-----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, C83A0/Uhu+Hc/THpxyZ+7KO9B5nBeDYAmLseu1o9VyxXnZRzx3anY9D9bKJUcwV/ TeX1G57LkaoPRBvQKjF6sA== 0000351116-96-000001.txt : 19960401 0000351116-96-000001.hdr.sgml : 19960401 ACCESSION NUMBER: 0000351116-96-000001 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FREEPORT MCMORAN INC CENTRAL INDEX KEY: 0000351116 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE CHEMICALS [2870] IRS NUMBER: 133051048 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-08124 FILM NUMBER: 96540453 BUSINESS ADDRESS: STREET 1: 1615 POYDRAS ST CITY: NEW ORLEANS STATE: LA ZIP: 70112 BUSINESS PHONE: 5045824000 10-K405 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From .......... to .......... Commission file number 1-8124 Freeport-McMoRan Inc. DELAWARE 13-3051048 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1615 Poydras Street New Orleans, Louisiana 70112 (Address of principal executive offices) (Zip Code) 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 $.01 per Share 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 voting stock held by non-affiliates of the registrant was approximately $1,133,832,000 on March 8, 1996. On March 8, 1996, there were issued and outstanding 27,307,870 shares of the Registrant's Common Stock. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Annual Report to stockholders for the year ended December 31, 1995 are incorporated by reference into Parts II and IV of this Report and portions of the registrant's Proxy Statement dated March 22, 1996, submitted to the registrant's stockholders in connection with its 1996 Annual Meeting to be held on April 30, 1996 are incorporated by reference into Part III of this Report. _______________________________________________________________________________ TABLE OF CONTENTS Page Part I.......................................................................1 Items 1. and 2. Business and Properties......................................1 Overview...............................................................1 General........................................................1 Recapitalization Activities and Distribution of FCX............1 Agricultural Minerals..................................................2 Introduction...................................................2 Fertilizer Business-IMC-Agrico Company.........................3 Phosphate Rock.................................................4 Phosphate Fertilizers..........................................4 Animal Feed Ingredients........................................5 Marketing......................................................5 Sulphur Business.......................................................5 Production.....................................................6 Marketing......................................................6 Oil and Natural Gas....................................................6 General................................................................7 Competition....................................................7 Operating Hazards..............................................7 Environmental Matters..........................................7 Relationship between the FTX Group and FRP.............................8 Management and Ownership.......................................8 Credit Arrangements............................................8 Conflicts of Interest..........................................9 Administrative Services Agreement..............................9 Employees..............................................................9 Item 3. Legal Proceedings...................................................10 Item 4. Submission of Matters to a Vote of Security Holders.................10 Executive Officers of the Registrant..................................10 Part II.....................................................................11 Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.................................................11 Item 6. Selected Financial Data.............................................11 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...........................................11 Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................................................11 Part III....................................................................12 Item 10. Directors and Executive Officers of the Registrant.................12 Item 11. Executive Compensation.............................................12 Item 12. Security Ownership of Certain Beneficial Owners and Management.....12 Item 13. Certain Relationships and Related Transactions.....................12 Part IV.....................................................................13 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K....13 Signatures.................................................................S-1 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. OVERVIEW General Freeport-McMoRan Inc., a Delaware corporation formed in 1981 ("FTX" or the "Company") through Freeport-McMoRan Resource Partners, Limited Partnership ("FRP") is engaged in the mining and sale of phosphate rock, the production, distribution and sale of phosphate-based fertilizers and animal feed ingredients, and is the largest producer of Frasch sulphur in the world. See "Agricultural Minerals." Through FRP, FTX is also engaged in the purchase, transportation, terminalling and sale of sulphur and the production of oil and natural gas. See "Oil and Natural Gas." Prior to the restructuring of FTX completed in the third quarter of 1995, FTX also engaged 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 through Freeport-McMoRan Copper & Gold Inc. ("FCX"). See "- Recapitalization Activities and Distribution of FCX." Until December 31, 1995, FTX provided general executive, administrative and other services to FRP, FCX, McMoRan Oil & Gas Co., a Delaware corporation engaged in oil and natural gas exploration activities ("MOXY") and FM Properties Operating Co., a Delaware general partnership engaged in the acquisition, development and marketing of real estate in the Austin, Dallas, Houston and San Antonio, Texas areas ("FMP"). Since January 1, 1996, substantially the same services have been provided to these companies and partnership and to FTX on substantially the same terms and conditions by FM Services Company ("FMS"), a company owned 50% by each of FTX and FCX. See "Relationship between the FTX Group and FRP - Administrative Services Agreements." Recapitalization Activities and Distribution of FCX In July 1995 the Company divested all ownership interest in FCX through the distribution of all shares of FCX Class B common stock owned by it to FTX shareholders, thus completing the separation of the two principal businesses theretofore conducted by FTX into two independent financial and operating entities -- copper and gold conducted by FCX and its affiliates, and agricultural minerals conducted by FRP and its affiliates. Prior to the restructuring, FTX owned 68.9% of the outstanding common stock of FCX. As a result of the July 1995 distribution of FCX stock, FTX no longer owns any interest in FCX. In connection with the divestiture, FTX conducted substantial recapitalization and restructuring activities. Certain of these actions taken by FTX during 1995 in connection with its restructuring and divestiture of FCX are summarized below: - April 1995: FTX issued approximately 11.4 million shares of FTX common stock in exchange for approximately four million shares of its $4.375 Convertible Exchangeable Preferred Stock (the "Preferred Stock") pursuant to an exchange offer to holders of Preferred Stock at an exchange ratio of 2.85 shares of FTX common stock for each share of Preferred Stock, reflecting an enhancement of 0.5 share of FTX common stock over the Preferred Stock conversion ratio. As of December 31, 1995, approximately one million shares of Preferred Stock remained outstanding and convertible into an aggregate of 1.8 million shares of FTX common stock, after adjustment for the reverse stock split described below. The Preferred Stock was privately placed and is not listed for trading on any exchange. - May and July 1995: The RTZ Corporation PLC ("RTZ") acquired from FTX 21.5 million shares of FCX Class A common stock in May 1995 for $450 million and 2.4 million shares of FCX Class A common stock in July 1995 for $50.2 million. The proceeds of these sales were used to redeem certain securities described below and to retire FTX's bank debt. - June 1995: FTX redeemed approximately $749.2 million principal amount of its outstanding Zero Coupon Convertible Subordinated Debentures due 2006 (the "ABC Securities") for approximately $280.8 million. Approximately $500,000 principal amount of ABC securities were converted into 7,040 shares of FTX common stock prior to the redemption. Funds for the redemption were provided from the sale of FTX common stock to RTZ in May 1995. - June 1995: FTX redeemed approximately $16.4 million principal amount of its 6.55% Convertible Subordinated Notes due January 15, 2001 (the "Notes") for approximately $15 million. Approximately $356.6 million principal amount of the Notes were converted into 19.9 million shares of FTX common stock, reflecting an enhanced conversion ratio of 55.95 shares of FTX common stock for each $1,000 principal amount of Notes. - July 1995: FTX entered into a new credit facility currently providing $300 million of credit, all of which is available to FRP and $75 million of which is available to FTX. See "Relationship between the FTX Group and FRP - Credit Arrangements." FCX assumed an obligation of FTX to guaranty up to $90 million of the indebtedness of FMPO, and FTX agreed to pay an annual fee to FCX for such guaranty and to guaranty up to an additional approximately $60 million of FMPO debt. At December 31, 1995, the indebtedness of FMPO totalled approximately $121.3 million, of which $45.0 million was guaranteed by FTX. - July 1995: FTX declared and paid a special tax-free distribution of all of the approximately 118 million FCX Class B common shares then owned by FTX to holders of its common stock. Pursuant to the distribution, FTX stockholders received 0.701734 shares of FCX Class B common stock per share of FTX common stock. - September 1995: FTX sold its wholly owned subsidiary, Freeport Copper Company ("FCC") to FCX for $25 million. FCC's sole asset is a fifty percent interest in a joint venture controlling approximately 7,600 acres in Arizona, which is involved in research projects for an experimental in-situ leaching process that would be used to mine copper. - October 1995: FTX stockholders approved a one-for-six reverse split of FTX common stock, reducing the number of outstanding shares from approximately 168.4 million to 28.1 million. In order to ensure the tax-free nature of the distribution of FCX Class B common stock, FTX has agreed that, unless it obtains an opinion of tax counsel or supplemental ruling from the Internal Revenue Service that the tax free nature of the distribution would not be adversely affected, until July 17, 1997, it will (i) not dispose of any interest in FRP, (ii) use its best efforts to remain managing general partner of FRP and cause its business to be conducted substantially unchanged, (iii) take no affirmative steps to merge, liquidate or, except in the ordinary course of business, sell any of its or FRP's assets, or (iv) subject to certain permitted conditions, not redeem or re-acquire shares of its common stock or re-acquire shares of FCX Class B common stock. FTX and FCX also agreed to transition certain management services to FCX by July 17, 1996. See "Relationship between the FTX Group and FRP - Administrative Services Agreement." FTX has no present intention of taking any action that would be inconsistent with this agreement at any time in the future. AGRICULTURAL MINERALS Introduction The Company's agricultural minerals business is conducted through FRP, a Delaware limited partnership organized in 1986 in which FTX owned as of December 31, 1995 an approximately 51.5% interest and served as administrative managing general partner. Through its joint venture interest in IMC-Agrico Company, a Delaware general partnership ("IMC-Agrico"), FRP is the world's largest and one of the world's lowest cost producers, marketers and distributors of phosphate fertilizer, with operations in Central Florida and on the Mississippi River in Louisiana. FRP's Main Pass sulphur mine, offshore Louisiana in the Gulf of Mexico, and its Culberson mine in Texas, also make FRP the largest producer of Frasch sulphur in the world. The combined sulphur and phosphate mining and fertilizer production operations provide FRP with the competitive advantages of vertical integration and operating efficiencies and reduce the sensitivity of FRP's phosphate fertilizer costs to changes in raw materials prices. IMC-Agrico's business includes the mining and sale of phosphate rock and the production, marketing and distribution of phosphate fertilizers and animal feed ingredients. IMC-Agrico was formed as a joint venture partnership in July 1993 when FRP and IMC Global Inc. ("IMC") contributed their respective phosphate fertilizer businesses to IMC-Agrico. FRP believes that the combination of its internal production of raw materials, through its sulphur division and the IMC-Agrico joint venture, and the strategic location of IMC- Agrico's fertilizer operations provide it with a competitive advantage over other fertilizer producers. FRP's sulphur operations include the mining, purchase, transportation, terminalling and marketing of sulphur. The Main Pass deposit, which was discovered in 1988, contains the largest known sulphur reserve in North America. FRP's Main Pass offshore mining complex is the largest structure of its type in the Gulf of Mexico and one of the largest in the world. The mining complex reached full design capacity of 5,500 long tons per day in December 1993 and has since operated at or above design level. FRP has a 58.3% interest in the Main Pass mine and serves as its manager and operator. In January 1995, FRP began operating the Culberson mine when it acquired substantially all of the domestic assets of Pennzoil Sulphur Co. ("Pennzoil"). As of December 31, 1995, the Main Pass and Culberson mines were estimated to contain proved and probable sulphur reserves totaling 55.2 million long tons net to FRP. Main Pass also contains proved oil reserves from which FRP produces and sells oil for the Main Pass joint venture. Oil production averaged approximately 12,400 barrels per day (6,000 barrels net to FRP) during the year ended December 31, 1995. As of December 31, 1995, Main Pass was estimated to contain 15.9 million barrels (6.6 million barrels net to FRP) of proved oil reserves. FRP continues to benefit from significant improvements in phosphate fertilizer markets that began in late 1993 and continue into 1996. FRP's 1995 average realization for its principal fertilizer product, diammonium phosphate ("DAP"), increased approximately 55% to approximately $175 per short ton from the 1993 average of approximately $113 per short ton. In late March 1996, the spot market price for DAP as quoted in industry publications was approximately $200 per short ton, FOB Central Florida. Fertilizer Business-IMC-Agrico Company In July 1993, FRP and IMC contributed to IMC-Agrico their respective phosphate fertilizer businesses, including the mining and sale of phosphate rock and the production, marketing and distribution of phosphate fertilizers. At the time, FRP and IMC were among the largest and lowest cost phosphate fertilizer producers in the world. The formation of IMC-Agrico has reduced production costs by permitting the more efficient use of existing plant capacity as well as eliminating duplicative administrative and marketing functions. IMC-Agrico makes quarterly cash distributions to FRP and IMC, based on sharing ratios that vary from year to year until the fiscal year ending June 30, 1998. As a result of an agreement reached in January 1996, FRP's Current Interest was increased by 0.85% effective as of March 1, 1996, and on July 1, 1996, FRP's Capital Interest will also be increased by 0.85%. FRP's Current Interest and its Capital Interest as adjusted to give effect to the increases described above, are as follows: Fiscal Year Current Interest Capital Interest Ending June 30 As Adjusted As Adjusted ______________ ________________ ________________ 1996 . . . . . . . . . . 53.95% 43.60% 1997 . . . . . . . . . . 54.35% 43.05% 1998 and thereafter. . . 41.45% 41.45% The IMC-Agrico policy committee establishes policies relating to the strategic direction of IMC-Agrico and assures that its policies are implemented. FRP and IMC have equal representation on the policy committee. The policy committee has the sole authority to make certain decisions affecting IMC-Agrico, including the authorization of certain expansion capital expenditures, incurring certain indebtedness, approving significant acquisitions and dispositions and certain other decisions. In January 1996, IMC-Agrico's day-to-day management was restructured so that it operates substantially as a stand-alone entity. Included in the restructuring was the establishment of a new office of the president of IMC-Agrico who is responsible for managing its business affairs. The president is appointed by IMC subject to the approval of the policy committee. An executive officer of FRP was selected as the initial president of IMC-Agrico and has joined IMC-Agrico in that role. The president reports to IMC who maintains responsibility for the operation of IMC-Agrico, subject to the terms of the partnership agreement governing IMC-Agrico and the direction of the policy committee. Phosphate Rock IMC-Agrico's phosphate mining operations and production plants, located in Polk, Hillsborough, Hardee and Manatee Counties in central Florida, produce phosphate rock principally for the manufacture of phosphate fertilizers. IMC-Agrico sells phosphate rock to foreign distributors, domestic animal feed manufacturers and other phosphate fertilizer producers. IMC-Agrico uses phosphate rock internally in the production of phosphate fertilizers at its plants located in central Florida and in Louisiana. Phosphate rock is generally mixed with sulphuric acid to produce phosphoric acid from which various granulated phosphate products can be produced. IMC-Agrico's annual phosphate rock mining capacity is approximately 27 million tons per year and currently accounts for approximately 50% of domestic phosphate rock mining capacity and 19% of the western world's capacity. IMC-Agrico produced approximately 25 million tons of phosphate rock during the year ended December 31, 1995. As of December 31, 1995, FRP's share of IMC-Agrico's proved and probable phosphate rock reserves were approximately 186.4 million short tons that are mineable from existing operations, plus an additional 183.8 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. These reserves are either owned by IMC-Agrico or controlled by it through long-term lease or royalty arrangements. Phosphate Fertilizers IMC-Agrico manufactures phosphate fertilizers, principally DAP, monoammonium phosphate ("MAP") and granular triple superphosphate ("GTSP"), and related products, including sulphuric acid, phosphoric acid, anhydrous ammonia and urea. IMC-Agrico's fertilizer operations consist of six phosphoric acid and fertilizer manufacturing facilities, three in central Florida and three on the Mississippi River in Louisiana. IMC-Agrico's New Wales, Nichols and South Pierce plants are located in Florida. The New Wales complex, located near Mulberry, Florida, primarily produces DAP, MAP, GTSP and merchant grade phosphoric acid. The New Wales plant also produces animal feed ingredients (see "Animal Feed Ingredients"). The Nichols plant, located in Nichols, Florida, produces DAP, sulphuric acid and phosphoric acid. The South Pierce plant, located in Bartow, Florida, produces GTSP, sulphuric acid and phosphoric acid. IMC-Agrico's Faustina, Uncle Sam and Taft plants are located in Louisiana. The Faustina plant, located in Donaldsonville, Louisiana, produces DAP, MAP, anhydrous ammonia, urea, sulphuric acid and phosphoric acid. The Uncle Sam plant, located at Uncle Sam, Louisiana, produces sulphuric acid and phosphoric acid which is then shipped to the nearby Faustina and Taft plants, where it is used to produce DAP and MAP. The Taft plant, located in Taft, Louisiana, produces DAP and MAP. As market conditions dictate, operations at Taft are suspended by IMC-Agrico to avoid building excessive inventories. 