-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RHM9B51YIwDtvSsQeZK/MbPe46O8uoTKX7De4SavfpvG/DokBgXLt1dLh/HKiG/L 42S8SYm2ebj+GzKp3pIpwQ== 0000351116-96-000003.txt : 19960812 0000351116-96-000003.hdr.sgml : 19960812 ACCESSION NUMBER: 0000351116-96-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960809 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FREEPORT MCMORAN INC CENTRAL INDEX KEY: 0000351116 STANDARD INDUSTRIAL CLASSIFICATION: METAL MINING [1000] IRS NUMBER: 133051048 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08124 FILM NUMBER: 96607466 BUSINESS ADDRESS: STREET 1: 1615 POYDRAS ST CITY: NEW ORLEANS STATE: LA ZIP: 70112 BUSINESS PHONE: 5045824000 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended June 30, 1996 Commission File Number: 1-8124 Freeport-McMoRan Inc. Incorporated in Delaware 13-3051048 (IRS Employer Identification No.) 1615 Poydras Street, New Orleans, Louisiana 70112 Registrant's telephone number, including area code:(504) 582-4000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- On June 30, 1996, there were issued and outstanding 26,364,358 shares of the registrant's Common Stock, par value $0.01 per share. FREEPORT-McMoRan INC. TABLE OF CONTENTS Page Part I.Financial Information Financial Statements: Condensed Balance Sheets 3 Statements of Income 4 Statements of Cash Flow 5 Notes to Financial Statements 6 Remarks 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II. Other Information 12 Signature 14 Exhibit Index E-1 FREEPORT-McMoRan INC. PART I. FINANCIAL INFORMATION Item 1. Financial Statements. FREEPORT-McMoRan INC. CONDENSED BALANCE SHEETS (Unaudited) June 30, December 31, 1996 1995 ---------- ---------- (In Thousands) ASSETS Current assets: Cash and short-term investments $ 7,339 $ 23,496 Accounts receivable 93,591 100,994 Inventories 136,654 119,010 Prepaid expenses and other 4,849 4,499 ---------- ---------- Total current assets 242,433 247,999 Property, plant and equipment, net 974,430 999,840 Other assets 52,359 72,631 ---------- ---------- Total assets $1,269,222 $1,320,470 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued liabilities $ 149,232 $ 180,766 Long-term debt, less current portion 385,695 359,501 Accrued postretirement benefits and pension costs 182,169 170,542 Reclamation and mine shutdown reserves 120,772 128,981 Other liabilities and deferred credits 85,287 92,722 Minority interest 181,639 196,021 Stockholders' equity 164,428 191,937 ---------- ---------- Total liabilities and stockholders' equity $1,269,222 $1,320,470 ========== ========== The accompanying notes are an integral part of these financial statements. FREEPORT-McMoRan INC. STATEMENTS OF INCOME (Unaudited) Three Months Six Months Ended June 30, Ended June 30, ------------------------ ------------------------ 1996 1995 1996 1995 ---------- ---------- ---------- ---------- (In Thousands, Except Per Share Amounts) Revenues $ 242,793 $ 233,398 $ 499,620 $ 487,877 Cost of sales: Production and delivery 172,573 165,924 342,521 338,426 Depreciation and amortization 9,385 7,072 20,807 21,412 ---------- ---------- ---------- ---------- Total cost of sales 181,958 172,996 363,328 359,838 Gain on IMC-Agrico investment - - (11,917) - General and administrative expenses 14,405 13,218 32,040 30,981 ---------- ---------- ---------- ---------- Total costs and expenses 196,363 186,214 383,451 390,819 ---------- ---------- ---------- ---------- Operating income 46,430 47,184 116,169 97,058 Interest expense, net (8,413) (15,519) (16,438) (31,230) Other income (expense), net 607 440 1,355 651 ---------- ---------- ---------- ---------- Income before minority interest and income taxes 38,624 32,105 101,086 66,479 Minority interest in net income of consolidated subsidiaries (18,639) (19,127) (47,741) (50,411) Income tax provision (6,764) (5,717) (18,899) (6,557) ---------- ---------- ---------- ---------- Income from continuing operations 13,221 7,261 34,446 9,511 Discontinued operations - 292,847 - 315,457 ---------- ---------- ---------- ---------- Net income 13,221 300,108 34,446 324,968 Preferred dividends (1,095) (34,623) (2,191) (40,092) ---------- ---------- ---------- ---------- Net income applicable to common stock $ 12,126 $ 265,485 $ 32,255 $ 284,876 ========== ========== ========== ========== Net income per primary share: Continuing operations $.49 $.29 $1.26 $.40 Discontinued operations - 11.89 - 13.28 Preferred dividends (.04) (1.40) (.08) (1.69) ---- ------ ----- ------ $.45 $10.78 $1.18 $11.99 ==== ====== ===== ====== Net income per fully diluted share: Continuing operations $.49 $.47 $1.26 $.86 Discontinued operations - 9.91 - 10.64 Preferred dividends (.04) (1.13) (.08) (1.13) ---- ----- ---- ----- $.45 $9.25 $1.18 $10.37 ==== ===== ===== ====== Average common and common equivalent shares outstanding: Primary 27,145 24,637 27,412 23,753 ====== ====== ====== ====== Fully diluted 27,145 29,560 27,412 29,638 ====== ====== ====== ====== Dividends per common share: Cash $.09 $- $.18 $ - Property - - - 1.5612 ---- -- ---- ------- $.09 $- $.18 $1.5612 ==== == ==== ======= The accompanying notes are an integral part of these financial statements. FREEPORT-McMoRan INC. STATEMENTS OF CASH FLOW (Unaudited) Six Months Ended June 30, ------------------------ 1996 1995 ---------- ---------- (In Thousands) Cash flow from operating activities: Net income $ 34,446 $ 324,968 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 20,807 72,892 Gain on IMC-Agrico investment (11,917) - Recognition of unearned income (363) (36,207) Amortization of debt discount and financing costs 1,043 15,211 Deferred income taxes 18,798 83,715 Minority interests' share of net income 47,741 133,403 Cash distribution from IMC-Agrico in excess of interest in capital 24,897 21,347 Reclamation and mine shutdown expenditures (6,476) (4,928) Gain on FCX securities transactions - (391,224) Loss on recapitalization of FTX securities - 43,316 (Increase) decrease in working capital, net of effect of acquisitions and distributions: Accounts receivable 22,359 2,006 Inventories (17,644) (21,419) Prepaid expenses and other (353) 3,471 Accounts payable and accrued liabilities (40,855) 12,078 Other 8,926 10,299 ---------- ---------- Net cash provided by operating activities 101,409 268,928 ---------- ---------- Cash flow from investing activities: Capital expenditures: FRP (16,649) (15,484) FCX - (308,099) Other (926) (1,821) Sale of assets 4,000 375 ---------- ---------- Net cash used in investing activities (13,575) (325,029) ---------- ---------- Cash flow from financing activities: Purchase of FTX common shares (57,672) (12,317) Purchase of FRP units (1,305) (2,061) Purchase of FCX Class A common shares - (111,747) Purchase/Redemption of FTX securities: ABC Debentures - (280,826) 6.55% Senior Notes - (14,955) Distributions paid to minority interests: FRP (61,898) (61,150) FCX - (59,970) Net proceeds from infrastructure financing - 228,899 Repayments of debt, net (123,768) (65,009) Proceeds from sale of FRP 7% Senior Notes 147,831 - Proceeds from sale of FCX Class A common shares - 447,006 Cash dividends paid: Common stock (4,832) - Preferred stock (2,191) (6,565) Other (156) (628) ---------- ---------- Net cash provided by (used in) financing activities (103,991) 60,677 ---------- ---------- Net increase (decrease) in cash and short-term investments (16,157) 4,576 Net decrease attributable to discontinued operations - 13,098 Cash and short-term investments at beginning of year 23,496 13,810 ---------- ---------- Cash and short-term investments at end of period $ 7,339 $ 31,484 ========== ========== The accompanying notes are an integral part of these financial statements. FREEPORT-McMoRan INC. NOTES TO FINANCIAL STATEMENTS 1. PARENT COMPANY BALANCE SHEET The unaudited, unconsolidated condensed balance sheet of Freeport- McMoRan Inc. (FTX) as of June 30, 1996 follows (in thousands): Cash and short-term investments $ 72 Note receivable from FRP 9,000 Other current assets 16,523 Property, plant and equipment, net 42,856 Investment in FRP 197,275 Other assets 5,373 ---------- Total assets $ 271,099 ========== Accounts payable and accrued liabilities $ 26,069 Long-term debt - Other liabilities and deferred credits 80,602 Stockholders' equity 164,428 ---------- Total liabilities and stockholders' equity $ 271,099 ========== 2. LONG-TERM DEBT In February 1996, Freeport-McMoRan Resource Partners, Limited Partnership (FRP) sold publicly $150 million of its 7% Senior Notes due 2008. Net proceeds of $147.8 million were used to reduce bank indebtedness. Following the sale of the 7% Senior Notes, the committed amount under the FTX/FRP revolving credit facility was reduced from $400 million to $300 million, all of which is available to FRP and $75 million of which is available to FTX. As of June 30, 1996, $255.0 million was available under the credit facility. 3. INVESTMENT IN IMC-AGRICO COMPANY In March 1996, FRP and its joint venture partner in IMC-Agrico increased FRP's ownership in IMC-Agrico by 0.85 percent. As a result, FRP recognized a gain of $11.9 million in the first quarter of 1996 resulting from the increased share of IMC-Agrico's net assets. 4. PROPOSED MERGER On August 7, 1996, FTX, the administrative managing general partner and 51.6 percent owner of FRP, announced that it had entered into a non-binding letter of intent with Arcadian Corporation regarding a possible combination of their businesses into a newly formed corporation. Although it is not a condition to the combination, it is intended that FRP will be offered an opportunity to participate in a transaction that would convert the publicly held FRP units into capital stock of the new corporation. The proposed combination is subject to the negotiation and execution of a definitive merger agreement, completion of due diligence, approval of the boards of directors of FTX and Arcadian, approval by the shareholders of FTX and Arcadian, and approval under the Hart-Scott-Rodino Anti-Trust Improvements Act. Completion of the combination is also subject to such rights as IMC Global Inc. may have to participate in the transaction under its partnership agreement with FRP governing their IMC-Agrico joint venture. The proposed transaction with FRP would also be subject to approval of a special committee of the FTX board of directors representing the interests of FRP public unitholders and to a vote of those unitholders. The companies intend to complete the definitive agreement in approximately 30 days. ----------------- Remarks The information furnished herein should be read in conjunction with FTX's financial statements contained in its 1995 Annual Report to stockholders and incorporated by reference in its Annual Report on Form 10-K. The information furnished herein reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the periods. All such adjustments are, in the opinion of management, of a normal recurring nature. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. PROPOSED MERGER On August 7, 1996, Freeport-McMoRan Inc. (FTX), the administrative managing general partner and 51.6 percent owner of Freeport-McMoRan Resource Partners, Limited Partnership (FRP), announced that it had entered into a non-binding letter of intent with Arcadian Corporation regarding a possible combination of their businesses into a newly formed corporation. Although it is not a condition to the combination, it is intended that FRP will be offered an opportunity to participate in a transaction that would convert the publicly held FRP units into capital stock of the new corporation. The proposed combination is subject to the negotiation and execution of a definitive merger agreement, completion of due diligence, approval of the boards of directors of FTX and Arcadian, approval by the shareholders of FTX and Arcadian, and approval under the Hart-Scott-Rodino Anti-Trust Improvements Act. Completion of the combination is also subject to such rights as IMC Global Inc. may have to participate in the transaction under its partnership agreement with FRP governing their IMC-Agrico joint venture. The proposed transaction with FRP would also be subject to approval of a special committee of the FTX board of directors representing the interests of FRP public unitholders and to a vote of those unitholders. The companies intend to complete the definitive agreement in approximately 30 days. RESULTS