893 Adjustments to reconcile net income to net cash provided by operating activities: Income from investment in PT-FI and PTII (111,822) (53,861) (128,220) Net loss from investment in RTM 6,309 15,666 - Elimination of intercompany profit (3,005) 6,610 - Dividends received from PT-FI and PTII 147,465 132,048 78,214 Accretion of note receivable from PT-FI, net - (9,104) (1,808) Depreciation and amortization 3,711 2,397 200 (Increase) decrease in accounts receivable (24,240) - 20,000 Increase (decrease) in accounts payable (4,648) (646) 597 Other 1,654 (5,959) (1,854) -------- -------- -------- Net cash provided by operating activities 145,665 137,967 97,022 -------- -------- -------- Cash flow from investing activities: Received from Government of Indonesia 2,247 6,288 3,911 Investment in RTM (36,365) (43,642) - Investment in PTII (8) - (211,892) Investment in Freeport Hasa Inc. - - (1) -------- -------- -------- Net cash used in investing activities (34,126) (37,354) (207,982) -------- -------- -------- Cash flow from financing activities: Cash dividends paid: Class A common stock (38,316) (33,298) (26,088) Class B common stock (85,187) (85,277) (85,277) Special preference stock (15,708) (15,708) (4,407) Step-Up preferred stock (17,500) (5,590) - Mandatory redeemable preferred stock (13,614) (1,683) - Proceeds from sale of: Class A common stock - - 174,142 Preferred and preference stock 252,985 561,090 217,867 PT-FI common shares - - 212,484 9 3/4% senior notes 116,276 - - Proceeds from equipment loan 70,000 - - Proceeds from FTX 88,280 20,650 - Repayment to FTX (99,750) (8,380) - Loans to PT-FI (369,261) (706,750) (212,484) -------- -------- -------- Net cash provided by (used) in financing activities (111,795) (274,946) 276,237 -------- -------- -------- Net increase (decrease) in cash and short- term investments (256) (174,333) 165,277 Cash and short-term investments at beginning of year 427 174,760 9,483 -------- -------- -------- Cash and short-term investments at end of year $ 171 $ 427 $174,760 ======== ======== ======== Interest paid $ 7,788 $ 213 $ - ======== ======== ======== Taxes paid $ 29,871 $ 22,723 $ 11,762 ======== ======== ======== FREEPORT-McMoRan COPPER & GOLD INC. SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued) a. The footnotes contained in FCX's 1994 Annual Report to stockholders are an integral part of these statements. Freeport-McMoRan Copper & Gold Inc. EXHIBIT INDEX --------------- Sequentially Exhibit Numbered Number Page -------- ---- 3.1 Composite copy of the Certificate of Incorporation of FCX. 3.2 By-Laws of FCX, as amended. Incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K of FCX for the fiscal year ended December 31, 1992 (the "FCX 1992 Form 10-K"). 4.1 Certificate of Designations of the 7% Convertible Exchangeable Special Preference Stock (the "Special Preference Stock") of FCX. Incorporated by reference to Exhibit 5 to the Form 8 Amendment No. 1 dated July 16, 1992 (the "Form 8 Amendment") to the Application for Registration on Form 8-A of FCX dated July 2, 1992. 4.2 Deposit Agreement dated as of July 21, 1992 among FCX, Mellon Securities Trust Company, as Depositary, and holders of depositary receipts ("Depositary Receipts") evidencing certain Depositary Shares, each of which, in turn, represents 2-16/17 shares of Special Preference Stock. Incorporated by reference to Exhibit 2 to the Form 8 Amendment. 4.3 Form of Depositary Receipt. Incorporated by reference to Exhibit 1 to the Form 8 Amendment. 4.4 Certificate of Designations of the Step-Up Convertible Preferred Stock of FCX. Incorporated by reference to Exhibit 4.4 to the Annual Report on Form 10-K of FCX for the fiscal year ended December 31, 1993 (the "FCX 1993 Form 10-K"). 4.5 Deposit Agreement dated as of July 1, 1993 among FCX, Mellon Securities Trust Company, as Depositary, and holders of depositary receipts ("Step- Up Depositary Receipts") evidencing certain Depositary Shares, each of which, in turn, represents 0.05 shares of Step-Up Convertible Preferred Stock. Incorporated by reference to Exhibit 4.5 to the FCX 1993 Form 10-K. 4.6 Form of Step-Up Depositary Receipt. Incorporated by reference to Exhibit 4.6 to the FCX 1993 Form 10-K. 4.7 Certificate of Designations of the Gold-Denominated Preferred Stock of FCX. Incorporated by reference to Exhibit 4.7 to the FCX 1993 Form 10-K. 4.8 Deposit Agreement dated as of August 12, 1993 among FCX, Mellon Securities Trust Company, as Depositary, and holders of depositary receipts ("Gold- Denominated Depositary Receipts") evidencing certain Depositary shares, each of which, in turn, represents 0.05 shares of Gold-Denominated Preferred Stock. Incorporated by reference to Exhibit 4.8 to the FCX 1993 Form 10-K. 4.9 Form of Gold-Denominated Depositary Receipt. Incorporated by reference to Exhibit 4.9 to the FCX 1993 Form 10-K. 4.10 Certificate of Designations of the Gold-Denominated Preferred Stock, Series II (the "Gold-Denominated Preferred Stock II") of FCX. Incorporated by reference to Exhibit 4.1 to the Quarterly Report on Form 10-Q of FCX for the quarter ended March 31, 1994 (the "FCX 1994 First Quarter Form 10-Q"). 