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 supplies its share of IMC- Agrico's sulphur requirements through its production from the Main Pass and Culberson mines and IMC supplies IMC-Agrico with its sulphur requirements from its share of Main Pass production and purchases from third parties, including FRP. IMC-Agrico's ammonia needs are fulfilled by internal production from its Faustina plant and third party domestic suppliers under long-term contracts. IMC-Agrico's phosphoric acid capacity is approximately 4.0 million tons of contained P2O5 (P2O5 is an industry term indicating a product's phosphate content measured chemically in units of phosphorous pentoxide), which represents approximately 32% of U.S. production capacity and 11% of world capacity. IMC-Agrico operated at approximately 97% of P2O5 capacity in 1995 as compared to 93% in 1994. IMC-Agrico's plants have an estimated annual sustainable capacity to produce approximately 8.2 million tons of granulated phosphates (DAP, MAP and GTSP), 10.4 million tons of sulphuric acid, 260,000 tons of urea and 565,000 tons of anhydrous ammonia. During 1995, IMC-Agrico produced approximately 7.6 million tons of granulated phosphates, as compared to 7.1 million tons in 1994. Animal Feed Ingredients In October 1995, IMC-Agrico acquired the animal feed ingredients business of Mallinckrodt Group Inc. for $110 million cash. Prior to the acquisition, this business was IMC-Agrico's largest P2O5 customer, consuming nearly 300,000 tons per year (approximately 7% of IMC-Agrico's capacity). FRP's portion of the purchase price was $46.2 million and was funded by borrowings under its credit facility. See "Relationship Between the FTX Group and FRP - Credit Arrangements." Prior to the acquisition, IMC-Agrico managed Mallinckrodt's animal feed plant operations on a contractual basis. The principal manufacturing facilities of the animal feed operations are located within IMC- Agrico's New Wales complex. This newly acquired business is one of the world's largest producers of phosphate-based animal feed ingredients and enhances IMC- Agrico's flexibility in maximizing returns from its core phosphate production. Marketing IMC-Agrico sells its fertilizer products in the domestic and export markets under spot market and long-term contract terms. IMC-Agrico markets its products domestically throughout the eastern two-thirds of the United States. In 1995, approximately 40% of IMC-Agrico's phosphate fertilizer shipments were sold in the domestic market. Approximately 60% of IMC-Agrico's phosphate rock production was used in 1995 to produce phosphate fertilizers at its plants in Florida and Louisiana, with a majority of the remaining amount sold in the domestic market. Virtually all of FRP's export sales of phosphate fertilizers are marketed through the Phosphate Chemical Export Association ("Phoschem"), a Webb-Pomerene Act association. Since January 1995, IMC has been responsible for marketing DAP, MAP and GTSP for PhosChem's members. This marketing arrangement allows IMC-Agrico to interface directly with its major international customers and enhances its ability to pursue growth and marketing opportunities on a global basis. Although phosphate fertilizer sales are fairly constant from month to month, seasonal increases occur in the domestic market prior to the fall and spring planting of crops. Generally, domestic sales taper off after the spring planting season. However, this decline in domestic sales generally coincides with a time when major international buyers such as China, India and Pakistan purchase product for mid-year delivery. In conducting business abroad, IMC-Agrico is subject to the customary risks encountered in foreign operations, including changes in currency and exchange controls, the availability of foreign exchange, laws, policies and actions affecting foreign trade and government subsidies, tariffs and quotas. All of FRP's major products are commodities, and the markets and prices for such products have been volatile historically and may continue to be volatile in the future. FRP's operating margins and cash flow are subject to substantial fluctuations in response to changes in supply and demand for its products, conditions in the domestic and foreign agriculture industry, market uncertainties and a variety of additional factors beyond FRP's control. SULPHUR BUSINESS FRP's sulphur operations include the mining, purchase, transportation, terminalling 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 equipment and sales and other related commercial contracts and obligations. As a result, FRP now produces sulphur from its Main Pass and Culberson mines for sale to IMC-Agrico and to third parties. Production The Main Pass and Culberson mines utilize the Frasch mining process, which involves drilling wells and injecting superheated water into the underground sulphur deposit to melt the solid sulphur, which is then brought to the surface in liquid form. FRP and its predecessors have been using the Frasch process for over 80 years. FRP has also developed technology that allows it to use sea water in the Frasch process. FRP is not aware of any competitor that has developed a Frasch sulphur mine using superheated sea water. The Main Pass deposit was discovered by FRP in 1988. The mine currently has the highest production rate of any sulphur mine in the world and contains the largest known 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 reached full design capacity of 5,500 long tons per day in December 1993 and has since operated at or above design capacity. During the year ended December 31, 1995, production averaged approximately 6,000 long tons per day. The mine is owned 58.3% by FRP, 25% by IMC and 16.7% by Homestake Sulphur Company ("Homestake"). At December 31, 1995, the Main Pass deposit was estimated to contain proved and probable sulphur reserves totaling 68.1 million long tons (39.7 million long tons net to FRP). FRP began operating the Culberson mine in January 1995 after acquiring the mine from Pennzoil. For the year ended December 31, 1995, production at the Culberson mine averaged approximately 2,500 long tons per day. FRP is implementing strategies to strengthen operating efficiencies at the Culberson mine to further reduce costs. As of December 31, 1995, the Culberson mine was estimated to contain proved and probable sulphur reserves totaling 15.5 million long tons. FRP also supplements its sulphur production by purchasing sulphur from third parties who recover sulphur in the production of oil and natural gas and the refining of petroleum products. Marketing Sulphur produced at the Main Pass mine is transported by barge in liquid form to its storage, handling and shipping facilities located at Port Sulphur, Louisiana. Sulphur production from the Culberson mine is transported in liquid form by unit train to Galveston where storing, handling and shipping facilities are located. 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's and other customers' plants in Louisiana 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 processes and transports for a fee both IMC's and Homestake's share of Main Pass sulphur and serves as marketing agent for Homestake. FRP's production of sulphur accounted for an estimated 30% of domestic and 8% of world elemental sulphur production in 1995. FRP's sulphur is used primarily to manufacture sulphuric acid, which is used primarily to produce phosphoric acid, one of the basic materials used to produce phosphate fertilizers. During the year ended December 31, 1995, sales to domestic phosphate fertilizer producers, including IMC-Agrico, accounted for approximately 65% of FRP's total sulphur sales. A small number of companies account for a large portion of total United States sulphur consumption. OIL AND NATURAL GAS The only significant FTX oil and natural gas interest is held by FRP at Main Pass. Oil reserves are associated with the same caprock reservoir as the sulphur reserves at Main Pass. Oil production commenced in the fourth quarter of 1991 and averaged approximately 12,400 barrels per day (6,000 barrels per day net to FRP) during the year ended December 31, 1995. As of December 31, 1995, FRP estimated that the remaining proved recoverable oil reserves at Main Pass were approximately 15.9 million barrels (6.6 million barrels net to FRP). FRP currently does not intend to pursue oil operations that are not related to Main Pass. GENERAL Competition The sulphur, fertilizer and phosphate rock mining industries are highly competitive. All of the FRP's products are commodities and the markets for such products can be volatile. Because competition is based largely on price, maintaining low production costs is critical to competitiveness. In this global business, IMC-Agrico faces stiff competition from overseas producers, most of which are state supported, especially those in North Africa and the former Soviet Union. Additionally, foreign competitors are frequently motivated by non-market factors such as the need for hard currency. In the United States, IMC-Agrico competes against a number of major phosphate fertilizer producers, including large cooperatives. FRP competes in the sulphur business with a number of domestic marketers of recovered sulphur and with Canadian, Mexican and Venezualan imports. Operating Hazards The production of sulphur and phosphate fertilizer involves the handling of hazardous or toxic substances, some of which may have the potential, if released into the environment in sufficient quantities, to expose FRP and IMC-Agrico to significant liability. See "-Environmental Matters." FRP's offshore sulphur mining and oil production operations, and its marine transportation operations, are subject to marine perils, including hurricanes and other adverse weather conditions. FRP's mining operations are also subject to the usual risks encountered in the Frasch mining industry, including fires, underground subsidence and blowouts. FRP's oil activities are subject to all of the risks normally incident to the development and production of oil, including blowouts, cratering and fires, each of which could result in injury to personnel and/or damage to property and the environment. FRP has in place programs to minimize the risks associated with its businesses. In addition, it has the benefit of certain liability, property damage, business interruption and other insurance coverage in types and amounts that it considers reasonable and believes to be customary in the FRP's business. This insurance provides protection against loss from some, but not all, potential liabilities normally incident to the ordinary conduct of FRP's business, including coverage for certain types of damages associated with environmental and other liabilities that arise from sudden, unexpected and unforeseen events, with such coverage limits as management deems prudent. FTX also maintains a property insurance program that covers some, but not all of the risks of physical damage to tangible property of FRP as well as the corresponding cost of business interruption. 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 compliance with applicable laws and regulations. FTX has implemented corporate-wide environmental programs that include the activities of FRP and continues to study 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 involve the extraction, handling, production, processing, treatment, storage, transportation and disposal of materials and waste products that, under certain conditions, may be toxic or hazardous and are regulated under environmental laws. Although significant capital expenditures and operating costs have been and will continue to be incurred based on these requirements, FRP does not believe these expenditures and costs have had a material adverse effect on its business. Continued government and public emphasis on environmental issues can be expected to result in increased capital expenditures and operating costs in the future. However, the impact of future laws and regulations or of future changes to existing laws and regulations cannot be predicted or quantified. Federal legislation (sometimes referred to as "Superfund") imposes liability, without regard to fault, for cleanup of certain waste sites, even though such waste management activities may have been performed in compliance with regulations applicable at the time. Under the Superfund legislation, one party may 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 operating sites. States also have regulatory programs that can mandate waste cleanup. Liability under these laws can be significant and involves inherent uncertainties. The Company 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. Some of these sites involve significant cleanup costs; however, at each of these sites other large 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. FRP believes that the aggregate costs involved with these potential liabilities at sites for which notification has been received will not exceed amounts accrued and expects that any resulting costs would be incurred over a period of years. RELATIONSHIP BETWEEN THE FTX GROUP AND FRP Management and Ownership FTX and FMRP serve as the managing general partners of FRP and the directors and officers of FTX, together with FRP's officers, perform all FRP management functions and carry out the activities of FRP. The officers of FRP continue to be employees and officers of FTX and its other subsidiaries, but subject to certain exceptions, are employed principally for the operation of FRP's business. As of December 31, 1995, FTX and FMRP held partnership interests that represented an approximate 51.5% interest in FRP. As a result of being the administrative managing general partner and this ownership, FTX has the ability to control all matters relating to the management of FRP, including any determination with respect to the acquisition or disposition of Company assets, future issuance of additional debt or other securities of FRP and any distributions payable in respect of FRP's partnership interests. In addition to such other obligations as it may assume, FTX has the general duty to act in good faith and to exercise its rights of control in a manner that is fair and reasonable to the holders of partnership interests. Under the terms of its credit facility, the failure by FTX to maintain control of FRP, or the direct or indirect ownership of at least 50.1% of the partnership interests in FRP, would allow acceleration of the indebtedness thereunder. See "-Credit Arrangements." Publicly owned FRP units have cumulative preferential rights to receive minimum quarterly distributions of 60 cents per unit through the distribution to be made with respect to the quarter ending December 31, 1996 before any distributions may be made to FTX. On February 15, 1996, FRP paid a distribution of 62.5 cents per publicly held unit ($31.3 million) and 67.35 cents per FTX owned unit ($35.9 million), which reduced the total unpaid distribution due FTX by $2.6 million to $379.9 million. After December 31, 1996, FTX will recover this unpaid distribution on a quarterly basis from one half of any excess of future quarterly distributions over 60 cents per unit for all units. Credit Arrangements On June 30, 1995, FTX and FRP entered into a five-year revolving line of credit maturing on June 30, 2000 (the "Credit Facility"). In February 1996, FRP sold $150 million of its 7% senior notes due 2008. Following the sale of the notes, the committed amount under the Credit Facility was reduced to $300 million, all of which is available to FRP and $75 million of which is available to FTX. As of March 8, 1996, $50 million was outstanding and $250 million was available under the Credit Facility. Under the Credit Facility, FTX is required to maintain at least a 50.1% ownership interest in FRP and control of FRP. FRP is not permitted to enter into any agreement restricting its ability to make distributions and is restricted in its ability to create liens and security interests on its assets. To secure the Credit Facility, FTX has pledged its FRP units representing a minimum 50.1% ownership in FRP and FRP has granted a security interest in its interest in IMC-Agrico and the Main Pass oil reserves. The Credit Facility places restrictions on, among other things, additional borrowings and requires FRP to maintain certain minimum working capital levels and specified cash flow to interest coverage ratios and not exceed a specified debt-to-capitalization ratio. FRP has minimized amounts outstanding under the Credit Facility by borrowing excess funds from FTX. As of December 31, 1995, $24.7 million was outstanding under this arrangement. Interest is charged based on interest rates under the Credit Facility. In February 1994, IMC-Agrico entered into a $75 million revolving credit facility with a group of banks (the "IMC-Agrico Facility"). The IMC-Agrico Facility, which has a letter of credit subfacility for up to $25 million, provides for a three-year maturity with IMC-Agrico having the right to request one-year extensions of the revolving period. As of December 31, 1995, there were no borrowings outstanding under 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 net partners' capital and fixed charge coverage requirements and a current ratio test, and places limitations on the incurrence of additional debt. It also prohibits changes, without bank approval, to the IMC-Agrico partnership agreement relating to distributions. Conflicts of Interest The nature of the respective businesses of FRP and FTX and its affiliates may give rise to conflicts of interest between FRP and FTX. Conflicts could arise, for example, with respect to transactions involving potential acquisitions of businesses or mineral properties, the issuance of additional partnership interests, the determination of distributions to be made by FRP, the allocation of general and administrative expenses between FTX and FRP and other business dealings between FRP and FTX and its affiliates. Except in cases where a different standard may have been provided for, FTX has a general duty to act in good faith and to exercise rights of control in a manner that is fair and reasonable to the holders of FRP's partnership interests. In resolving conflicts of interest, FRP's partnership agreement permits FTX to consider the relative interest of each party to a potential conflict situation which, under certain circumstances, could include the interest of FTX and its other affiliates. The extent to which this provision is enforceable under Delaware law is not clear. Administrative Services Agreement Pursuant to the terms of an Administrative Services Agreement (the "Services Agreement"), FMS furnishes general executive, administrative, financial, accounting, legal, environmental, insurance, personnel, engineering, tax, research and development, sales and certain other services to FTX in order to enable it to perform its duties as administrative managing general partner of FRP. The nature and timing of the services provided under the Services Agreement are similar to those historically provided directly by FTX to FRP. FRP reimburses FTX, at FTX's cost, including allocated overhead, for such services on a monthly basis, including amounts paid by FTX under the Services Agreement and allocated to FRP. Such costs are allocated among FRP, FTX and certain of FTX's other affiliates based on direct utilization whenever possible and an allocation formula based on a combination of the operating income, property, plant and equipment and capital expenditures of FRP, FTX and such other affiliates. EMPLOYEES As of March 1, 1996, FTX had a total of 491 employees. 