OF OPERATIONS Second Quarter Six Months ---------------------- ---------------------- 1996 1995 1996 1995 ---------- ---------- ---------- ---------- (In Millions, Except Per Share Amounts) Revenues $ 242.8 $ 233.4 $ 499.6 $ 487.9 Operating income 46.4 47.2 116.2 97.1 Income from continuing operations 13.2 7.3 34.4 9.5 Discontinued operations - 292.8 - 315.5 Preferred dividends (1.1) (34.6) (2.1) (40.1) ---------- ---------- ---------- ---------- Net income to common stock $ 12.1 $ 265.5 $ 32.3 $ 284.9 ========== ========== ========== ========== FTX operates primarily through its 51.6 percent interest in FRP. Operating results for the 1996 periods benefited from higher average realizations on phosphate fertilizer, phosphate rock and oil sales. The animal feed ingredients business, acquired in October 1995, also contributed to operating results. Offsetting the impact of these positive factors were lower production and sales volumes for phosphate rock, sulphur and oil. The six-month 1996 period was impacted by an $11.9 million gain resulting from the increase in FRP's ownership of IMC-Agrico Company (Note 3) and charges totaling $3.0 million representing miscellaneous asset valuations at IMC-Agrico. Depreciation and amortization for the 1996 quarter rose $2.3 million from the 1995 period amount, primarily attributable to a $2.8 million increase related to FRP's disproportionate interest in the IMC-Agrico cash distributions and $0.5 million associated with the animal feed ingredients operations, partially offset by a $0.9 million reduction from phosphate rock activities caused by the decline in sales volumes. For the six-month 1996 period, depreciation and amortization decreased $0.6 million from the 1995 period, reflecting a $1.5 million reduction from Main Pass oil operations and a $1.4 million reduction from phosphate rock activities caused by the decline in sales volumes. These decreases were partially offset by $1.0 million of depreciation associated with the animal feed ingredients business. General and administrative expenses for the second-quarter and six-month 1996 periods rose $1.2 million and $1.1 million, respectively, from the 1995 period amounts primarily reflecting the inclusion of the animal feed ingredients operations. The six-month 1996 period also includes $1.3 million higher stock appreciation rights costs (second-quarter 1995 included a $1.5 million reduction to expense), whereas the 1995 period included a $1.2 million charge for the reorganization of IMC-Agrico's marketing function. Interest expense for the 1996 periods decreased from the year-ago amounts as a result of the elimination of FTX's parent company debt in connection with its 1995 recapitalization and reorganization activities. Minority interest's share of net income represents the FRP public unitholders' pro rata share of FRP earnings, with the quarter by periods including a $0.5 million gain in 1996 and a $0.8 million gain in 1995 resulting from a disproportionate share of FRP distributions received by FTX during the periods (a gain of $1.7 million for the six-month 1996 period versus an $8.0 million charge for the six-month 1995 period). FTX's income tax provision for 1996 increased from the 1995 period amount, primarily resulting from the rise in pretax, after-minority interest earnings. Preferred stock dividends were lower, reflecting the impact of the 1995 recapitalization activities. Agricultural Minerals Operations FTX's agricultural minerals operations, which includes FRP's fertilizer and phosphate rock operations (conducted through IMC-Agrico) and its sulphur business, reported second-quarter 1996 operating income of $50.1 million on revenues of $233.0 million compared with operating income of $48.8 million on revenues of $224.2 million for the 1995 period. Operating income for the first six months of 1996 was $126.3 million on revenues of $480.2 million compared with operating income of $104.2 million on revenues of $468.9 million for the year-ago period. Significant items impacting operating income are as follows (in millions): Second Six Quarter Months ---------- ----------- Agricultural minerals operating income -1995 $ 48.8 $ 104.2 ---------- ----------- Increases (decreases): Sales volumes (11.4) (48.7) Realizations 16.4 59.5 Other 3.8 .5 ---------- ---------- Revenue variance 8.8 11.3 Cost of sales (8.1)a (3.7)a Gain on IMC-Agrico investment - 11.9 General and administrative .6 2.6 ---------- ---------- 1.3 22.1 ---------- ---------- Agricultural minerals operating income -1996 $ 50.1 $ 126.3 ========== ========== a. Includes a reduction to depreciation of $8.5 million and $11.3 million for the second quarter of 1996 and 1995, respectively, and $15.8 million and $16.1 million for the six-month period of 1996 and 1995, respectively, caused by FRP's disproportionate interest in IMC- Agrico cash distributions. The six-month 1996 period also includes $3.0 million of asset valuation charges from IMC-Agrico. FRP's second-quarter 1996 phosphate fertilizer sales volumes were 7 percent higher than those in the 1995 period, with IMC-Agrico's realization for diammonium phosphate (DAP), its principal fertilizer product, averaging 6 percent higher. The improvement in average price realizations resulted from the tight supply/demand situation experienced during late 1995 that moved prices higher in early 1996. After near record high fertilizer prices, price weakness began late in the first quarter and continued into the current quarter as industry exports and domestic sales volumes were lower than anticipated. In response to market conditions, IMC-Agrico temporarily idled its Taft, Louisiana plant and reduced DAP production at its New Wales, Florida plant in March and April, respectively, and also idled its Nichols, Florida phosphate plant in mid-May. However, near the end of the second quarter, North American and international demand strengthened, resulting in improved market prices. In response to these improving market conditions, in July IMC-Agrico resumed full capacity operations at its New Wales, Florida plant and commenced production at its Taft, Louisiana plant. FRP's phosphate fertilizer unit production costs