4.11 Deposit Agreement dated as of January 15, 1994, among FCX, Mellon Securities Trust Company, as Depositary, and holders of depositary receipts ("Gold- Denominated II Depositary Receipts") evidencing certain Depositary shares, each of which, in turn, represents 0.05 shares of Gold-Denominated Preferred Stock II. Incorporated by reference to Exhibit 4.2 to the FCX 1994 First Quarter Form 10-Q. 4.12 Form of Gold-Denominated II Depositary Receipt. Incorporated by reference to Exhibit 4.3 to the FCX 1994 First Quarter Form 10-Q. 4.13 Certificate of Designations of the Silver-Denominated Preferred Stock of FCX. 4.14 Deposit Agreement dated as of July 25, 1994 among FCX, Mellon Securities Trust Company, as Depositary, and holders of depositary receipts ("Silver-Denominated Depositary Receipts") evidencing certain Depositary shares, each of which, in turn, initially represents 0.025 shares of Silver-Denominated Preferred Stock. Incorporated by reference to Exhibit 4.2 to the July 15, 1994 Form 8-A. 4.15 Form of Silver-Denominated Depositary Receipt. Incorporated by reference to Exhibit 4.1 to the July 15, 1994, Form 8-A. 4.16 Credit Agreement dated as of June 1, 1993 (the "PT-FI Credit Agreement") among PT-FI, the several banks which are parties thereto (the "PT-FI Banks"), Morgan Guaranty Trust Company of New York, as PT-FI Trustee (the "PT-FI Trustee"), and Chemical Bank, as agent (the "PT-FI Bank Agent"). Incorporated by reference to Exhibit 4.10 to the FCX 1993 Form 10-K. 4.17 First Amendment dated as of February 2, 1994 to the PT-FI Credit Agreement among PT-FI, the PT-FI Banks, the PT- FI Trustee and the PT-FI Bank Agent. Incorporated by reference to Exhibit 4.11 to the FCX 1993 Form 10-K. 4.18 Second Amendment dated as of March 1, 1994 to the PT-FI Credit Agreement among PT-FI, the PT-FI Banks, the PT- FI Trustee and the PT-FI Bank Agent. Incorporated by reference to Exhibit 4.12 to the FCX 1993 Form 10-K. 4.19 Third Consent and Waiver dated as of October 18, 1994 to the PT-FI Credit Agreement among PT-FI, the PT-FI Banks, the PT-FI Trustee and the PT-FI Bank Agent. 4.20 Fourth Amendment, Consent and Limited Waiver dated as of November 23, 1994 to the PT-FI Credit Agreement among PT-FI, the PT-FI Banks, the PT-FI Trustee and the PT-FI Bank Agent. 4.21 Term Loan and Working Capital Agreement dated as of November 4, 1994 (the "RTML Term Loan") among Rio Tinto Metal, S.A. ("RTML"), the Lenders and Barclays Bank PLC as Agent (the "Agent"). 4.22 Amendment No. 1 dated as of March 7, 1995 to the RTML Term Loan among RTML, the Lenders and the Agent. 4.23 Agreement dated as of May 1, 1988 between Freeport Minerals Company and FCX assigning certain stockholder rights and obligations. Incorporated by reference to Exhibit 10.13 to Registration No. 33-20807. 10.1 Design, Engineering and Related Services Contract dated as of September 15, 1992 between PT-FI and Fluor Daniel Engineers & Constructors, Ltd. Incorporated by reference to Exhibit 10.1 to the FCX 1992 Form 10- K. 10.2 Site Services Contract dated as of September 15, 1992 between PT-FI and Fluor Daniel Eastern, Inc. Incorporated by reference to Exhibit 10.2 to the FCX 1992 Form 10-K. 10.3 Contract of Work dated December 30, 1991 between The Government of the Republic of Indonesia and PT-FI. Incorporated by reference to Exhibit 10.20 to the FCX 1991 Form 10-K. 10.4 Management Services Agreement dated as of May 1, 1988 among FCX, FII and FTX. Incorporated by reference to Exhibit 10.01 to Registration No. 33-20807. 10.5 Concentrate Sales Agreement dated as of December 30, 1990 between FII and Dowa Mining Co., Ltd., Furukawa Co., Ltd., Mitsubishi Materials Corporation, Mitsui Mining & Smelting Co., Ltd., Nittetsu Mining Co., Ltd., Nippon Mining Co., Ltd. and Sumitomo Metal Mining Co., Ltd. (Confidential information omitted and filed separately with the Securities and Exchange Commission.) Incorporated by reference to Exhibit 10.3 to the Annual Report on Form 10-K of FCX for the fiscal year ended December 31, 1990. 12.1 FCX Computation of Ratio of Earnings to Fixed Charges. 13.1 Those portions of the 1994 Annual Report to stockholders of FCX which are incorporated herein by reference. 21.1 Subsidiaries of FCX. 23.1 Consent of Arthur Andersen LLP dated March 23, 1995. 24.1 Certified resolution of the Board of Directors of FCX authorizing this report to be signed on behalf of any officer or director pursuant to a Power of Attorney. 24.2 Powers of Attorney pursuant to which this report has been signed on behalf of certain officers and directors of FCX. 27.1 FCX Financial Data Schedule.