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. Certain information about the executive officers of FTX as of March 8, 1996 is set forth in the following table and accompanying text: Name Age Position or Office ____ ___ __________________ James R. Moffett 57 Chairman of the Board Richard C. Adkerson 49 Vice Chairman of the Board Rene L. Latiolais 53 President and Chief Executive Officer Charles W. Goodyear 38 Executive Vice President and Chief Financial Officer Thomas J. Egan 51 Senior Vice President W. Russell King 46 Senior Vice President All of the Executive Officers 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 Annual Report to stockholders for the year ended December 31, 1995 is incorporated herein by reference. As of March 8, 1996, there were 18,569 record holders of FTX's common stock. Item 6. Selected Financial Data. The information set forth under the caption "Selected Financial and Operating Data" on page 11 of FTX's Annual Report to stockholders for the year ended December 31, 1995 is incorporated herein by reference. 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 12 through 18 of FTX's Annual Report to stockholders for the year ended December 31, 1995 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 20 through 37, and the report of management on page 19 of FTX's Annual Report to stockholders for the year ended December 31, 1995 are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not applicable. PART III Items 10. Directors and Executive Officers of the Registrant. The information set forth under the caption "Information About Nominees and Directors" of the Proxy Statement submitted to the stockholders of the registrant in connection with its 1996 Annual Meeting to be held on April 30, 1996 is incorporated herein by reference. Items 11. Executive Compensation. The information set forth under the captions "Director Compensation" and "Executive Officer Compensation" of the Proxy Statement submitted to the stockholders of the registrant in connection with its 1996 Annual Meeting to be held on April 30, 1996 is incorporated herein by reference. Items 12. Security Ownership of Certain Beneficial Owners and Management. The information set forth under the captions "Securities Ownership of Directors and Executive Officers" and "Common Stock Ownership of Certain Beneficial Owners" of the Proxy Statement submitted to the stockholders of the registrant in connection with its 1996 Annual Meeting to be held on April 30, 1996 is incorporated herein by reference. Items 13. Certain Relationships and Related Transactions. The information set forth under the caption "Certain Transactions" of the Proxy Statement submitted to the stockholders of the registrant in connection with its 1996 Annual Meeting to be held on April 30, 1996 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. During the last quarter of the period covered by this report, FTX filed a report on Form 8-K dated November 14, 1995 reporting an event under item 5 thereof. No financial statements were filed. 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 28, 1996. FREEPORT-McMoRan INC. By: /s/ James R. Moffett ___________________________ James R. Moffett Chairman of the Board Pursuant to the requirements of the Securities 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 28, 1996. Signature Title * President, Chief Executive Officer _____________________________ (Principal Executive Officer) Rene L. Latiolais * Executive Vice President and Chief _____________________________ Financial Officer Charles W. Goodyear (Principal Financial Officer) * Controller - Financial Reporting _____________________________ (Principal Accounting Officer) John T. Eads * Vice Chairman of the Board and ____________________________ Director Richard C. Adkerson * Director ____________________________ Robert W. Bruce III * Director ____________________________ Thomas B. Coleman * Director ____________________________ Robert A. Day * Director ____________________________ William B. Harrison, Jr. * Director ____________________________ Henry A. Kissinger * Director ____________________________ Bobby Lee Lackey * Director ____________________________ Gabrielle K. McDonald /s/ James R. Moffett Chairman of the Board and Director ____________________________ James R. Moffett * Director ____________________________ George Putnam * Director ____________________________ B. M. Rankin, Jr. * Director ____________________________ J. Taylor Wharton * Director ____________________________ Ward W. Woods, Jr. 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 20 through 37, inclusive, of FTX's 1995 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 1995 Annual Report to stockholders. 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 thereto. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS We have audited, in accordance with generally accepted auditing standards, the financial statements as of December 31, 1995 and 1994 and for each of the three years in the period ended December 31, 1995 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 23, 1996. 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. These schedules have been subjected to the auditing procedures applied in the audits 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 23, 1996 F-1 FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT BALANCE SHEETS December 31, ------------------------ 1995 1994 ---------- ---------- ASSETS (In Thousands) Current assets: Current assets: Accounts receivable from FRP $ 24,740 $ - Accounts receivable -other 25,661 17,503 Prepaid expenses and other 807 5,833 ---------- ---------- Total current assets 51,208 23,336 Property, plant and equipment-net 48,139 52,303 Investment in FCX - 328,880 Investment in FRP 211,016 229,588 Long-term receivables and other assets 18,968 96,592 ---------- ---------- Total assets $ 329,331 $ 730,699 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued liabilities $ 58,528 $ 105,860 Long-term debt - 753,433 Other liabilities and deferred credits 78,866 101,873 Stockholders' equity 191,937 (230,467) ---------- ---------- Total liabilities and stockholders' equity $ 329,331 $ 730,699 ========== ========== The footnotes contained in FTX's 1995 Annual Report to stockholders are an integral part of these statements. F-2 FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF OPERATIONS Years Ended December 31, ------------------------------------- 1995 1994 1993 ---------- ---------- --------- (In Thousands) Revenues $ 745 $ 749 $ 6,852 ---------- ---------- ---------- Cost of sales 2,673 7,203 28,953 Exploration expenses - 3,738 22,067 Provision for restructuring charges - - 12,403 Gain on valuation and sale of assets, net - - (50,688) General and administrative expenses 9,816 12,664 19,785 ---------- ---------- ---------- Total costs and expenses 12,489 23,605 32,520 ---------- ---------- ---------- Operating loss (11,744) (22,856) (25,668) Interest expense, net (19,908) (38,591) (52,963) Equity in earnings (loss) of subsidiaries 60,378 10,881 (112,722) Other income, net 12,692 2,173 4,779 ---------- ---------- ---------- Income (loss) before income taxes 41,418 (48,393) (186,574) Income tax benefit 50,982 13,261 68,069 ---------- ---------- ---------- Income (loss) from continuing operations 92,400 (35,132) (118,505) Discontinued operations 340,424 107,715 35,387 ---------- ---------- ---------- Income (loss) before extraordinary item and changes in accounting principle 432,824 72,583 (83,118) 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) 432,824 63,475 (103,835) Preferred dividends (42,283) (22,032) (22,368) ---------- ---------- ---------- Net income (loss) applicable to common stock $ 390,541 $ 41,443 $ (126,203) ========== ========== ========== The footnotes contained in FTX's 1995 Annual Report to stockholders are an integral part of these statements. F-3 FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF CASH FLOW Years Ended December 31, -------------------------------------- 1995 1994 1993 ---------- ---------- ---------- Cash flow from operating activities: (In Thousands) Net income (loss) $ 432,824 $ 63,475 $ (103,835) 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 3,767 9,073 26,180 Other noncash charges to income, including net reimbursements from subsidiaries - - 27,623 Oil and gas exploration expenses 16 5,231 26,710 Amortization of debt discount and financing costs 14,343 31,113 28,771 Equity in (earnings) losses of subsidiaries (115,071) (64,973) 96,931 Cash distributions from subsidiaries 141,179 92,000 85,853 Gain on sale of FCX Class A shares (435,060) - - Loss on recapitalization of FTX securities 44,371 - - Gain on conversion/distribution of FCX securities - (114,750) (44,116) Gain on valuation and sale of assets, net - - (50,688) Deferred income taxes 17,886 18,558 (54,731) (Increase) decrease in working capital, net of effect of acquisitions and dispositions: Accounts receivable (1,782) (2,146) 28,516 Prepaid expenses and other 5,276 4,694 (719) Accounts payable and accrued liabilities (30,936) 22,389 (30,565) Payment to Freeport-McMoRan Royalty Trust - (2,854) (2,296) Other 10,391 (15,392) 6,852 ---------- ---------- ---------- Net cash provided by operating activities 87,204 55,526 61,203 ---------- ---------- ---------- Cash flow from investing activities: Capital expenditures (2,059) (32,958) (57,165) Sale of assets 25,000 65,596 99,983 ---------- ---------- ---------- Net cash provided by investing activities 22,941 32,638 42,818 ---------- ---------- ---------- Cash flow from financing activities: Proceeds from sale of FCX Class A shares 497,166 - - Purchase of: FTX common shares (44,752) (67,747) (22,229) FCX Class A shares (58,906) (47,596) (16,482) FRP units (2,253) - - ABC debentures (280,826) - - 6.55% Senior notes (14,955) - - 10 7/8% Senior Debentures - (142,919) - Distribution of MOXY shares - (35,441) - Borrowings (repayments) of debt-net (165,000) 155,000 3,943 (Increase) decrease in long-term note due from FCX 800 11,470 (12,270) (Increase) decrease in long-term note due from FRP (24,740) 100,900 138,450 Cash dividends paid: Common stock (5,168) (44,467) (175,890) Preferred stock (8,757) (22,110) (22,384) Other (2,754) 4,746 1,858 ---------- ---------- ---------- Net cash used in financing activities (110,145) (88,164) (105,004) ---------- ---------- ---------- Net decrease in cash and short-term investments - - (983) Cash and short-term investments at beginning of year - - 983 ---------- ---------- ---------- Cash and short-term investments at end of year $ - $ - $ - ========== ========== ========== The footnotes contained in FTX's 1995 Annual Report to stockholders are an integral part of these statements. F-4 FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS for the years ended December 31, 1995, 1994 and 1993 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: 1995: Sulphur $ 55,105 $ 2,643 $ - $ 14,206a $ 71,954 Fertilizer 37,683 2,785 - (4,537) 35,931 Oil & Gas 19,989 1,666 - (559) 21,096 ---------- ---------- ---------- ---------- ---------- $ 112,777 $ 7,094 $ - $ 9,110b $ 128,981 ========== ========== ========== ========== ========== 1994: Sulphur $ 57,287 $ 1,041 $ - $ (3,223) $ 55,105 Fertilizer 38,437 2,310 - (3,064) 37,683 Oil & Gas 14,963 3,799 - 1,227 19,989 ---------- ---------- ---------- ---------- ---------- $ 110,687 $ 7,150 $ - $ (5,060)b $ 112,777 ========== ========== ========== ========== ========== 1993: Sulphur $ 35,200 $ 27,562 $ - $ (5,475) $ 57,287 Fertilizer 18,543 5,365 - 14,529c 38,437 Oil & Gas 8,617 7,995 - (1,649) 14,963 ---------- ---------- ---------- ---------- ---------- $ 62,360 $ 40,922 $ - $ 7,405b $ 110,687 ========== ========== ========== ========== ========== a. Includes $23.5 million of liabilities assumed in connection with the acquisition of the sulphur assets of Pennzoil Co. (See Note 5 to the Financial Statements). b. Includes expenditures of $11.1 million in 1995, $9.7 million in 1994 and $14 million in 1993. c. 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. 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 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). 4.3 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 Annual Report on Form 10-K of FRP for the fiscal year ended December 31, 1994. 4.4 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"). 4.5 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. 4.6 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"). 4.7 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"). 4.8 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. 4.9 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. 4.10 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. 4.11 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. 4.12 Form of Depositary Receipt. Incorporated by reference to Exhibit 4.5 to the FRP 1992 Form 10-K. 4.13 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. 4.14 FRP Depositary Unit Reinvestment Plan. Incorporated by reference to Exhibit 4.4 to the FRP 1991 Form 10-K. 4.15 Credit Agreement dated as of June 30, 1995 (the "FTX/FRP Credit Agreement") among FTX, FRP, the various financial institutions which are parties thereto (the "Banks"), Chemical Bank, as Administrative Agent and Chase, as Documentary Agent (collectively, the "Agents"). Incorporated by reference to Exhibit 4.1 to the Quarterly Report on Form 10-Q of FRP for the quarter ended September 30, 1995. 4.16 First Amendment dated as of January 10, 1996 to the FTX/FRP Credit Agreement among FTX, FRP, the FTX/FRP Banks and the Agents. Incorporated by reference to Exhibit 10.2 to the Current Report on 8-K of FRP dated February 13, 1996. 4.17 Subordinated Indenture as of October 26, 1990 (the "Subordinated Indenture") between FRP and Manufacturers Hanover Trust Company ("MHTC") as Trustee. Incorporated by reference to Exhibit 4.11 to the Annual Report on Form 10-K of FRP for the fiscal year ended December 31, 1993. 4.18 First Supplemental Indenture dated as of February 15, 1994 between FRP and Chemical Bank, as Successor to MHTC, as Trustee, to the Subordinated Indenture providing for the issuance of $150,000,000 of aggregate principal amount of 8 3/4% Senior Subordinated Notes due 2004. Incorporated by reference to Exhibit 4.12 to the FRP 1993 Form 10-K. 4.19 Form of Senior Indenture (the "Senior Indenture") from FRP to Chemical Bank, as Trustee. Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8- K of FRP dated February 13, 1996. 4.20 Form of Supplemental Indenture dated February 14, 1996 from FRP to Chemical Bank, as Trustee, to the Senior Indenture providing for the issuance of $150,000,000 aggregate principal amount of 7% Senior Notes due 2008. Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K dated February 16, 1996 of FRP. 10.1 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"). 10.2 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. 10.3 Amended and Restated Partnership Agreement dated as of May 26, 1995 among IMC-Agrico GP Company, Agrico, Limited Partnership and IMC-Agrico MP Inc. Incorporated by reference to Exhibit 10.3 to the Annual Report on Form 10-K of FRP for the fiscal year ended December 31, 1995 (the "FRP 1995 Form 10-K"). 10.4 Amendment and Agreement dated as of January 23, 1996 to the Amended and Restated Partnership Agreement dated May 26, 1995 by and among IMC-Agrico MP, Inc., IMC Global Operations, Inc. and IMC-Agrico Company. Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K dated February 13, 1996 of FRP. 10.5 Amended and Restated Parent Agreement dated as of May 26, 1995 among IMC Global Operations, Inc., FRP, FTX and IMC- Agrico. Incorporated by reference to the FRP 1995 Form 10-K. 10.6 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"). 10.7 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 10.8 through 10.27) 10.8 Annual Incentive Plan of FTX, as amended. Incorporated by reference to Exhibit 10.24 to the Annual Report on Form 10-K of FTX for the fiscal year ended December 31, 1994 (the "FTX 1994 Form 10-K"). 10.9 1992 Long-Term Performance Incentive Plan of FTX, as amended. Incorporated by reference to Exhibit 10.25 to the FTX 1994 Form 10-K. 10.10 1987 Long-Term Performance Incentive Plan of FTX, as amended. Incorporated by reference to Exhibit 10.26 to the FTX 1994 Form 10-K. 10.11 FTX Variable Compensation Incentive Program, as amended. Incorporated by reference to Exhibit 19.4 to the FTX 1991 Third Quarter Form 10-Q. 10.12 FTX Performance Incentive Awards Program, as amended. 10.13 FTX President's Award Program, as amended. 10.14 FTX 1992 Stock Option Plan. Incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of FCX for the quarter ended June 30, 1992 (the "FCX 1992 Second Quarter Form 10-Q"). 10.15 1982 Stock Option Plan of FTX, as amended. Incorporated by reference to Exhibit 10.31 to the FTX 1994 Form 10-K. 10.16 FTX 1992 Stock Incentive Unit Plan. Incorporated by reference to Exhibit 10.2 to the FCX 1992 Second Quarter Form 10-Q. 10.17 1988 Stock Option Plan for Non-Employee Directors of FTX, as amended. 10.18 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. 10.19 FTX Directors' Charitable Gift Program. Incorporated by reference to Exhibit 10.29 to the Annual Report on Form 10-K of FTX for the fiscal year ended December 31, 1992 (the "FTX 1992 Form 10-K"). 