were essentially unchanged as lower costs for ammonia and sulphur were offset by higher phosphate rock production, chemical processing and natural gas costs. The long-term fundamental market outlook for phosphate fertilizers remains favorable because of record low global grain stocks and historically high grain prices. Global fertilizer demand is expected to continue to increase. With many international phosphate suppliers sold out through the third quarter, global supply and demand should result in favorable prices throughout the balance of the year. FRP's second-quarter 1996 phosphate rock sales volumes declined 39 percent primarily reflecting the previously reported October 1995 expiration of a cost-plus contract that resulted in below market realizations on annual sales of 1.5 million tons net to FRP. Also contributing to the reduction in sales volumes were lower sales in the export market. The 18 percent increase in second-quarter 1996 realizations, primarily caused by the below market contract expiration, was offset by lower sales volumes and higher rock mining costs, resulting in lower earnings from its phosphate rock operations. Phosphate rock sales volumes are expected to decline further as IMC- Agrico does not intend to renew certain long-term sales contracts as they expire in order to maximize the long-term value of its phosphate rock reserves through internal use. Sulphur sales volumes in the second quarter of 1996 declined 14 percent from the 1995 period level, as FRP operated its Main Pass and Culberson mines at reduced rates (equivalent to 350,000 tons lower annual production) in response to lower domestic sulphur demand from phosphate fertilizer producers. Sulphur market prices were negatively affected by the lower demand. FRP's future sulphur sales volumes and realizations will continue to depend on the level of demand from the domestic phosphate fertilizer industry. Second Quarter Six Months ------------------------ ------------------------ 1996 1995 1996 1995 ---------- ---------- ---------- ---------- Phosphate fertilizers -primarily DAP Sales (short tons) a 809,900 760,400 1,599,900 1,660,300 Average realized price b All phosphate fertilizers $174.96 $163.53 $185.88 $163.68 DAP 178.37 169.01 192.05 169.10 Phosphate rock Sales (short tons) a 740,700 1,221,500 1,492,500 2,560,200 Average realized price b $27.27 $23.18 $26.77 $22.10 Sulphur Sales (long tons) c 665,700 772,700 1,403,800 1,533,300 a. Reflects FRP's 43.6 percent and 45.1 percent share of the IMC- Agrico assets for the years ended June 30, 1996 and 1995, respectively. b. Represents average realization f.o.b. plant/mine. c. Includes internal consumption totaling 169,000 tons and 189,700 tons for the second quarter of 1996 and 1995, respectively, and 355,000 tons and 368,600 tons for the six-month period of 1996 and 1995, respectively. Oil Operations - Second Quarter Six Months ----------------- ------------------- 1996 1995 1996 1995 ------- ------- --------- --------- Sales (barrels) 502,300 541,000 1,044,500 1,161,800 Average realized price $19.26 $16.71 $18.32 $15.99 Operating income (in millions) $2.5 $1.4 $4.7 $2.5 Main Pass oil production declined slightly from the 1995 period, as expected. Net production for 1996 is expected to be slightly lower than 1995 levels. Main Pass operating income for the 1996 periods benefited from an increase in average realizations caused by higher world market prices. During the quarter, FRP, a significant consumer of natural gas in its sulphur and fertilizer operations, acquired a 25 percent leasehold interest in an oil and gas joint venture to explore a 35,000 acre project area in south Terrebonne Parish, Louisiana. Two high- potential, high-risk prospects have been identified, with drilling on the East Fiddler's Lake prospect begun in July 1996 and drilling on the North Bay Junop prospect anticipated to begin in late 1996. A 3-D seismic survey has indicated additional potential prospects which may be drilled in 1997. In connection with the acquisition of this interest, FRP reimbursed McMoRan Oil & Gas Co., a formerly owned affiliate of FTX, $2.1 million for certain costs previously incurred on the project area. FRP acquired its interest on the same proportionate basis as Phillips Petroleum, which has a 50 percent leasehold interest in the project area and is the operator of the initial two drilling prospects. FRP will continue to evaluate opportunities for additional investments. CAPITAL RESOURCES AND LIQUIDITY FTX's main source of cash flow is distributions from its ownership in FRP. 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 before any distributions may be made to FTX. On July 19, 1996, FRP declared a distribution of 60 cents per publicly held unit ($30.0 million) and 23 cents per FTX- owned unit ($12.5 million), payable August 15, 1996, increasing the total unpaid distributions to FTX to $398.4 million. As a result, an additional $9.4 million minority interest charge will be recognized by FTX during the third quarter of 1996. Unpaid distributions to FTX are recoverable from one-half of any excess of future quarterly FRP distributions over 60 cents per unit for all units. FRP's future distributions will be dependent on the distributions received from IMC-Agrico, cash flow from FRP's sulphur and oil operations, and on the level of and methods of financing its capital expenditure needs including reclamation and growth projects. Distributable cash in July 1996 included $49.8 million from IMC-Agrico. Future distributions from IMC-Agrico will depend primarily on the phosphate fertilizer market, discussed earlier, and FRP's share of IMC-Agrico cash distributions (Current Interest). In March 1996, FRP and its joint venture partner in IMC-Agrico amended the IMC-Agrico Partnership Agreement to (1) increase FRP's ownership in IMC-Agrico by 0.85 percent, (2) alter the management structure of the joint venture and (3) modify certain product pricing arrangements between IMC-Agrico and other of the joint venture partner's business units. As a result, FRP's Current Interest is 54.35 percent for the twelve months ended June 30, 1997 and declines to 41.45 percent thereafter. The partnership