10.20 FTX Matching Gifts Program. Incorporated by reference to Exhibit 10.30 to the FTX 1992 Form 10-K. 10.21 Financial Counseling and Tax Return Preparation and Certification Program of FTX, as amended. 10.22 FTX Executive Universal Life Insurance Plan. Incorporated by reference to Exhibit 10.32 to the FTX 1992 Form 10-K. 10.23 FM Services Company Performance Incentive Awards Program. Incorporated by reference to Exhibit 10.14 to the Annual Report on Form 10-K of FCX for the fiscal year ended December 31, 1995 (the "FCX 1995 Form 10-K"). 10.24 Financial Counseling and Tax Return Preparation and Certification Program of FM Services Company. Incorporated by reference to Exhibit 10.15 to the FCX 1995 Form 10-K. 10.25 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. 10.26 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. 10.27 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. 13.1 Those portions of the 1995 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 27, 1996. 23.2 Consent of Ernst & Young LLP dated March 27, 1996. 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 Report of Ernst & Young LLP. EX-10 2 EXHIBIT 10.12 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 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. An individual who has been awarded an incentive payment for a particular year need not be employed by the Company or any of its subsidiaries at the time of payment thereof to be eligible to receive such payment. Notwithstanding any of the foregoing to the contrary, if an individual selected for eligibility under the Plan for a particular year should cease to be employed by the Company and its subsidiaries for any reason prior to the end of such year, the Chairman of the Board shall evaluate, or cause to be evaluated, the performance of such employee and the employee's operating or staff unit for the portion of such year prior to such cessation of employment. 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 may be made at any time during the year for which such incentive payments are made but shall in no event be later than February 28 of the year following such year. 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 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.; any corporation or other entity in which any two or more of the aforementioned entities collectively possess, 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; 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, any subsidiary of the Company, Freeport-McMoRan Copper & Gold Inc., any subsidiary of Freeport-McMoRan Copper & Gold Inc., McMoRan Oil & Gas Co., or any subsidiary of McMoRan Oil & Gas Co. 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. EX-10 3 EXHIBIT 10.13 Freeport-McMoRan Inc. President's Award Program Purpose The purpose of the President's Award Program (the "Program") of Freeport-McMoRan Inc. (the "Company") is to provide an opportunity for discretionary cash rewards for those situations where an outstanding individual contribution cannot properly be or should not be rewarded with merit salary increases, annual incentives, or promotion. Administration The Program shall be administered by the President and Chief Executive Officer of the Company. The President shall have full authority to interpret the provisions of the Program and to make Awards thereunder. Eligibility for and Payment of Awards The following persons are eligible to receive Awards under the Program: (i) any person providing services as an officer of the Company or a Subsidiary (as hereinafter defined), whether or not employed by such entity, but excluding any such person who is also a director of the Company, (ii) any employee of the Company or a Subsidiary, including bargaining-unit employees but excluding any director who is also an employee of the Company or a Subsidiary, (iii) any officer, employee, member, or associate of an entity with which the Company has contracted to receive executive, management, or professional services who provides services to the Company or a Subsidiary through such arrangement, and (iv) any member or associate of, or counsel to, a law firm rendering services to the Company or a Subsidiary. For purposes of the Program, "Subsidiary" shall mean (i) any corporation or other entity in which the Company 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 and (ii) any other entity in which the Company has a direct or indirect economic interest that is designated as a Subsidiary by the President. Recommendations for a President's Award must be made to, and in a manner prescribed by, the President by senior executives of the Company. The aggregate amount of all Awards granted with respect to any calendar year may not exceed $150,000. The Awards can be granted and paid at any time during the calendar year deemed appropriate by the President. General Provisions The Program shall be funded from operating earnings of the Company and shall not be deducted from any funds established for the purpose of salary or incentive payments. The Program will become effective on December 2, 1987 upon approval by the Board of Directors of the Company and shall continue as provided herein except as amended or terminated by the Board of Directors. EX-10 4 EXHIBIT 10.17 1988 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS OF FREEPORT-MCMORAN INC. ARTICLE I PURPOSE OF THE PLAN This 1988 Stock Option Plan for Non-Employee Directors (this "Plan") is intended to provide a method whereby non-employee directors of Freeport-McMoRan Inc. (the "Company"), who are making and will continue to make substantial contributions to the success of the Company and its Subsidiaries (as hereinafter defined), may be compensated for their contributions and encouraged to acquire a proprietary interest in the Company, and whereby prospective new directors may be persuaded to serve the Company as directors, and to promote the interests of the Company and all its stockholders. Accordingly, the Company will, on or before May 1, 1997, grant to such persons as are identified in this Plan, in the manner hereinafter provided, options ("Options") to purchase shares of the Common Stock of the Company ("Common Stock"), on the terms and subject to the conditions hereinafter set forth. ARTICLE II 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%. Board: The Board of Directors of the Company. 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). Code: The Internal Revenue Code of 1986, as 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 of sales and earnings, and ending on the twelfth business day following such date. Eligible Director: A director of the Company who is not, and within the preceding one year has not been, an employee of the Company or a Subsidiary or otherwise eligible for selection to participate in any plan of the Company or any Subsidiary that entitles the participants therein to acquire stock, stock options or stock appreciation rights of the Company or its Subsidiaries. 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. Option Cancellation Gain: With respect to the cancellation of an Option pursuant to Section 3 of Article IV hereof, the sum of (a) the excess of the Fair Market Value as of the Option Cancellation Date (as that term is defined in Section 3 of Article IV hereof) of all the outstanding shares of Common Stock covered by such Option, whether or not then exercisable, over the purchase price of such shares under such Option, (b) the Fair Market Value as of the Option Cancellation Date of any Subsidiary Equity Securities that would have been distributed pursuant to Section 5 of Article VII hereof had there been an exercise as of the Option Cancellation Date of all the outstanding shares of Common Stock covered by such Option, whether or not then exercisable, (c) the amount of any cash in lieu of any Subsidiary Equity Securities and any fractional interests therein that would have been distributed pursuant to Section 5 of Article VII hereof had there been an exercise as of the Option Cancellation Date of all the outstanding shares of Common Stock covered by such Option, whether or not then exercisable, plus (d) the amount equal to the Applicable Rate multiplied by the total of the amounts set forth in clauses (a), (b) and (c). Option Gain: The sum of (a) the excess of the Fair Market Value of the shares of Common Stock covered by the exercise of an Option over 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 as a result of such exercise pursuant to Section 5 of Article VII hereof; as such Fair Market Values are determined in each case on (i) the Income Recognition Date with respect to each such security or (ii) the date of such exercise, whichever is less. 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. 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 Company, Inc., and Freeport-McMoRan Oil & Gas Company and depositary units of Freeport-McMoRan Energy Partners, Ltd. and Freeport-McMoRan Resource Partners, Limited Partnership. ARTICLE III ADMINISTRATION OF THE PLAN The Plan shall be administered by the Board. The Board will interpret this Plan and may from time to time adopt such rules and regulations for carrying out the terms and provisions of this Plan as it may deem best; however, the Board shall have no discretion with respect to the selection of directors who receive Options, the number of shares of Common Stock subject to any Options or the purchase price thereof. All determinations by the Board 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 Board pursuant to the provisions of this Plan, and all related orders or resolutions of the Board, shall be final, conclusive and binding on all persons, including the Company and its stockholders, employees, directors and optionees. ARTICLE IV STOCK SUBJECT TO THE PLAN SECTION 1. The shares to be issued or delivered upon exercise of Options 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 Board, may, upon exercise of Options granted under this Plan, cause a Subsidiary to deliver shares of Common Stock held by such Subsidiary. Any Subsidiary Equity Securities distributed pursuant to Section 5 of Article VII of this Plan shall be made available 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 IV, the aggregate number of shares of Common Stock which may be purchased pursuant to Options shall not exceed 250,000. 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 purchased under this Plan shall be increased or decreased proportionately, as the case may be, and the number of shares of Common Stock deliverable upon the exercise thereafter of any Option theretofore granted (whether or not then exercisable) shall be increased or decreased proportionately, as the case may be, without change in the aggregate purchase price. In the event the Company is merged or consolidated into or with another corporation in a transaction in which the Company is not the survivor, or in the event that substantially all of the Company's assets are sold to another entity not affiliated with the Company, any holder of an Option, whether or not then exercisable, shall be entitled to receive (unless the Company shall take such alternative action as may be necessary to preserve the economic benefit of the Option for the optionee) on the effective date of any such transaction (the "Option Cancellation Date"), in cancellation of such Option, an amount in cash equal to the Option Cancellation Gain relating thereto, determined as of the Option Cancellation Date. 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 5 of Article VII 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 theretofore granted hereunder (whether or not then exercisable) shall be subject to such adjustment as 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 of any right attached thereto or provided for therein or the substitution, on an equitable basis, of Common Stock, other Subsidiary Equity Securities, or a combination thereof for such Subsidiary Equity Securities. ARTICLE V PURCHASE PRICE OF OPTIONED SHARES The purchase price per share of Common Stock under each Option shall be 100% of the Fair Market Value of a share of Common Stock at the time such Option is granted, but in no case shall such price be less than the par value of the Common Stock. ARTICLE VI ELIGIBILITY OF RECIPIENTS Options will be granted only to individuals who are Eligible Directors at the time of such grant. No individual who is an employee of the Company or a Subsidiary at the time of such grant shall be eligible to receive an Option. ARTICLE VII GRANT OF OPTIONS SECTION 1. Each Option shall constitute a non-qualified stock option which is not intended to qualify under Section 422A of the Code. SECTION 2. On May 1, 1988 and May 1 of each subsequent year through and including 1997, each Eligible Director, as of each such date, shall be granted an Option to purchase 1,664 shares of Common Stock. Each Option shall become exercisable with respect to 416 shares on each of the first, second, third and fourth anniversaries of the date of grant and may be exercised by the holder thereof with respect to all or any part of the shares comprising each installment as such holder may elect at any time after such installment becomes exercisable but no later than the termination date of such Option; provided that each Option shall become exercisable in full upon a Change in Control. SECTION 3. The purchase price of shares subject to any Option shall be the Fair Market Value thereof on the respective date of grant. SECTION 4. Each Option shall provide that, promptly following the last Income Recognition Date 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 multiplied by the Applicable Rate. SECTION 5. Each Option shall provide that, upon the exercise of such Option or portion 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; provided however, that in the case of any distribution of Subsidiary Equity Securities to an optionee who is subject to Section 16 of the Securities Exchange Act of 1934 in respect of such Securities, such optionee shall not be entitled to receive such Securities, but shall be entitled to receive in lieu thereof a number of shares of Common Stock having an aggregate Fair Market Value, on the date of such exercise, equal to the aggregate Fair Market Value, on the date of such exercise, of such Subsidiary Equity Securities. No fractional shares of Common Stock shall be delivered pursuant to the foregoing proviso; however, fractional shares that would have been delivered upon the exercise of the Option in part but for this sentence shall be accumulated with fractional shares so resulting from any subsequent exercise of such Option, and any whole shares resulting from such accumulation shall be delivered upon any such subsequent exercise. Notwithstanding the foregoing, if an optionee is, on the date of any such exercise, ineligible to own any Subsidiary Equity Securities that would otherwise be distributable to such optionee in accordance with this section, such optionee will 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). ARTICLE VIII NON-TRANSFERABILITY OF OPTIONS No Option shall be transferable by the optionee otherwise than by will or by the laws of descent and distribution, and any such Option shall be exercisable during the lifetime of the optionee only by the optionee or the optionee's duly appointed legal representative. ARTICLE IX EXERCISE OF OPTIONS SECTION 1. Each Option shall terminate 10 years and two days from the date on which it was granted. SECTION 2. Except in cases provided for in Article X hereof, each Option may be exercised only while the optionee is an Eligible Director. SECTION 3. Each Option shall provide that the Option or any portion thereof may be exercised only during an Election Period. Each Option shall provide, however, that in the event of a Change in Control, the Election Period exercise requirement is waived. SECTION 4. A person electing to exercise an Option or any portion thereof 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 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 or any Subsidiary Equity Securities distributable in connection with the exercise thereof, 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 certificates for such shares of Common Stock and such Subsidiary Equity Securities have been issued or delivered by the Company. SECTION 5. Each Option shall be subject to the requirement that if at any time the Board shall be advised by counsel that the listing, registration or qualification of the shares of Common Stock subject to such Option, or the Subsidiary Equity Securities distributable in connection with the exercise thereof, 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 the issue or purchase of shares thereunder or the distribution of Subsidiary Equity Securities with respect thereto, such Option 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 such counsel for the Board. SECTION 6. 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, 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 X TERMINATION OF SERVICE AS AN ELIGIBLE DIRECTOR SECTION 1. If and when an optionee shall cease to be an Eligible Director for any reason other than death or retirement from the Board, all of the optionee's Options shall be terminated except that any Option, to the extent then exercisable, may be exercised within three months after such optionee ceases to be an Eligible Director, but not later than the termination date of the Option. SECTION 2. If and when an optionee shall cease to be an Eligible Director by reason of the optionee's retirement from the Board, all of the optionee's Options shall be terminated except that any Option, to the extent then exercisable or exercisable within one year thereafter, may be exercised within three years after such retirement, but not later than the termination date of the Option. SECTION 3. Should an optionee die while serving as an Eligible Director, 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. SECTION 4. Should an optionee die after ceasing to be an Eligible Director, 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. ARTICLE XI AMENDMENTS TO PLAN AND OPTIONS SECTION 1. The provisions of this Plan that pertain to any matter set forth in Rule 16b-3(c)(2)(ii)(A) under the Securities Exchange Act of 1934, as such rule or any successor thereto may be amended from time to time, shall not be amended more than once every six months, other than to comport with changes in the Code, the Employee Retirement Income Security Act, or the rules thereunder. SECTION 2. Subject to the provisions of Section 1 of this Article XI, 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) except pursuant to Section 3 of Article IV, increase the maximum number (determined as provided in this Plan) of shares of Common Stock which may be purchased pursuant to Options, either individually or in aggregate; (b) permit the granting of any Option at a purchase price other than 100% of the Fair Market Value of the Common Stock at the time such option is granted, subject to adjustment pursuant to Section 3 of Article IV; (c) permit the exercise of an Option unless the full purchase price of the shares as to which the Option is exercised is paid at the time of exercise; (d) extend beyond May 1, 1997, the period during which Options may be granted; (e) modify in any respect the class of individuals who constitute Eligible Directors; or (f) materially increase the benefits accruing to participants hereunder. EX-10 5 EXHIBIT 10.21 Freeport-McMoRan Inc. Financial Counseling and Tax Return Preparation and Certification Program 1. Purpose. The purpose of the Freeport-McMoRan Inc. Financial Counseling and Tax Return Preparation and Certification Program (the "Program") is to enable those senior executives chosen to participate in the Program to devote to the business activities of Freeport-McMoRan Inc. (the "Company") or its subsidiaries the time and attention that such executives would otherwise have had to devote to their personal financial or tax affairs, and, in the case of the Tax Return Preparation and Certification aspect of the Program, to provide the Company with assurance that the tax affairs of participating executives are properly attended to. To this end, the Program contemplates providing professional counseling services in the area of personal financial and estate planning (other than investment advice) by an independent adviser selected by each participant from among several designated by the Company. It also contemplates the provision of professional assistance, by a nationally recognized public accounting firm selected by the Company, with the preparation and filing of personal income tax returns, followed by a certification by such firm to the Company that all required returns have been properly prepared and timely filed. 2. Administration. The Program shall be administered by the Chairman of the Board of the Company who shall have full authority to interpret the Program and from time to time adopt rules and regulations for carrying out the Program, 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. 3. Eligibility for Participation. Participation in the Financial Counseling aspect of the Program shall be offered to the Chairman of the Board, the President and the Senior Vice Presidents of the Company, and, in addition to such participants in the current Long-Term Performance Incentive Plan as may from time to time be selected by the Chairman of the Board. The Chairman of the Board of the Company shall also from time to time select from among the senior executives of the Company and its divisions and subsidiaries those individuals who are to be requested to participate in the Tax Return Preparation and Certification aspect of the Program. Participation in either aspect of the Program will normally continue through the year following each participant's retirement. 4. General Provisions. The selection of any employee for participation in either aspect of the Program 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 either aspect of the Program shall be in addition to, and in no way preclude, other forms of compensation to or in respect of such employee. 5. Additional Cash Payment. An additional cash payment shall be paid to each participant as provided herein in order to gross-up fees paid pursuant to the Program for tax purposes. For participants in the Program, a cash payment shall be paid during such tax reporting year according to the following formula: (the lesser of A or B) x _(C + D) [1 - (C + D)] in which A equals two percent of the participant's estimated income in the current tax reporting year, to be reported by the Company on the participant's form W-2 for such year; B equals the amount of fees paid during such year on the participant's behalf pursuant to the Program; C equals the maximum federal income tax rate applicable to individuals in effect during such year; and D equals the combined maximum applicable state and local income tax rates applicable to individuals in effect during such year. 6.Amendment or Termination. The Committee may from time amend or at any time terminate the Program. Executed this day of , 1995. Freeport-McMoRan Inc. _______________________________ Chairman of the Board Reviewed: _________________________ General Counsel EX-11 6 Exhibit 11.1 FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE Years Ended December 31, ----------------------------------- 1995 1994 1993 ---------- ---------- ---------- (In Thousands, Except Per Share Amounts) Primary: Net income (loss) applicable to common stock $ 390,541 $ 41,443 $ (126,203) ========== ========== ========== Average common shares outstanding 25,839 23,106 23,470 Common stock equivalents: Stock options 242 98 129 ---------- ---------- ---------- Average common and common equivalent shares outstanding 26,081 23,204 23,599 ========== ========== ========== Net income (loss) per common and common equivalent share $ 14.97 $ 1.79 $ (5.35) ========== ========== ========== Fully Diluted: Net income (loss) applicable to common stock $ 390,541 $ 41,443 $ (126,203) Plus preferred dividends 8,756 - - Plus interest, net of tax effect, on convertible subordinated debentures 15,921 - - ---------- ---------- ---------- Net income (loss) applicable to common stock $ 415,218 $ 41,443 $ (126,203) ========== ========== ========== Average common shares outstanding 25,839 23,106 23,470 Common stock equivalents: Stock options 271 98 213 Convertible securities: 2,347 - - 783 - - ---------- ----------- ---------- Average common and common equivalent shares outstanding 29,240 23,204 23,683 ========== ========== ========== Net income (loss) per common and common equivalent share $ 14.20 $ 1.79 $ (5.35) ========== ========== ========== EX-13 7 EXHIBIT 13.1 SELECTED FINANCIAL AND OPERATING DATA 1995 1994 1993 1992 1991 ---------- ---------- ---------- ---------- ---------- (Financial Data In Millions, Except Per Share Amounts) FINANCIAL DATA a Years Ended December 31: Revenues $995.9 $770.1 $684.7 $940.6 $1,111.7 Operating income (loss) 182.9 91.9 (243.4) (24.6) 45.7 Net income (loss) from: Operations $25.3b $(35.1)b $(77.0) $(27.3) $36.3 Discontinued operations 340.4 107.7 35.4 215.1 50.9 Nonrecurring gains/ (losses), net c 67.1 - (48.6) - 5.0 Changes in accounting principle and extraordinary loss - (9.1) (13.6) - (51.2) Preferred dividends (42.3)d (22.1) (22.4) (18.7) (.9) ----- ----- ------ ------ ------ Net income (loss) applicable to common stock $390.5 $ 41.4 $(126.2) $169.1 $40. 1 ====== ======= ======== ======= ====== Net income (loss) per primary share from: Operations $.97b $(1.51)b $(3.26) $(1.13) $1.56 Discontinued operations 13.05 4.64 1.50 8.93 2.19 Nonrecurring gains/(losses), net c 2.57 - (2.06) - .21 Changes in accounting principle and extraordinary loss - (.39) (.58) - (2.20) Preferred dividends (1.62)d (.95) (.95) (.78) (.04) ----- ---- ---- ---- ---- Net income (loss) applicable to common stock $14.97 $1.79 $(5.35) $7.02 $1.72 ====== ====== ====== ====== ===== Average common shares outstanding 26.1 23.2 23.6 24.1 23.3 Dividends per common share: Cash $.18 $1.875 $7.50 $7.50 $7.50 Property e 108.41 7.768 - 1.05 - ------- ----- ------ ----- ------ $108.59 $9.643 $7.50 $8.55 $7.50 ======== ======= ====== ====== ====== At December 31: Property, plant and equipment, net $999.8 $964.5 $1,102.8 $1,271.2 $1,647.5 Long-term debt, less current portion 359.5 1,122.1 1,082.8 785.5 1,308.0 Minority interest 196.0 217.8 239.8 418.6 206.5 Stockholders' equity 191.9 (230.5) .6 346.0 388.3 Total assets 1,320.5 1,649.4 1,888.6 2,157.4 2,587.5 OPERATING Phosphate fertilizers -primarily diammonium phosphate (DAP) Sales (short tons) f 3,427,700 3,193,400 3,346,600 3,984,000 4,027,000 Average realized price g All phosphate fertilizers $169.07 $144.13 $110.03 $127.27 $147.10 DAP 175.11 149.32 113.09 132.11 154.07 Phosphate rock Sales (short tons)f 4,470,400 4,373,400 3,840,300 3,440,500 2,247,000 Average realized price g $22.53 $21.38 $22.02 $26.96 $28.21 Sulphur Sales (long tons) h 3,049,700 2,087,800 1,973,200 2,346,100 2,528,200 Oil Sales (barrels) 2,217,600 2,533,700 3,443,000 4,884,000 350,800 Average realized price $15.82 $13.74 $14.43 $15.91 $13.34 FREEPORT-McMoRan INC. SELECTED FINANCIAL AND OPERATING DATA NOTES a. Restated to reflect copper/gold business activities as discontinued operations. Also reflects the one-for-six reverse stock split approved in October 1995. b. Includes minority interest charges totaling $14.4 million ($0.55 per share) in 1995 and $17.2 million ($0.74 per share) in 1994 because FTX was not paid its proportionate share of FRP distributions. Also includes stock option charges totaling $5 million ($0.19 per share) in 1995 caused by the rise in FTX's common stock price during the year. c. In 1995 includes gains primarily related to the settlement of certain insurance claims ($5.3 million or $0.20 per share), a tax benefit attributable to the reversal of certain tax accruals no longer required ($62.8 million or $2.41 per share) and a charge for an early retirement program ($1 million or $0.04 per share); in 1993 includes the loss on restructuring activities and valuation and sale of assets; and in 1991 includes an insurance settlement gain ($7.3 million or $0.31 per share), net of a loss on the valuation of assets ($2.3 million or $0.10 per share). d. Includes a $33.5 million charge ($1.29 per share) resulting from the $4.375 Convertible Exchangeable Preferred Stock exchange offer. e. Reflects the fair market value of property distributions (FCX in 1995 and 1994, MOXY in 1994 and FMPO in 1992). f. Reflects FRP's 43.6 percent, 45.1 percent and 46.5 percent share of IMC-Agrico assets for the years ended June 30, 1996 - 1994, respectively, while FRP received 53.1 percent, 55 percent and 58.6 percent, respectively, of the cash flow generated during such periods. g. Represents average realization f.o.b. plant/mine. h. Includes internal consumption totaling 754,400 tons, 739,900 tons, 1,138,800 tons, 1,654,300 tons and 1,612,400 tons for 1995-1991, respectively. FREEPORT-McMoRan Inc. MANAGEMENT'S DISCUSSION AND ANALYSIS In July 1995, Freeport-McMoRan Inc. (FTX) declared a special tax-free dividend of the Class B common stock of Freeport-McMoRan Copper & Gold Inc. (FCX) to FTX common stockholders (Note 3), completing a restructuring plan to separate its copper/gold and agricultural minerals businesses into two independent financial and operating entities. Prior to the distribution, FTX completed certain recapitalization activities, including the sale of 23.9 million FCX Class A common shares for net proceeds of $497.2 million, the conversion/redemption of FTX's preferred stock and publicly held debt securities (Notes 4 and 7) and the repayment of FTX's parent company bank borrowings. FTX also obtained a new credit facility following the FCX distribution which provides greater financial flexibility and reduced financing costs. FTX's ongoing business operations now essentially consist of its 51.5 percent ownership in Freeport-McMoRan Resource Partners, Limited Partnership (FRP). FRP has benefited from the favorable pricing trends for its phosphate fertilizer products which began in mid-1993 and have continued through 1995, as evidenced by its dramatically improved operating results and significantly higher operating cash flow. Phosphate fertilizer market fundamentals continue to remain positive with the anticipation of increased global demand coupled with a currently tight supply/demand situation. As a result, Standard & Poor's raised FRP's senior debt rating to an investment grade of BBB-, serving to reduce financing costs. During 1995, FRP built on its already strong asset base by participating in two separate acquisitions (Note 5); the purchase of Pennzoil Co.'s Culberson sulphur mine and related assets, and the IMC-Agrico Company (IMC-Agrico) purchase of the animal feed ingredients business of Mallinckrodt Group Inc. Both acquisitions served to strengthen FRP's strategic market position. The Pennzoil transaction added both sulphur reserves and a significant sulphur transportation system. The Mallinckrodt animal feed ingredients business is one of the world's largest producers of phosphate-based animal feed ingredients with an annual capacity in excess of 700,000 tons. This business is IMC-Agrico's largest phosphoric acid customer, consuming nearly 300,000 tons per year or about seven percent of IMC-Agrico's capacity. FRP continues to evaluate additional growth opportunities. RESULTS OF OPERATIONS Because FTX no longer owns any interest in FCX, FTX's financial results were restated to reflect FCX's copper/gold business as discontinued operations. Additionally, in October 1995, FTX effected a one-for-six reverse split of its common stock. Accordingly, all common and per share amounts have been restated. 1995 1994 1993 ---------- ---------- ---------- (In Millions) Revenues $ 995.9 $ 770.1 $ 684.7 Operating income (loss) 182.9 91.9 (243.4) Net income (loss) from: Operations $ 25.3a $ (35.1)a $ (77.0) Discontinued operations (Note 3) 340.4 107.7 35.4 Nonrecurring gains/ (losses), net 67.1b - (48.6)c Changes in accounting principle and extraordinary loss - (9.1) (13.6) Preferred dividends (42.3)d (22.1) (22.4) ---------- ---------- ---------- Net income (loss) applicable to common stock $ 390.5 $ 41.4 $ (126.2) ========== ========== ========== a. Includes minority interest charges totaling $14.4 million in 1995 and $17.2 million in 1994 because FTX was not paid its proportionate share of FRP distributions, and stock option charges of $5 million in 1995. b. Consists of a $5.3 million gain (included in other income) primarily related to the settlement of certain insurance claims, a $62.8 million tax benefit and a $1 million charge for an early retirement program. c. Consists of restructuring, asset sales/recoverability and other related charges. d. Includes a $33.5 million charge resulting from the $4.375 Convertible Exchangeable Preferred Stock exchange offer (Note 7). 1995 Compared With 1994. FTX benefited from the significant strengthening in the phosphate fertilizer markets throughout 1995 and the expansion of its sulphur production capacity (see Selected Financial and Operating Data), resulting in higher revenues and improved operating results. Depreciation and amortization for 1995 decreased $9.6 million from the 1994 amount, primarily caused by a $10.5 million decline relating to FRP's disproportionate interest in the IMC-Agrico joint venture cash distributions, partially offset by a $2.7 million increase resulting from the acquired sulphur assets. General and administrative expenses for 1995 increased by $19.6 million, primarily because of $15.5 million in stock option charges resulting from the rise in FTX's common stock price during the year (Note 7) and $3 million for an early retirement program. Interest expense decreased from 1994 as a result of the significant reduction in average debt levels brought about by FTX's recapitalization efforts. Income taxes for 1995 include a $62.8 million benefit attributable to the reversal of certain tax accruals no longer required because of the resolution of certain federal and state tax issues and the realization of tax credits not previously recognized (Note 6). Minority interest's share of net income for 1995 rose reflecting the increased level of earnings at FRP and includes a $23 million charge ($26.5 million in 1994) because FTX was not paid its proportionate share of FRP distributions (Note 2). Agricultural Minerals Operations - FTX's agricultural minerals operations, which include FRP's fertilizer and phosphate rock operations (conducted through IMC-Agrico) and its sulphur business, reported 1995 operating income of $205.9 million on revenues of $960 million compared with operating income of $123.8 million on revenues of $730.4 million in 1994. Significant items impacting operating income are as follows (in millions): Agricultural minerals operating income -1994 $ 123.8 ---------- Increases (decreases): Sales volumes 81.3 Realizations 147.7 Other 0.6 ---------- Revenue variance 229.6 Cost of sales (135.4)a General and administrative (12.1)b ---------- 82.1 ---------- Agricultural minerals operating income -1995 $ 205.9 ========== a. Includes a reduction to depreciation and amortization of $26.3 million and $15.8 million for 1995 and 1994, respectively, caused by FRP's disproportionate interest in IMC-Agrico cash distributions. b. Includes $10.3 million of the stock option charge discussed above. FRP's 1995 phosphate fertilizer sales volumes were 7 percent higher than those in 1994, with IMC-Agrico experiencing continued excellent export demand and strong domestic sales for diammonium phosphate (DAP), its principal fertilizer product. The increased demand resulted in IMC-Agrico phosphate fertilizer facilities operating near capacity for the majority of 1995. Despite recent industrywide capacity utilization above 100 percent, domestic phosphate fertilizer producer inventories remain below normal. This tight supply/demand situation is reflected in improved phosphate fertilizer realizations, with FRP's average DAP realization increasing 17 percent from 1994. FRP's 1995 DAP realizations included large forward sales to China at prices which were ultimately below market prices at the time of shipment. FRP's phosphate fertilizer unit production costs were increased from 1994, reflecting higher raw material costs for ammonia and phosphate rock. Fertilizer prices continued to rise during the fourth quarter of 1995 and are expected to remain firm for the near term, as the increased global demand for phosphate fertilizers comes at a time when essentially no operable idle capacity exists. Furthermore, worldwide grain stocks are projected to be at their lowest-ever levels in the upcoming fertilizer season, strengthening grain prices and improving the outlook for this spring's fertilizer use. As a result, strong domestic demand is anticipated to continue into the spring with an expected 13 percent increase in planted corn acreage. Additionally, in late 1995 IMC-Agrico reached an agreement with China providing for significant shipments of DAP throughout 1996 at market-related prices at the time of shipment. FRP's 1995 phosphate rock sales volumes were slightly higher than in 1994. Increased demand from phosphate fertilizer producers and the addition of a long-term supply contract in October 1994 were offset by the expiration of a contract in October 1995 providing annual sales of 1.5 million tons net to FRP. Because of the low margin associated with sales under the expired contract, the impact to FRP's earnings is not significant. FRP's increased sulphur production capacity resulting from the Culberson mine purchase, combined with continued strong demand from the domestic phosphate fertilizer industry, resulted in a 46 percent increase in sales volumes. FRP also benefited from the strengthening in Tampa, Florida sulphur prices during 1995. 