agreement changes were made in recognition of changes in IMC-Agrico's business and in connection with a merger transaction between the joint venture partner and another company. FTX's parent company obligations were significantly reduced as a result of the recapitalization and restructuring activities completed in 1995. FTX retained certain cash requirements related to its past business activities, including oil and gas property abandonment obligations and employee benefit liabilities. Also, FTX could potentially incur future cash payments relating to its FM Properties Inc. debt guarantee, discussed in Note 9 to FTX's 1995 year-end financial statements. FTX anticipates that its cash distributions from FRP and its amounts available under the credit facility will be sufficient to meet these obligations. FTX's credit facility (Note 2) provides $300 million of credit available to FRP ($252.0 million of additional borrowings available at July 26, 1996), $75 million of which is available to FTX. FTX's regular quarterly cash dividend of 9 cents per common share, initiated in August 1995, allows FTX to use additional available funds to purchase FTX stock, purchase FRP units and/or invest in new growth opportunities. Since the change in its dividend policy through June 30, 1996, FTX has purchased approximately 2.4 million FTX shares and 181,200 FRP units for an aggregate cost of $93.7 million. The timing of additional FTX stock and FRP unit purchases is dependent upon many factors, including their price, FTX's financial condition and general economic and market factors. Net cash provided by continuing operations during the first six months of 1996 declined to $101.4 million, compared with $130.3 million in the 1995 period (excludes $138.6 million from discontinued operations), primarily caused by the increase in FRP's product inventories. Net cash used in investing activities was $13.6 million compared with $16.9 million in the 1995 period (excludes $308.1 million from discontinued operations). Capital expenditures for 1996, including amounts associated with the North Bay Junop/East Fiddler's Lake oil and gas exploration area, are currently estimated to approximate $45 million. Net cash used in financing activities totaled $104.0 million in the 1996 period compared with net cash generated of $60.7 million in the 1995 period. Net debt borrowings (including debt offerings and infrastructure sales) totaled $24.1 million in the 1996 period compared with repayments totaling $131.9 million in the 1995 period, with the 1995 period including net proceeds of $447.0 million from the sale of Freeport-McMoRan Copper & Gold Inc. (FCX) Class A common shares as part of FTX's restructuring activities. During the first six months of 1996, equity purchases totaled $59.0 million, acquiring approximately 1.6 million of its common shares for an aggregate $57.7 million and 63,200 FRP units for an aggregate $1.3 million. During the 1995 period, equity purchases totaled $126.1 million, consisting of 0.7 million of its common shares for $12.3 million, 2.8 million FCX Class A common shares for $111.7 million and 137,500 FRP units for $2.1 million. -------------------------------- The results of operations reported and summarized above are not necessarily indicative of future operating results. FREEPORT-McMoRan INC. PART II. Other Information Item 1. Legal Proceedings. Tom Beanal v. Freeport-McMoRan Inc. and Freeport-McMoRan Copper & Gold Inc., Civ. No. 96-1474 (E.D. La. filed Apr. 29, 1996) and Yosefa Alomang v. Freeport-McMoRan Inc. and Freeport-McMoRan Copper & Gold Inc., Civ. No. 96-9962 (Orleans Civ. Dist. Ct. La. filed June 19, 1996) and Civ. No. 96-2139 (E.D. La. removed June 24, 1996). In both actions, the plaintiffs allege substantially identical environmental, human rights and social/cultural violations in Indonesia. Tom Beanal seeks $6 billion in monetary damages and other equity relief and Yosefa Alomang seeks unspecified monetary damages and other equitable relief. The registrant denies the allegations, which have been refuted by a series of independent examinations of the Indonesian mining operations of P.T. Freeport Indonesia Company. The registrant believes that the actions are baseless and will vigorously defend such actions. Item 4. Submission of Matters to a Vote of Security Holders. (a) The Annual Meeting of Stockholders of the registrant was held on April 30, 1996 (the Annual Meeting). Proxies for the Annual Meeting were solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. (b) At the Annual Meeting Robert W. Bruce III, Robert A. Day and Bobby Lee Lackey were elected to serve until the 1999 annual meeting of stockholders. In addition to the directors elected at the Annual Meeting, the terms of the following directors continued after the Annual Meeting: Richard C. Adkerson, Thomas B. Coleman, William B. Harrison, Jr., Henry A. Kissinger, Rene L. Latiolais, Gabrielle K. McDonald, James R. Moffett, George Putnam, B. M. Rankin, Jr., J. Taylor Wharton and Ward W. Woods, Jr. (c) At the Annual Meeting the stockholders voted to elect three directors. Set forth below is the number of shares voted for or withheld from each nominee. There were no abstentions or broker non- votes with respect to the election of directors. Name For Withheld - ------------------- ---------- -------- Robert W. Bruce III 24,557,311 192,040 Robert A. Day 24,551,536 197,815 Bobby Lee Lackey 24,551,827 197,524 At the Annual Meeting, the stockholders also voted on and approved a proposal to ratify the appointment of Arthur Andersen LLP as the independent auditors to audit the financial statements of the registrant and its subsidiaries for the year 1996. Holders of 24,653,261 shares voted for, holders of 51,710 shares voted against and holders of 44,380 shares abstained from voting on, such proposal. There were no broker non-votes with respect to such proposal. At the Annual Meeting the stockholders voted on and approved a proposal to amend to the registrant's Annual Incentive Plan. Holders of 23,504,046 shares voted for, 885,546 shares voted against and holders of 359,759 shares abstained from voting on, such proposal. There were no broker non-votes