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. Main Pass unit production costs for 1995 were virtually unchanged from 1994. Oil and Gas Operations - In mid-1994, FTX distributed substantially all its non-Main Pass oil and gas exploration activities to its common stockholders as part of the McMoRan Oil & Gas Co. (MOXY) distribution (Note 5). Since then, FTX's only significant oil and gas operation is FRP's production of oil at Main Pass, as follows: 1995 1994 --------- --------- Sales (barrels) 2,217,600 2,533,700 Averaged realized price $15.82 $13.74 Operating income (in millions) $1.9 $2.8 In 1995, Main Pass oil operating income was impacted by $1.8 million for the previously discussed stock option charge. Net production for 1996 is estimated to approximate 1995 levels, as drilling activities are expected to generate production sufficient to offset declining reservoir production. 1994 Compared With 1993. FTX's 1994 results primarily reflect the improvement in the phosphate fertilizer market during the year and the benefits from the formation of IMC-Agrico and other restructuring activities undertaken in 1993, discussed below. Partially offsetting these positive factors were increased raw material prices for ammonia and reduced oil sales volumes. 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 management information systems 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 10). Depreciation and amortization during 1994 declined by $67.3 million compared with 1993, primarily consisting of a $26.6 million decrease relating to the disproportionate interest in IMC-Agrico cash distributions, a $15.3 million reduction from Main Pass oil operations caused by the decline in sales volumes between periods and the $18.7 million in restructuring charges recorded in 1993. These decreases were partially offset by a $6 million increase in sulphur depreciation because of higher Main Pass sulphur production. General and administrative expenses reflect the benefits from the formation of IMC-Agrico and the other 1993 restructuring activities. The 1993 amount includes $9.5 million in restructuring related charges. Interest expense in 1994 increased as a result of the Main Pass sulphur project becoming operational for accounting purposes in July 1993 (previously, related interest costs totaling $11.1 million in 1993 were capitalized) and rising interest rates. See Note 6 to the financial statements for information on the provision for income taxes. Minority interest's share of net income reflected a $26.5 million charge in 1994 because FTX was not paid its proportionate share of distributions from FRP. FTX's 1994 earnings include a $9.1 million charge from the early extinguishment of debt (Note 4). Earnings for 1993 include a $13.6 million charge for the cumulative effect of changes in accounting principle for periodic scheduled maintenance costs, deferred charges and costs of management information systems (Note 1). These changes were adopted to improve the measurement of operating results by recognizing cash expenditures as expense when incurred unless they directly relate to long-lived additions. These changes did not have a material impact on operating income. Agricultural Minerals Operations - FTX's agricultural minerals operations 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 impacting operating income are as follows (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 other 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 phosphate fertilizer sales volumes were slightly below 1993 levels. Producer inventories remained 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. FRP's phosphate rock sales volumes rose 14 percent during 1994, reflecting increased demand and the advent of a supply contract in October 1994 adding annual sales of approximately 0.8 million tons net to FRP through 2004. Main Pass sulphur production increased during 1994, reducing unit production costs below 1993 levels. 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 during the second half of 1994. Oil and Gas Operations - FTX's non-Main Pass oil and gas operations 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. 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. Oil realizations recovered somewhat from the significant decline which occurred in late 1993. The 1993 price decline resulted in a $60 million charge to FRP's earnings for the excess net book value of its oil assets over the estimated future net cash flow to be received. CAPITAL RESOURCES AND LIQUIDITY FTX's recapitalization and restructuring activities significantly reduced its parent company obligations. However, FTX still has certain cash requirements related to its past business activities, including oil and gas payments and employee benefit liabilities. It potentially could also have future cash requirements relating to its FM Properties Inc. debt guarantee (Note 9). FTX anticipates that its cash distributions from FRP and amounts available to it under the new credit facility will be sufficient to meet these obligations. The new credit facility provides $400 million of credit available to FTX/FRP ($183 million of additional borrowings available at February 6, 1996), $75 million of which is available to FTX as the holding company. In August 1995, the FTX Board of Directors established a new dividend policy for FTX common stock, declaring a regular quarterly cash dividend of 9 cents per common share. The new dividend policy allows FTX to use additional available funds to purchase FTX stock, purchase FRP units and/or invest in new growth opportunities. The timing of FTX stock and FRP unit purchases is dependent upon many factors, including their price, FTX's financial condition and general economic and market factors. FTX is primarily a holding company and its 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 January 19, 1996, FRP declared a distribution of 62.5 cents per publicly held unit ($31.3 million) and 67.35 cents per FTX-owned unit ($35.9 million), payable February 15, 1996, reducing the unpaid distributions to FTX by $2.6 million. The remaining $379.9 million of 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 and cash flow from FRP's sulphur and oil operations. Distributable cash in January 1996 included $64.3 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). FRP's Current Interest is presently 53.1 percent through June 30, 1996, changing to 53.5 percent for the twelve months ended June 30, 1997 and declining to 40.6 percent thereafter. However, in January 1996 FRP and its joint venture partner in IMC-Agrico agreed to an increase in FRP's Current Interest of 0.85 percent and a modification of certain product pricing between IMC-Agrico and the joint venture partner. This agreement is subject to the joint venture partner consummating a merger. Net cash provided by (used in) continuing operations was $241 million in 1995 (excludes $138.6 million from discontinued operations), $170.6 million in 1994 (excludes $336.2 million from discontinued operations) and $(41.2) million in 1993 (excludes $158.5 million from discontinued operations). These increases primarily reflect the improvement in FRP's agricultural minerals earnings. Also benefiting the 1995 and 1994 periods were working capital reductions achieved by IMC-Agrico and the sale of receivables (Note 1). Net cash used in investing activities totaled $368.9 million for 1995, $694.2 million for 1994 and $429 million for 1993, which included significant expenditures by its discontinued operations. Based on current estimates, capital expenditures related to the FRP operations will approximate $45 million for 1996. Capital expenditures for the non-FRP continuing operations have declined significantly following the MOXY distribution. Investing cash flows for 1995 also included the Mallinckrodt acquisition. Sales of various non-core assets generated proceeds of $26.9 million in 1995, $112 million in 1994 and $145.2 million in 1993. Net cash provided by (used in) financing activities totaled $(14) million for 1995, $207.2 million for 1994 and $(30) million for 1993. Net debt repayments (including debt offerings, redemptions and infrastructure sales) totaled $153.7 million in 1995 compared with net borrowings of $398.3 million in 1994 and a net repayment of $160 million in 1993. During 1995, FTX sold 23.9 million FCX Class A common shares for net proceeds of $497.2 million, which was used to retire all parent company debt. During 1994 and 1993, FCX sold preferred stock to finance its significant expansion-related capital expenditures. Distributions to FCX minority interests declined in 1995 reflecting the mid-year distribution of FCX. During 1995, FTX's equity purchases totaled $160.8 million, acquiring 1 million of its common shares for an aggregate $44.8 million, 5.3 million FCX shares for an aggregate $111.7 million and 0.3 million FRP units for an aggregate $4.3 million. During 1994, FTX's equity purchases primarily consisted of 0.6 million of its common shares for $67.7 million and 2.2 million FCX Class A common shares for $47.6 million. During 1993, 0.2 million FTX common shares and 0.8 million FCX Class A common shares were purchased for an aggregate $38.7 million. The reduction in cash dividends results from changes in FTX's dividend policy (Note 7) and the conversion of FTX's preferred stock to common stock in mid-1995. 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 compliance with local, state and federal laws and regulations, and prescribes the use of periodic environmental audits of all 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 methods to reduce discharges and emissions. Federal legislation (sometimes referred to as "Superfund") requires payments for cleanup of certain waste sites, even though waste management activities were performed in compliance with regulations applicable at the time. 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 operating 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 the potential liabilities at those sites for which notification has been received will not exceed amounts accrued and expects that any costs would be incurred over a period of years. The costs associated with those sites for which notifications have not been received are uncertain and cannot be estimated at present. However, FTX believes that these costs, should they be incurred, will not have a material adverse effect on its operations or financial position. 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 9). In June 1994, a sinkhole was found at a phosphogypsum storage area at IMC-Agrico's New Wales, Florida facility. The Florida Department of Environmental Protection was notified and IMC-Agrico pumped grout material into the sinkhole, thereby plugging it and preventing further collapse. Groundwater monitoring wells indicate that, to date, any impacts from the sinkhole have been contained on-site. 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. Rene L. Latiolais Charles W. Goodyear President and Executive Vice President and Chief Executive Officer Chief Financial Officer FREEPORT-MCMORAN INC. BALANCE SHEETS December 31, ------------------------ 1995 1994 ---------- ---------- (In Thousands) ASSETS Current assets: Cash and short-term investments $ 23,496 $ 13,810 Accounts receivable: Customers 58,220 46,831 Other 42,774 43,094 Inventories: Products 83,924 79,377 Materials and supplies 35,086 30,300 Prepaid expenses and other 4,499 7,433 ---------- ---------- Total current assets 247,999 220,845 ---------- ---------- Property, plant and equipment 1,978,065 1,905,410 Less accumulated depreciation and amortization 978,225 940,871 ---------- ---------- Net property, plant and equipment 999,840 964,539 ---------- ---------- Investment in FCX - 328,880 Other assets 72,631 135,178 ---------- ---------- Total assets $1,320,470 $1,649,442 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued liabilities $ 180,766 $ 191,553 Long-term debt, less current portion 359,501 1,122,070 Accrued postretirement benefits and pension costs 170,542 158,707 Reclamation and mine shutdown reserves 128,981 112,777 Other liabilities and deferred credits 92,722 77,034 Minority interest 196,021 217,768 Stockholders' equity: Convertible exchangeable preferred stock, par value $1, at liquidation value, authorized 50,000,000 shares 50,084 250,000 Common stock, par value $0.01 and $1 per share, respectively, authorized 100,000,000 shares and 300,000,000 shares, respectively 337 166,365 Capital in excess of par value of common stock 522,694 - Retained earnings (deficit) 92,746 (221,925) Cumulative foreign currency translation adjustment - (2,555) Common stock held in treasury -6,016,800 and 4,863,200 shares, respectively, at cost (473,924) (422,352) ---------- ---------- 191,937 (230,467) ---------- ---------- Total liabilities and stockholders' equity $1,320,470 $1,649,442 ========== ========== The accompanying notes are an integral part of these financial statements. FREEPORT-McMoRan INC. STATEMENTS OF OPERATIONS Years Ended December 31, ---------------------------------------- 1995 1994 1993 ---------- ---------- ---------- (In Thousands, Except Per Share Amounts) Revenues $ 995,857 $ 770,112 $ 684,650 Cost of sales: Production and delivery 688,260 556,746 574,940 Depreciation and amortization 46,784 56,411 123,679 ---------- ---------- ---------- Total cost of sales 735,044 613,157 698,619 Exploration expenses - 6,672 31,331 Provision for restructuring charges - - 46,350 Loss on valuation and sale of assets, net - - 64,114 General and administrative expenses 77,933 58,379 87,661 ---------- ---------- ---------- Total costs and expenses 812,977 678,208 928,075 ---------- ---------- ---------- Operating income (loss) 182,880 91,904 (243,425) Interest expense, net (49,655) (71,565) (59,542) Other income (expense), net 9,624 (1,245) 86 ---------- ---------- ---------- Income (loss) before income taxes and minority interest 142,849 19,094 (302,881) Income tax benefit 50,983 13,138 68,674 Minority interest in net (income) loss of consolidated subsidiaries (101,432) (67,364) 108,627 ---------- ---------- ---------- Income (loss) from continuing operations 92,400 (35,132) (125,580) Discontinued operations 340,424 107,715 35,387 ---------- ---------- ---------- Income (loss) before extraordinary item and changes in accounting principle 432,824 72,583 (90,193) Extraordinary loss on early extinguishment of debt, net - (9,108) - Cumulative effect of changes in accounting principle, net - - (13,642) ---------- ---------- ---------- Net income (loss) 432,824 63,475 (103,835) Preferred dividends (42,283) (22,032) (22,368) ---------- ---------- ---------- Net income (loss) applicable to common stock $ 390,541 $ 41,443 $ (126,203) ========== ========== ========== Net income (loss) per primary share: Continuing operations $3.54 $(1.51) $(5.32) Discontinued operations 13.05 4.64 1.50 Extraordinary loss - (.39) - Cumulative effect of changes in accounting principle - - (.58) Preferred dividends (1.62) (.95) (.95) ----- ----- ---- $14.97 $ 1.79 $(5.35) ====== ======= ====== Net income (loss) per fully diluted share: Continuing operations $3.70 $(1.51) $(5.32) Discontinued operations 11.64 4.64 1.50 Extraordinary loss - (.39) - Cumulative effect of changes in accounting principle - - (.58) Preferred dividends (1.14) (.95) (.95) ----- ----- ---- $14.20 $ 1.79 $(5.35) ====== ======= ====== Average common and common equivalent shares outstanding: Primary 26,081 23,204 23,599 ====== ======= ======= Fully diluted 29,240 23,204 23,683 ====== ======= ======= Dividends per common share: Cash $.18 $1.875 $7.50 Property 108.41 7.768 - ------ -------- ---- $108.59 $9.643 $7.50 ======= ======= ====== The accompanying notes are an integral part of these financial statements. FREEPORT-MCMORAN INC. STATEMENTS OF STOCKHOLDERS' EQUITY Years Ended December 31, -------------------------------------- 1995 1994 1993 ---------- ---------- ---------- (In Thousands) $1.875 Convertible exchangeable preferred stock: Balance at beginning of year $ - $ 6,286 $ 7,453 Conversions to common stock and redemptions - (6,286) (1,167) ---------- ---------- ---------- Balance at end of year - - 6,286 ---------- ---------- ---------- $4.375 Convertible exchangeable preferred stock: Balance at beginning of year 250,000 250,000 250,000 Conversions to common stock (199,916) - - ---------- ---------- ---------- Balance at end of year 50,084 250,000 250,000 ---------- ---------- ---------- Common stock: Balance at beginning of year 166,365 165,293 164,818 Conversions to common stock and other 32,649 1,072 475 One-for-six reverse stock split and change in par value (198,677) - - ---------- ---------- ---------- Balance at end of year 337 166,365 165,293 ---------- ---------- ---------- Capital in excess of par value of common stock: Balance at beginning of year - 21,868 186,032 Dividends on preferred stock - - (20,499) Dividends on common stock (1,427) (35,600) (131,992) Distribution of FCX (240,721) - - Conversions to common stock and other 566,165 13,732 (11,673) One-for-six reverse stock split and change in par value 198,677 - - ---------- ---------- ---------- Balance at end of year 522,694 - 21,868 ---------- ---------- ---------- Retained earnings (deficit): Balance at beginning of year (221,925) (81,224) 68,532 Net income (loss) 432,824 63,475 (103,835) Dividends on preferred stock (42,283) (22,032) (1,869) Dividends on common stock (39,166) (182,144) (44,052) Sale of Freeport Copper Company to FCX 15,600 - - Distribution of FCX (52,304) - - ---------- ---------- ---------- Balance at end of year 92,746 (221,925) (81,224) ---------- ---------- ---------- Cumulative foreign currency translation adjustment: Balance at beginning of year (2,555) (7,187) - Adjustment 2,555 4,632 (7,187) ---------- ---------- ---------- Balance at end of year - (2,555) (7,187) ---------- ---------- ---------- Common stock held in treasury: Balance at beginning of year (422,352) (354,387) (330,814) Purchase of 981,300, 638,600 and 221,000 shares, respectively (44,752) (67,747) (22,229) Other (6,820) (218) (1,344) ---------- ---------- ---------- Balance at end of year (473,924) (422,352) (354,387) ---------- ---------- ---------- Total stockholders' equity $ 191,937 $ (230,467) $ 649 ========== ========== ========== The accompanying notes are an integral part of these financial statements. FREEPORT-McMoRan INC. STATEMENTS OF CASH FLOW Years Ended December 31, --------------------------------------- 1995 1994 1993 ---------- ---------- ----------- (In Thousands) Cash flow from operating activities: Net income (loss) $ 432,824 $ 63,475 $ (103,835) 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 99,622 137,038 199,506 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 (Recognition) deferral of unearned income (36,207) 36,207 - Amortization of debt discount and financing costs 16,112 37,128 41,166 Gain on FCX securities transactions (435,060) (114,750) (44,116) Loss on recapitalization of FTX securities 44,371 - - Deferred income taxes 46,290 96,065 (39,035) Minority interests' share of net income (loss) 184,425 168,951 (61,689) Cash distributions from IMC-Agrico in excess of interest in capital 40,835 43,293 - Reclamation and mine shutdown expenditures (10,545) (9,837) (9,980) (Increase) decrease in working capital, net of effect of acquisitions and dispositions: Accounts receivable 11,374 (44,614) 2,821 Inventories (22,851) (76,527) 4,475 Prepaid expenses and other 1,705 7,350 (10,873) Accounts payable and accrued liabilities (6,337) 163,283 (24,590) Other 13,025 (14,574) (5,186) ---------- ---------- ---------- Net cash provided by operating activities 379,583 506,827 117,289 ---------- ---------- ---------- Cash flow from investing activities: Capital expenditures: FCX (308,099) (743,470) (463,512) FRP (39,485) (29,681) (52,170) Other (2,070) (33,070) (58,530) Sale of assets: Oil and gas - - 95,250 Geothermal - 36,910 23,000 Other 26,906 75,092 26,961 Mallinckrodt purchase (46,200) - - ---------- ---------- ---------- Net cash used in investing activities $ (368,948) $ (694,219) $ (429,001) ----------- ----------- ---------- Cash flow from financing activities: Proceeds from sale of equity securities: FCX Class A common shares $ 497,166 $ - $ - FCX preferred stock - 252,985 561,090 Purchase of FTX common shares (44,752) (67,747) (22,229) Purchase of FCX Class A common shares (111,747) (47,596) (16,482) Purchase of FRP units (4,314) (1,342) - Distributions paid to minority interests: FCX (59,970) (110,312) (74,848) FRP (121,439) (121,184) (121,180) Distribution of MOXY shares - (35,441) - Net proceeds from infrastructure financing 228,899 110,825 20,000 Proceeds from debt 510,896 669,928 441,376 Repayment of debt (597,700) (501,901) (621,381) Proceeds from (purchase of) debt securities: ABC debentures (280,826) - - 6.55% Senior notes (14,955) - - 10 7/8% Senior debentures - (142,919) - FRP 8 3/4% Senior Subordinated Notes - 146,125 - FCX 9 3/4% Senior notes - 116,276 - Cash dividends paid: Common stock (5,168) (44,467) (175,890) Preferred stock (8,757) (22,110) (22,384) Other (1,380) 6,088 1,962 ---------- ---------- ---------- Net cash provided by (used in) financing activities (14,047) 207,208 (29,966) ---------- ---------- ---------- Net increase (decrease) in cash and short-term investments (3,412) 19,816 (341,678) Net (increase) decrease attributable to discontinued operations 13,098 (30,454) 358,044 Cash and short-term investments at beginning of year 13,810 24,448 8,082 ---------- ---------- ---------- Cash and short-term investments at end of year $ 23,496 $ 13,810 $ 24,448 ========== ========== ========== Interest paid $ 85,861 $ 94,631 $ 94,557 ========== ========== ========== Income taxes paid $ 72,458 $ 42,576 $ 15,925 ========== ========== ========== The accompanying notes, which include information in Notes 1-5, 7 and 10 regarding noncash transactions, are an integral part of these 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 publicly traded partnerships. Investments in joint ventures and partnerships (other than publicly traded entities) are 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 1995 presentation. In July 1995, FTX completed the distribution of its ownership in Freeport-McMoRan Copper & Gold Inc. (FCX) in the form of a tax-free dividend to the FTX common stockholders (Note 3). As a result of FTX no longer owning any interest in FCX, FTX's financial statements have been restated to reflect activities related to FCX's operations as discontinued. Except where otherwise indicated, the following notes relate to continuing operations consisting principally of FTX's ownership of Freeport-McMoRan Resource Partners, Limited Partnership (FRP). Use of Estimates. 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. 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 held by consolidated entities are not available to FTX until a distribution is paid to all owners of an entity's equity securities. Accounts Receivable. IMC-Agrico Company (IMC-Agrico) has an agreement whereby it can sell on an ongoing basis up to $65 million of accounts receivable. FTX's accounts receivable at December 31, 1995 and 1994 were net of $28.3 million and $17.9 million of receivables sold, respectively. Inventories. Inventories are generally stated at the lower of average cost or market. Property, Plant and Equipment. Property, plant and equipment are carried at cost, including capitalized interest during the construction and development period. 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 17 to 30 years for buildings and 5 to 25 years for machinery and equipment. In March 1995, the Financial Accounting Standards Board issued Statement No. 121 (FAS 121) which requires a reduction of the carrying amount of long-lived assets to fair value when events indicate that their carrying amount may not be recoverable. FTX adopted FAS 121 effective January 1, 1995, the effect of which was not material. 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. 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, 1995, FTX had accrued $53.9 million for abandonment and restoration of its non-operating sulphur assets, approximately one-half of which will be reimbursed by third parties, $42.7 million for reclamation of land relating to mining and processing phosphate rock and $21.1 million for the dismantlement and abandonment of certain oil and gas properties. FTX estimates that FRP's share of abandonment and restoration costs for its two operating sulphur mines will total approximately $50 million, $17.6 million of which had been accrued at December 31, 1995, with essentially all costs being incurred after 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. Net Income Per Share. All common share and per share amounts reflect the common stock split discussed in Note 7. 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. During 1995, a portion of FTX's $4.375 Convertible Exchangeable Preferred Stock and 6.55% Convertible Subordinated Notes were exchanged for FTX common stock. Had these conversions occurred on January 1, 1995, primary net income from continuing operations would have been $3.53 per share for 1995. Changes in Accounting Principle. During 1993, FTX adopted the following changes in accounting principle: 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. 2. FREEPORT-McMoRAN RESOURCE PARTNERS, LIMITED PARTNERSHIP FTX's fertilizer and sulphur operations and its Main Pass oil operations are conducted through its publicly traded affiliate, FRP. FTX owned 51.5 percent of the FRP units outstanding at December 31, 1995. 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. 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 (53.1 percent and 43.6 percent, respectively, at December 31, 1995) decline in annual increments to 40.6 percent for the fiscal year ending June 30, 1998 and remain constant thereafter. In January 1996, FRP and IGL agreed to an increase in FRP's Current and Capital Interest of 0.85 percent, subject to IGL consummating a merger. At December 31, 1995, FRP's investment in IMC-Agrico totaled $429.2 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 before any distributions may be made to FTX. On January 19, 1996, FRP declared a distribution of 62.5 cents per publicly held unit ($31.3 million) and 67.35 cents per FTX-owned unit ($35.9 million), reducing the unpaid distributions to FTX to $379.9 million. Unpaid FTX distributions are recoverable from one-half of any amount by which future quarterly distributable cash exceeds a 60 cents per unit distribution. 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 was not paid its proportionate share of FRP distributions, FTX reflected its proportionate share of FRP's earnings through recognition of portions of the deferred gain ($32.6 million in 1994 and $62.2 million in 1993). However, in 1994 the remaining deferred gain was utilized and FTX recognized an additional minority interest charge of $23 million in 1995 and $26.5 million in 1994. In 1996, to the extent that public unitholders receive a disproportionately large share of FRP distributions FTX will recognize a smaller share of FRP's reported earnings than would be represented by its percentage ownership of FRP. To the extent the cumulative unpaid distributions are reduced, FTX will recognize a disproportionately greater share of FRP's reported earnings. 3. FREEPORT-McMoRAN COPPER & GOLD INC. In July 1995, FTX distributed 117,909,323 shares of FCX Class B common stock to FTX common stockholders. As a result of FTX no longer owning any interest in FCX, FTX's financial statements have been restated to reflect activities related to FCX's operations as discontinued. In connection with a recapitalization of its liabilities, prior to the FCX distribution, FTX sold 23.9 million shares of FCX Class A common stock in 1995 to The RTZ Corporation PLC (RTZ) for net proceeds of $497.2 million, recognizing a pretax gain of $435.1 million. Discontinued operations results follow (in thousands): 1995 1994 1993 ---------- ---------- ---------- Revenues $ 830,275 $1,212,284 $ 925,932 ========== ========== ========== Income from discontinued operations $ 221,927 $ 256,079 $ 121,959 Minority interest (82,992) (101,588) (44,159) Provision for taxes (95,436) (115,357) (65,692) ---------- ---------- ---------- 43,499 39,134 12,108 Gain on FCX securities transactions 435,060 114,750 44,116 Recapitalization losses (Note 4) (44,371) - - Provision for taxes (93,764) (46,169) (20,837) ---------- ---------- ---------- $ 340,424 $ 107,715 $ 35,387 ========== ========== ========== Income from discontinued operations includes allocated interest from FTX totaling $16.6 million in 1995, $21.8 million in 1994 and $5.2 million in 1993. In September 1995, FCX paid FTX $25 million cash for 100 percent of the stock of Freeport Copper Company whose sole asset is a 50 percent interest in a joint venture with ASARCO Santa Cruz, Inc. controlling approximately 7,600 contiguous acres in Arizona. The joint venture is involved in a research project for an experimental in-situ leaching process that would be used to mine copper. 4. LONG-TERM DEBT December 31, ----------------------- 1995 1994 ---------- ---------- Notes payable: (In Thousands) FTX credit agreement, average rate 7.1% in 1995 and 5.4% in 1994 $ 196,400 $ 370,000 Other 13,440 13,951 Publicly traded notes and debentures: Zero Coupon Convertible Subordinated Debentures - 270,196 6.55% Convertible Subordinated Notes - 318,237 FRP 8 3/4% Senior Subordinated Notes due 2004 150,000 150,000 ---------- ---------- 359,840 1,122,384 Less current portion, included in accounts payable 339 314 ---------- ---------- $ 359,501 $1,122,070 ========== ========== Notes Payable. In 1995, FTX obtained a new variable rate revolving credit facility (the Credit Agreement). The facility provides $400 million of credit, all of which is available to FRP ($213 million of additional borrowings available at December 31, 1995) and $75 million of which is available to FTX as the holding company, through July 2000. Under this facility, FTX is required to retain control of FRP and FRP is not permitted to enter into any agreement restricting its ability to make distributions or create liens on its assets. As security for the banks, FTX has pledged units representing 50.1 percent of FRP, while FRP has pledged its interest in IMC-Agrico and Main Pass oil. The Credit Agreement provides for FRP minimum working capital requirements, specified cash flow to interest coverage, maximum debt to capitalization ratios and restrictions on other borrowings. 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. FTX and FRP entered into interest rate swaps to manage exposure to interest rate changes on a portion of their 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 10.2 percent on interest rate exchange agreements entered into in late 1987 and early 1988 on $55.3 million of financing at December 31, 1995, reducing annually through 1999. Interest on comparable floating rate debt averaged 6.1 percent in 1995, 4.4 percent in 1994 and 3.4 percent in 1993, resulting in additional interest costs of $5.4 million, $9.8 million and $12.8 million, respectively. Based on market conditions at December 31, 1995, unwinding these interest swaps would require an estimated $6.3 million. Publicly Traded Notes and Debentures. In June 1995, FTX redeemed $749.2 million principal amount of its Zero Coupon Convertible Subordinated Debentures (ABC Debentures) for $280.8 million (equal to book value) and redeemed $16.4 million face amount of 6.55% Convertible Subordinated Notes (6.55% Notes), with a book value of $14.1 million, for $15 million. Prior to the redemption, FTX increased the number of FTX common shares that would be received upon conversion of the 6.55% Notes. Holders of $356.6 million face amount of 6.55% Notes converted their notes at the enhanced rate into 3.3 million FTX common shares. FTX recorded a pretax loss on recapitalization of the ABC Debentures and 6.55% Notes totaling $44.4 million. In February 1994, FRP sold publicly $150 million of 8 3/4% Senior Subordinated Notes. Based on the December 31,1995 closing market price, this debt had a fair value of $151.9 million. 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. Minimum Principal Payments. Payments scheduled for each of the five succeeding years based on the amounts and terms outstanding at December 31, 1995 are $0.3 million, $0.4 million, $0.5 million, $0.5 million and $196.4 million. Capitalized Interest. Capitalized interest totaled $11.1 million in 1993. 5. ACQUISITIONS AND MOXY DISTRIBUTION Pennzoil. 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. The purchase price allocation is as follows (in thousands): Current assets $ 5,635 Property, plant and equipment 48,837 Current liabilities (7,499) Reclamation and mine shutdown reserves (15,200) Accrued long-term liabilities (31,773) ---------- Net cash investment $ - ========== Accrued long-term liabilities include the estimated future installment payments based on the prevailing sulphur price at the time of acquisition. Mallinckrodt. In October 1995, IMC-Agrico acquired the animal feed ingredients business of Mallinckrodt Group Inc. for $110 million cash. FRP funded its portion of the purchase price with borrowings under the Credit Agreement. The purchase price allocation is as follows (in thousands): Current assets $ 19,503 Property, plant and equipment 35,329 Current liabilities (8,632) ---------- Net cash investment $ 46,200 ========== McMoRan Oil & Gas Co. (MOXY). In 1994, FTX distributed common shares of its newly formed, wholly owned subsidiary, MOXY, to FTX's stockholders. MOXY was organized to carry 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 ========== 6. INCOME TAXES Income taxes are recorded pursuant to Statement of Financial Accounting Standards No. 109. The components of FTX's deferred taxes follow: December 31, ----------------------- 1995 1994 ---------- ---------- Deferred tax asset: (In Thousands) Net operating loss carryforwards $ - $ 121,248 Alternative minimum tax credits 49,780 47,183 Other tax carryforwards 31,256 45,637 Deferred compensation, postretirement and pension benefits 52,216 55,039 Reclamation and shutdown reserve 29,492 24,908 Basis in subsidiaries 8,094 - Other 20,141 14,440 Valuation allowance (11,489) (45,637) ---------- ---------- Total deferred tax asset 179,490 262,818 ---------- ---------- Deferred tax liability: Property, plant and equipment (127,113) (116,215) Basis in subsidiaries - (39,380) Other (38,963) (42,155) ---------- ---------- Total deferred tax liability (166,076) (197,750) ---------- ---------- Net deferred tax asset (included in other assets) $ 13,414 $ 65,068 ========== ========== During 1995, primarily because of the distribution of FCX and related recapitalization efforts, FTX was able to utilize all of its net operating loss carryforwards. FTX believes that no valuation allowance is needed for its alternative minimum tax (AMT) credits because historically it has been able to use substantially all of its tax benefits and AMT credits can be carried forward indefinitely. During 1995, as a result of using its net operating loss carryforwards, FTX determined that it is more likely than not that the majority of its other tax credits will be utilized and, accordingly, reduced the previously established valuation allowance by $27.4 million. FTX has provided a valuation allowance for its charitable contribution carryforwards as they are limited to ten percent of taxable income and substantially all expire between 1996 and 2000. FTX does not provide deferred taxes for financial and income tax reporting basis differences related to its investment in FRP which are considered permanent in duration (approximately $320 million). FTX believes it will ultimately be able to eliminate these differences on a tax-free basis. If ownership in FRP were to fall below 50 percent or if FTX were to determine that such difference will not be eliminated tax-free, FTX would be required to charge earnings for taxes on the difference between the book and tax basis of its investment. The income tax benefit from continuing operations consists of the following: 1995 1994 1993 ---------- ---------- ---------- (In Thousands) Current income taxes: Federal $ 116,920 $ (7,206) $ 6,430 State 13,286 788 (4,241) ---------- ---------- ---------- 130,206 (6,418) 2,189 ---------- ---------- ---------- Deferred income taxes: Federal (62,218) 20,482 55,808 State (17,005) (926) 10,677 ---------- ---------- ---------- (79,223) 19,556 66,485 ---------- ---------- ---------- $ 50,983 $ 13,138 $ 68,674 ========== ========== ========== Reconciliations of the differences between income taxes from continuing operations computed at the federal statutory tax rate and income taxes recorded follow: 1995 1994 1993 ----------------- ----------------- --------------- Amount Percent Amount Percent Amount Percent -------- ------- -------- ------- -------- ------- (Dollars In Thousands) Income taxes computed at the federal statutory tax rate $(49,997) 35% $ (6,683) 35% $106,008 35% (Increase) decrease attributable to: Statutory depletion 5,594 (4) 1,780 (9) 2,016 1 Partnership minority interests 38,139 (27) 25,342 (133) (45,057) (15) Taxes no longer required 35,449 (25) - - - - Change in valuation allowance 27,350 (19) - - - - Minimum and state taxes (3,719) 3 (138) 1 6,436 2 Other (1,833) 1 (7,163) 37 (729) - -------- ------ -------- ------- -------- ------ Income tax benefit $ 50,983 (36)% $ 13,138 (69)% $ 68,674 23% ======== ======= ======== ======= ======== ====== 7. STOCKHOLDERS' EQUITY Preferred Stock. In April 1995, FTX exchanged 1.9 million FTX common shares for 4 million shares of its $4.375 Convertible Exchangeable Preferred Stock ($4.375 Preferred Stock) in accordance with an exchange offer whereby FTX temporarily increased the FTX shares issuable upon conversion. As a result of the exchange offer, FTX recorded a noncash charge of $33.5 million to preferred dividends. As of December 31, 1995, one million shares of $4.375 Preferred Stock remained outstanding and are convertible into FTX common stock at a conversion price of $27.36 per share or the equivalent of 1.8 shares of FTX common stock for each share of $4.375 Preferred Stock. 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 October 1995, FTX effected a one-for-six reverse stock split of its common stock and changed the par value from $1.00 per share to $0.01 per share. In June 1994, FTX changed its dividend policy and distributed quarterly 0.075 FCX common shares for each FTX common share owned in lieu of paying a $1.875 quarterly cash dividend to its stockholders. FTX recorded a pretax gain of $105.5 million in 1994 related to these property dividends which is included in discontinued operations. In August 1995, FTX established a new dividend policy declaring a regular quarterly cash dividend of 9 cents per FTX common share. 