with respect to such proposal. At the Annual Meeting the stockholders voted on and approved the amendments to the 1992 Long-Term Performance Incentive Plan. Holders of 23,473,379 shares voted on, holders of 908,677 shares voted against and holders of 367,295 shares abstained from voting on, such proposal. There were no broker non-votes with respect to such proposal. At the Annual Meeting the stockholders voted on and approved the registrant's 1996 Stock Option Plan. Holders of 21,879,965 shares voted on, 2,153,763 shares voted against, and holders of 715,623 shares abstained from voting on, such proposal. There were no broker non-votes with respect to such proposal. Item 5. Other Events. On August 7,1996, the registrant issued a press release announcing that it had entered into a non-binding letter of intent with Arcadian Corporation regarding a possible combination of their businesses into a newly formed corporation. Although it is not a condition to the combination, it is intended that Freeport-McMoRan Resource Partners, Limited Partnership (FRP) will be offered an opportunity to participate in a transaction that would convert the publicly held limited partnership units of FRP into capital stock of the new corporation. Copies of the letter of intent and the press release are filed with this report as Exhibits 99.1 and 99.2, respectively. Item 6. Exhibits and Reports on Form 8-K. (a) The exhibits to this report are listed on the Exhibit Index appearing on page E-1 hereof. (b) No reports on Form 8-K have been filed by the registrant during the quarter for which this report is filed. FREEPORT-McMoRan INC. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FREEPORT-McMoRan INC. By: /s/ William J. Blackwell ------------------------ William J. Blackwell Controller - Financial Reporting (authorized signatory and Principal Accounting Officer) Date: August 9, 1996 FREEPORT-McMoRan INC. EXHIBIT INDEX Sequentially Numbered Number Description Page - ------ ----------- ---------- 11.1 Freeport-McMoRan Inc. Computation of Net Income per Common and Common Equivalent Share 27.1 Freeport-McMoRan Inc. Financial Data Schedule 99.1 Press Release dated August 7, 1996 99.2 Letter of Intent between Freeport-McMoRan Inc. and Arcadian Corporation EX-11 2 Exhibit 11.1 FREEPORT-McMoRan INC. COMPUTATION OF NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE Three Months Six Months Ended June 30, Ended June 30, ------------------------- ------------------------ 1996 1995 1996 1995 ---------- ----------- ---------- ---------- (In Thousands, Except Per Share Amounts) Primary: Net income applicable to common stock $12,126 $265,485 $32,255 $284,876 ========== =========== ========== ========== Average common shares outstanding 26,806 24,487 27,029 23,636 Common stock equivalents: Stock options 339 150 383 117 ---------- ---------- ---------- ---------- Common and common equivalent shares 27,145 24,637 27,412 23,753 ========== ========== ========== ========== Net income per common and common equivalent share $0.45 $10.78 $1.18 $11.99 ===== ====== ===== ====== Fully diluted: Net income applicable to common stock: Net income $12,126 $265,485 $32,255 $284,876 Plus preferred dividends - 1,096 - 6,564 Plus interest, net of tax effect, on convertible subordinated debentures - 6,707 - 15,921 ---------- ----------- ---------- ---------- Net income applicable to common stock $12,126 $273,288 $32,255 $307,361 ========== =========== ========== ========== Average common shares outstanding 26,806 24,487 27,029 23,636 Common stock equivalents: Stock options 339 155 383 119 Convertible securities: Preferred stock - 393 - 1,176 Convertible subordinated debentures - 4,525 - 4,707 ---------- ----------- ---------- ---------- Common and common equivalent shares 27,145 29,560 27,412 29,638 ========== =========== ========== ========== Net income per common and common equivalent share $0.45 $9.25 $1.18 $10.37 ===== ===== ===== ====== EX-27 3
5 This schedule contains summary financial information extracted from Freeport-McMoRan Inc. financial statements at June 30, 1996 and 1995 and for the 6 month periods then ended, and is qualified in its entirety by reference to such financial statements. Additionally, the 1995 amounts have been restated. 0000351116 FREEPORT-MCMORAN INC. 1,000 6-MOS 6-MOS DEC-31-1996 DEC-31-1995 JUN-30-1996 JUN-30-1995 7,339 31,484 0 0 65,476 42,212 0 0 136,654 105,800 242,433 321,745 1,942,362 1,962,906 967,932 974,392 1,269,222 1,698,632 149,232 199,339 385,695 491,409 0 0 50,084 50,084 340 197,862 114,004 144,748 1,269,222 1,698,632 499,620 487,877 499,620 487,877 363,328 359,838 363,328 359,838 (11,917) 0 0 0 16,438 31,230 101,086 66,479 18,899 6,557 34,446 9,511 0 315,457 0 0 0 0 34,446 324,968 1.18 11.99 1.18 10.37
EX-99 4 Exhibit 99.1 FREEPORT-McMoRan INC. AND ARCADIAN CORPORATION ANNOUNCE BUSINESS COMBINATION NEW ORLEANS, LA. and MEMPHIS, TN., August 7, 1996 -- Freeport-McMoRan Inc. (NYSE:FTX) and Arcadian Corporation (NYSE: ACA; ACA PRA) announced today that they have signed a non-binding letter of intent for the combination of their businesses into a newly formed corporation, pursuant to which it is contemplated that (i) the outstanding common stock of FTX and Arcadian would be converted into common stock of the new company, (ii) the new company would become the ultimate parent corporation of FTX and Arcadian, and (iii) FTX and Arcadian would become wholly-owned direct or indirect subsidiaries of the new company. Although it is not a condition to the combination, it is also intended that Freeport-McMoRan Resource Partners, Limited Partnership (NYSE:FRP) will be offered an opportunity to participate in a transaction that would convert the publicly held limited partnership units of FRP into capital stock of the new company. An application will be made to list the common stock of the new company on the New York Stock Exchange, and its aggregate market value would be approximately $3 billion based on current trading prices and assuming that FRP public unitholders elect to participate in the transaction. In the proposed combination, each share of common stock of FTX would be exchanged for one share of the new company's common stock, and each share of common stock of Arcadian would be exchanged for 0.658 shares of the new company's common stock. FTX's common stock closed yesterday at $36.50 per share, and Arcadian's common stock closed yesterday at $20.625 per share. In addition, each share of Arcadian's Mandatorily Convertible Preferred Stock, Series A, outstanding immediately prior to the combination would be converted into one share of a newly created Mandatorily Convertible Preferred Stock of the new company with substantially equivalent rights and preferences as the Arcadian stock, except that it would be convertible into up to 0.658 shares of the new company's common stock. In the proposed transaction with FRP, each public limited partnership unit would be converted into capital stock of the new company at a conversion rate to be agreed upon by FTX, FRP and Arcadian, and approved by a vote of the FRP public unitholders. The transactions are expected to be tax-free to FTX, Arcadian and FRP as well as to the shareholders of Arcadian and FTX and the public unitholders of FRP. James R. Moffett, Chairman of the Board of Freeport-McMoRan Inc. said: "The combination of Freeport-McMoRan and Arcadian would create an enterprise with over $2 billion in estimated consolidated annual revenues, over $500 million of estimated consolidated annual operating cash flow (including the revenues and cash flow attributable to FRP) and a very strong capital structure, which would be an industry leader in its current operations and an aggressive participant in worldwide agricultural mineral opportunities." The reporting of these amounts on a consolidated basis is consistent with FTX's historical presentation. William A. McMinn, Chairman of the Board of Arcadian Corporation said: "This proposed transaction would combine leading participants in two of the three major fertilizer nutrients. Freeport-McMoRan's leadership role in phosphates through IMC-Agrico, and Arcadian's position as the largest producer and marketer of nitrogen fertilizers and chemicals in the Western Hemisphere would create a unique platform to participate in the world's expanding needs for fertilizer inputs which make efficient food production possible." Rene L. Latiolais, Chief Executive Officer of Freeport- McMoRan Inc. and Freeport-McMoRan Resource Partners said: "This transaction, if approved by FRP public unitholders, would simplify the corporate structure of Freeport-McMoRan while allowing the FRP public unitholders an enhanced opportunity to participate in the growing demand for crop nutrients brought on by the worldwide agricultural revolution." Among other required conditions contained in the letter of intent, the proposed combination of FTX and Arcadian is subject to the negotiation and execution of a definitive merger agreement (which would include customary conditions to closing), completion of due diligence, approval of the Boards of Directors of Freeport-McMoRan Inc. and Arcadian Corporation, approval by the shareholders of Arcadian Corporation and Freeport-McMoRan Inc., and approval under the Hart-Scott-Rodino Anti-Trust Improvements Act. Completion of the combination is also subject to such rights as IMC Global, Inc. (NYSE:IGL) may have to participate in the transaction under its partnership agreement with FRP governing their IMC-Agrico Company joint venture. The proposed transaction with FRP would also be subject to approval of a special committee of the FTX Board of Directors representing the interests of FRP public unitholders and to a vote of those unitholders. The companies intend to complete the definitive agreement in approximately 30 days. The terms of the transaction , including the offering of the new company's shares, will be set forth by means of a joint proxy statement/prospectus. Arcadian Corporation is the largest producer and marketer of nitrogen fertilizers and chemicals in the Western Hemisphere. Freeport-McMoRan Inc. owns a 51.6% interest in Freeport- McMoRan Resource Partners, which is engaged in the production and sale of phosphate fertilizers and animal feed ingredients as well as the mining and sale of phosphate rock through IMC-Agrico Company; the mining, transporting, terminalling and marketing of sulphur and the development and production of oil and gas reserves. EX-99 5 Exhibit 99.2 August 5, 1996 Arcadian Corporation 6750 Poplar Avenue, Suite 600 Memphis, Tennessee 38138-7419 Attention: Mr. William A. McMinn Chairman of the Board Re: Business Combination of Arcadian Corporation and Freeport-McMoRan Inc. Gentlemen: This Letter of Intent, when executed by you, will constitute a non-binding statement of the intention of Arcadian Corporation ("Arcadian") and Freeport-McMoRan Inc. ("Freeport") concerning the proposed combination (the "Combination") of the businesses of Arcadian and Freeport into a newly-formed corporation ("Newco"), pursuant to which it is contemplated that (i) the outstanding capital stock of Arcadian and Freeport will be converted into capital stock of Newco, (ii) Newco will become the ultimate parent corporation of Arcadian and Freeport, and (iii) Arcadian and Freeport will become wholly-owned direct or indirect subsidiaries of Newco. It is also intended that, while not a condition to the Combination, Freeport will provide to Freeport- McMoRan Resource Partners, Limited Partnership ("FRP") an opportunity to participate in a transaction that would convert the publicly-held limited partnership units of FRP into common stock of Newco. There will be a period (the "Negotiation Period") commencing on the date of this Letter of Intent and ending one month thereafter during which (i) each of the parties will complete its due diligence and evaluation of the other party and of FRP and (ii) the parties will use their reasonable good faith efforts to negotiate a mutually acceptable definitive agreement to implement the Combination. During the Negotiation Period and thereafter until two weeks following receipt by Arcadian or Freeport of written notice from the other that the notifying party has terminated this Letter of Intent, neither Arcadian nor Freeport shall, directly or indirectly, through any director, officer, employee, affiliate, or other representative, solicit, encourage, Arcadian Corporation August 5, 1996 Page 2 furnish any information concerning, participate in negotiations or discussions concerning, consider, entertain, accept or consummate any proposal of any person relating to the acquisition of its business in whole or in part, whether through the purchase of assets or stock, or through a merger, consolidation, share exchange or otherwise; provided, however that the foregoing limitation shall not apply to Freeport's discussions with IMC Global, Inc. regarding any role that IMC Global may play in the Combination; and provided further that the foregoing limitation shall not apply to Arcadian or Freeport if, in the good faith judgment of its Board of Directors after consultation with legal counsel and financial advisors, compliance with such limitation would not be prudent in view of such directors' duties under applicable law. During the Negotiation Period, Arcadian and Freeport will consult with each other and use their good faith efforts to agree upon the form and substance of all public statements or announcements with respect to the Combination (except that, after such consultation, either Arcadian or Freeport may make such statements as it in good faith deems to be required by applicable law, stock exchange rules or otherwise). Either party may terminate this Letter of Intent at any time by written notice to the other party, and upon such termination (except as stated above), neither party shall have any obligation with respect to the Combination hereunder or otherwise or any liability to the other party hereunder or relating in any way to the proposed Combination. The definitive agreement will, among other things, provide: 1. That the Combination will constitute a tax-free transfer to a controlled corporation under Section 351 and/or a reorganization under Section 368 of the Internal Revenue Code of 1986, as amended. Subject to the conditions set forth below, in the Combination (i) each outstanding share of common stock of Arcadian (including shares of common stock resulting from the exercise of the Holders' Opt-Out Right as described in Arcadian's Certificate of Incorporation) shall be converted into 0.658 shares of common stock of Newco, (ii) each outstanding share of common stock of Freeport shall be converted into one share of common stock of Newco, (iii) each outstanding share of Arcadian's Mandatorily Convertible Preferred Stock, Series A will be converted into one share of Mandatorily Convertible Preferred Stock of Newco containing substantially equivalent terms and privileges as the Arcadian issue, except that such shares will be convertible into 0.658 shares of Newco common stock (subject to adjustment as set forth in Arcadian's Certificate of Incorporation), and (iv) appropriate mutually agreeable provisions will be made for Arcadian's and Freeport's outstanding options, warrants, SARS and other similar rights. 2. For representations, warranties and covenants acceptable to Arcadian and Freeport, concerning, among other things, the organization, business, and financial condition of, Arcadian Corporation August 5, 1996 Page 3 and litigation affecting, Arcadian and Freeport and, if the parties so agree, appropriate provisions governing fiduciary responsibilities, termination fees and voting arrangements. Such representations and warranties will not survive the closing of the Combination. 3. That the closing of the Combination shall be subject to, among other things: (a) board of directors' approvals by each of Freeport and Arcadian; (b) requisite approval by the stockholders of Freeport and Arcadian; (c) the completion of appropriate filings under the Hart-Scott-Rodino Antitrust Improvements Act and the expiration or termination of all applicable waiting periods thereunder; and (d) the obtaining of all other necessary governmental and third party consents and approvals. While not a condition to the Combination, it is the intent of the parties that Newco will provide to FRP an opportunity to participate in a transaction that would convert the publicly-held limited partnership units of FRP into common stock of Newco at a conversion rate that is satisfactory to Freeport, Arcadian and FRP. In its capacity as Administrative Managing General Partner of FRP, Freeport will appoint a special committee of its Board of Directors to act on behalf of the holders of limited partnership units of FRP and will authorize such committee to engage independent financial advisors and counsel to assist such committee in evaluating the proposed transaction. Please confirm that this letter accurately sets forth our mutual understanding by executing two copies of this letter and returning a fully executed copy to Freeport. It is recognized that the definitive agreement will include terms, provisions, conditions, representations and warranties in addition to and in modification of those discussed above. It is our expectation that the parties would enter into a definitive agreement within one month after your execution and return of this letter, that the stockholders' meetings of Arcadian and Freeport will be held as soon as practicable thereafter and that the closing will take place as soon as practicable after such meetings. Except for the obligations of Arcadian and Freeport set forth in the second and third sentences of the second paragraph of this letter, this letter shall not be deemed to be a binding agreement and shall create no legal obligation on the part of Freeport, Arcadian or any of their respective officers, directors, employees, agents or affiliates. Any such agreement or obligation shall be created solely by a written, executed and delivered definitive agreement. Arcadian Corporation August 5, 1996 Page 4 If the foregoing is in accordance with your understanding, kindly execute and return the enclosed copy of this letter as provided above. Very truly yours, FREEPORT-MCMORAN INC. By: /s/James R. Moffett -------------------- James R. Moffett Chairman of the Board Confirmed: ARCADIAN CORPORATION By: /s/William A. McMinn -------------------- William A. McMinn Chairman of the Board -----END PRIVACY-ENHANCED MESSAGE-----