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. FTX can grant options to employees to purchase up to 1.6 million shares under its 1992 stock option plans. The 1988 Stock Option Plan for Non-Employee Directors authorizes FTX to grant options to purchase up to 250,000 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 MOXY shares, each option was adjusted to preserve the economic value of the option. Additionally, the FCX distribution resulted 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 0.4 million SARs, follows: 1995 1994 -------------------------- --------------------- Number of Average Number of Average Options Option Price Options Option Price ---------- ------------ --------- ------------ Beginning of year 2,613,588 $98.76 2,290,498 $106.14 Granted 21,667 105.36 297,867 116.52 Adjustments 63,105 159,027 Exercised (1,177,285) 23.98 (114,908) 95.40 Expired (63,035) 89.46 (18,896) 107.40 ---------- ---------- End of year 1,458,040 18.84 2,613,588 98.76 ========== ========== At December 31, 1995, stock options representing one million shares were exercisable at an average option price of $18.53 per share. Options for approximately 325,000 shares and 80,000 shares were available for new grants under the 1992 and 1988 Stock Option Plans, respectively, as of December 31, 1995. During 1995, FTX recorded charges totaling $15.5 million for the cost of stock options resulting from the rise in FTX's common stock price. In October 1995 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (FAS 123) "Accounting for Stock-Based Compensation," effective for FTX at December 31, 1996. Under FAS 123, companies can either record expense based on the fair value of stock-based compensation upon issuance or elect to remain under the current APB Opinion No. 25 method whereby no compensation cost is recognized upon grant. Entities electing to remain with the accounting in APB Opinion No. 25 must make disclosures as if FAS 123 had been applied. FTX anticipates it will continue to account for its stock-based compensation plans under APB Opinion No. 25. 8. 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, ------------------------ 1995 1994 ---------- ---------- (In Thousands) Actuarial present value of benefit obligations (projected unit credit method): Vested $ 136,836 $ 90,396 Nonvested 3,961 1,643 ---------- ---------- Accumulated benefit obligations $ 140,797 $ 92,039 ========== ========== Projected benefit obligations (projected unit credit method) $ (174,074) $ (114,599) Less plan assets at fair value 130,970 108,326 ---------- ---------- Projected benefit obligations in excess of plan assets (43,104) (6,273) Unrecognized net (gain) loss from past experience different from that assumed 22,202 (5,179) Unrecognized prior service costs 3,848 4,340 Unrecognized net asset being recognized over 19 years (3,288) (3,763) ---------- ---------- Accrued pension cost $ (20,342) $ (10,875) ========== ========== In determining the present value of benefit obligations for 1995 and 1994, FTX used a 7 percent and 8.25 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 for continuing operations includes the following: 1995 1994 1993 ---------- ---------- ---------- (In Thousands) Service cost $ 4,429 $ 5,668 $ 8,573 Interest cost on projected benefit obligations 10,083 9,008 9,739 Actual return on plan assets (26,526) 126 (9,388) Net amortization and deferral 17,450 (8,814) 1,423 Termination benefits 4,292 2,404 26 ---------- ---------- ---------- Net pension cost $ 9,728 $ 8,392 $ 10,373 ========== ========== ========== As of January 1, 1996, FM Services Company (FMS), a newly formed entity owned 50 percent each by FTX and FCX, will provide certain administrative, financial and other services that were previously provided by FTX on a similar cost-reimbursement basis. As of January 1, 1996, all U.S. and expatriate employees performing direct services for FCX or its affiliates, other than those employed by FMS, became FCX employees. FCX and FMS will establish their own plans which will assume liabilities equal to the accumulated benefit obligation for the transferred employees and FTX will transfer assets equal to the liabilities assumed, while providing essentially the same benefits to employees. The operator of IMC-Agrico maintains non-contributory pension plans that cover substantially all of its employees. As of July 1, 1995, FRP's share of the actuarial present value of the vested projected benefit obligation was $10 million, based on a discount rate of 8.2 percent and a 5 percent annual increase in future compensation levels, with its share of plan assets totaling $2.7 million. FRP's share of the expense related to these plans totaled $4.6 million in 1995, $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 for continuing operations totaled $10.5 million in 1995 ($1.5 million for service cost and $9 million in interest for prior period services), $12.3 million in 1994 ($1.3 million and $10 million, respectively) and $11.3 million in 1993 ($1.8 million and $9.5 million, respectively). These benefits will be provided by FMS beginning in 1996. Summary information of the plan follows: December 31, ------------------------ 1995 1994 ---------- ---------- (In Thousands) Actuarial present value of accumulated postretirement obligation: Retirees $ 111,151 $ 109,356 Fully eligible active plan participants 11,248 8,806 Other active plan participants 16,980 4,611 ---------- ---------- Total accumulated postretirement obligation 139,379 122,773 Unrecognized net gain (loss) (7,498) 4,037 ---------- ---------- Accrued postretirement benefit cost $ 131,881 $ 126,810 ========== ========== 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 7 percent in 1995 and 8.25 percent in 1994. 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, 1995, FRP's share of the accumulated postretirement obligation was $4.2 million, which was unfunded. FRP's share of expense has not been material. The initial health care cost trend rate used was 9.8 percent, decreasing gradually to 5.5 percent in 2003. The discount rate used was 8.2 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 and 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. FTX has other employee benefits plans, certain of which are related to its performance, which costs are recognized currently in general and administrative expense. 9. 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 has made, and will continue to make, 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 because of such factors as the unknown timing and extent of the corrective actions that may be required and the application of joint and several liability. In June 1994, a sinkhole was found at a phosphogypsum storage area at IMC-Agrico's New Wales, Florida facility. The Florida Department of Environmental Protection was notified and IMC-Agrico pumped grout material into the sinkhole, thereby plugging it and preventing further collapse. Groundwater monitoring wells indicate that, to date, any impacts from the sinkhole have been contained on-site. 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). In anticipation of reaching the $5 million indemnity, the third party has assumed management of response activities for the indemnified 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 at the indemnified sites. FTX believes its exposure on other sites for which notification has been received will not exceed amounts accrued and expects that any costs would be incurred over a period of years. The costs associated with those sites for which notifications have not been received are uncertain and cannot be estimated at present. However, FTX believes that these costs, should they be incurred, will not have a material adverse effect on its operations or financial position. FM Properties Inc. (FMPO). In 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 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). FTX subsequently distributed the FMPO common stock to the FTX common stockholders, with FTX guaranteeing FMPO's debt. As part of the FCX distribution (Note 3), FCX assumed an obligation to guarantee up to $90 million of this indebtedness (FTX is responsible for the first $45 million and amounts in excess of FCX's $90 million up to an additional $12.3 million) and FTX is paying an annual three percent fee to FCX based on the amount guaranteed. During 1995, FMPO was able to extend its debt maturities until 1997 and is managing its assets with an objective of reducing its debt. Selected financial information of FMPO follows: 1995 1994 ---------- ---------- Statements of Operations: (In Thousands) Revenues $ 48,170 $ 40,435 Operating loss (4,104) (123,739) * Net income (loss) 153 (86,290) Cash Flow: Operating activities 47,655 11,968 Investing activities (35,242) 29,019 Financing activities (11,331) (42,270) Balance Sheets at December 31: Current assets 9,591 6,857 Current liabilities 8,100 22,146 Investment in real estate 180,040 198,453 Total assets 194,803 214,365 Long-term debt 121,294 132,075 Stockholders' equity 59,523 59,370 * Includes a $115 million pretax, noncash write-down. Long-Term Contracts and Operating Leases. FTX's minimum annual contractual charges under noncancelable long-term contracts and operating leases which extend to 2009 total $363.9 million, with $45.3 million in 1996, $41.5 million in 1997, $40.4 million in 1998, $29.8 million in 1999 and $39.2 million in 2000. Total expense under long-term contracts and operating leases amounted to $44.3 million in 1995, $30 million in 1994 and $27.5 million in 1993. 10. RESTRUCTURING AND VALUATION CHARGES Restructuring Charges. During 1993, FTX recognized restructuring expenses totaling $46.3 million (excluding $20.8 million associated with its discontinued operations). The charges consisted of $22 million for personnel related costs, $11.8 million for excess office space and furniture and fixtures resulting from staff reductions, $2.1 million for downsizing its MIS structure, $8.8 million for IMC-Agrico formation costs and $1.6 million of deferred charges relating to FTX's credit facilities which were substantially revised. 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 $48.8 million (excluding $16.3 million associated with its discontinued operations), comprised of (a) $16.2 million of production and delivery costs consisting of $9.9 million for revised estimates of prior year costs and $6.3 million for revised estimates of environmental liabilities, (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) $9.5 million of general and administrative expenses consisting of $5.4 million to downsize FTX's MIS structure and $4.1 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, 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 ($60 million) and non-Main Pass sulphur assets. 11. SUPPLEMENTARY MINERAL RESERVE INFORMATION (UNAUDITED) Proved and probable mineral reserves, including proved oil reserves, follow: December 31, -------------------------------------------------- 1995 1994 1993 1992 1991 ------- ------- -------- -------- -------- (In Thousands) Sulphur-long tons a 55,185 41,018 38,637 41,570 42,780 Phosphate rock-short tons b 186,375 206,661 215,156 208,655 206,183 Oil-barrels 6,638 7,279 9,962 13,861 18,496 a. Main Pass reserves are subject to a 12.5 percent federal royalty based on net mine revenues. Culberson reserves totaled 15.4 million tons for 1995 and are subject to a 9 percent royalty based on net mine revenues. b. For 1995-1993, 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. 12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Net Income Net Income Per Applicable Common Share Operating To Common --------------------- Revenues Income Stock Primary Fully Diluted ---------- ---------- ---------- ------- ------------- (In Thousands, Except Per Share Amounts) 1995 1st Quarter a $ 254,479 $ 49,874 $ 19,391 $ .85 $ .85 2nd Quarter b 233,398 47,184 265,485 10.78 8.98 3rd Quarter a,c 243,066 31,631 24,503 .86 .86 4th Quarter a,d 264,914 54,191 81,162 2.86 2.86 ---------- ---------- ---------- $ 995,857e $ 182,880 $ 390,541 14.97 14.20 ========== ========== ========== 1994 1st Quarter f $ 183,441 $ 12,258 $ 12,373 $ .53 $ .53 2nd Quarter f 186,946 20,073 4,634 .20 .20 3rd Quarter a 189,803 25,254 6,044 .26 .26 4th Quarter a 209,922 34,319 18,392 .80 .80 ---------- ---------- ---------- $ 770,112e $ 91,904 $ 41,443 1.79 1.79 ========== ========== ========== a. Because FTX was not paid its proportionate share of FRP distributions, additional minority interest charges to net income were $5.5 million ($0.24 per share), $5.2 million ($0.18 per share) and $4.1 million ($0.15 per share) in the first, third and fourth quarters of 1995, respectively. Similar charges of $7.1 million ($0.31 per share) and $10.1 million ($0.44 per share) were recorded in the third and fourth quarters of 1994, respectively. b. Net income includes a $33.5 million charge ($1.36 per share) for the $4.375 Convertible Exchangeable Preferred Stock exchange offer. c. Net income includes a $3.9 million charge ($0.14 per share) for stock option costs caused by the rise in FTX's common stock price. d. Net income includes a $1.8 million charge ($0.06 per share) for stock option costs and an early retirement program, a $5.3 million gain ($0.19 per share) for the reversal of certain insurance accruals no longer required and a $62.8 million gain ($2.21 per share) for the reversal of certain tax accruals no longer required. e. No customers accounted for ten percent or more of total revenues. Export sales to Asia, Australia, Latin America and Canada approximated 41 percent, 38 percent and 32 percent of total revenues for 1995-1993, respectively. f. Net income includes a $5.5 million charge ($0.23 per share) in the first quarter and a $3.6 million charge ($0.16 per share) in the second quarter related to early extinguishment of debt. 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, 1995 and 1994, and the related statements of operations, cash flow and stockholders' equity for each of the three years in the period ended December 31, 1995. 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 44 percent and 32 percent of assets as of December 31, 1995 and 1994, and 80 percent, 85 percent and 37 percent of the Company's total revenues for the years ended December 31, 1995, 1994 and 1993, respectively. Those statements were audited by other auditors whose reports have 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 reports 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 reports of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports 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, 1995 and 1994 and the results of its operations and its cash flow for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. As discussed in Note 1 to the consolidated financial statements, effective January 1, 1993, the Company 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 23, 1996 SHAREHOLDER INFORMATION COMMON SHARES/REVERSE STOCK SPLIT. 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 yearend 1995 the number of holders of record of our common stock was 21,182. On October 20, 1995, FTX's common shareholders approved an amendment to its certificate of incorporation effecting a one- for-six reverse split of FTX common stock, reducing the par value of FTX common stock and decreasing the number of authorized shares of FTX common stock. Common share price ranges on the NYSE composite tape, reflecting the one-for-six reverse stock split, during 1995 and 1994 were: 1995 1994 ------------------ ------------------ High Low High Low ------- ------- ------- ------- First Quarter $111.78 $102.00 $130.50 $112.50 Second Quarter 111.78 101.28 118.50 97.50 Third Quarter 145.50* 27.00* 120.00 96.78 Fourth Quarter 41.13 33.00 119.28 100.50 * Share prices include periods before and after FTX's July 28, 1995 tax-free distribution of FCX Class B common stock, which had a market value of $106.85 per FTX share. RESTRUCTURING PLAN/COMMON SHARE DIVIDENDS. On July 5, 1995, FTX announced that its Board of Directors declared a special tax-free dividend whereby FTX would distribute its ownership in FCX to FTX common shareholders. FTX distributed 4.210404 shares of FCX Class B common stock for each FTX common share of record on July 17, 1995. This special tax-free dividend completed FTX's restructuring announced in 1994. Cash and property dividends paid during 1995 and 1994, which reflect the one-for-six reverse stock split, were: 1995 - --------------------------------------------------------------- Dividend Per FTX Share Record Date Payment Date - ----------------------- ------------- ------------- 0.075 FCX.A share * Feb. 15, 1995 Mar. 1, 1995 4.210404 FCX shares * Jul. 17, 1995 Jul. 28, 1995 $0.09 Aug. 15, 1995 Sep. 1, 1995 $0.09 Nov. 15, 1995 Dec. 1, 1995 1994 - --------------------------------------------------------------- Dividend Per FTX Share Record Date Payment Date - ----------------------- ------------- ------------- $1.875 Feb. 15, 1994 Mar. 1, 1994 0.075 FCX.A share * May 16, 1994 Jun. 1, 1994 0.6 MOXY share * May 20, 1994 May 20, 1994 0.075 FCX.A share * Aug. 15, 1994 Sep. 1, 1994 0.075 FCX.A share * Nov. 15, 1994 Dec. 1, 1994 * Below is a summary of the cost basis of shares for the property dividends. Per Share Amount for Calculation of Cash in Lieu Cost Basis of a Fractional Record Date Share Per Share Share - --------------- ------- ----------- ---------------- Feb. 15, 1995 FCX.A $20.9375 $20.8125 Jul. 17, 1995 FCX ** 24.1250 May 16, 1994 FCX.A 24.1875 24.4375 May 20, 1994 MOXY 4.5000 5.4933 Aug. 15, 1994 FCX.A 22.7500 21.0625 Nov. 15, 1994 FCX.A 20.0625 22.0625 ** The cost basis for each share of FTX stock should be reduced to 21 percent of its former amount and the remaining 79 percent of the FTX cost basis should be established as the cost basis for the FCX shares and cash in lieu of a fractional share. EX-21 8 Exhibit 21.1 List of Subsidiaries of FREEPORT-McMoRan INC. Name Under Which Entity Organized It Does Business ----------------------------------- --------- ---------------- Freeport-McMoRan Resource Partners, Delaware Same Limited Partnership IMC-Agrico Company Delaware Same FM Services Company Delaware Same EX-23 9 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 Form S-8 (File Nos. 2-85000, 33-14641, 33-29850, 33-30417 and 33- 62170). /s/Arthur Andersen LLP ---------------------- Arthur Andersen LLP New Orleans, Louisiana, March 27, 1996 EX-23 10 Exhibit 23.2 CONSENT OF ERNST & YOUNG LLP We consent to the use of our report dated January 15, 1996, with respect to the financial statements of IMC-Agrico Company (not presented separately herein), incorporated by reference in the Registration Statements on Form S-8 (File Nos. 2-85000, 33-14641, 33-29850, 33-30417 and 33-62170) and related Prospectuses of Freeport-McMoRan Inc. and included in this Annual Report (Form 10-K) for the year ended December 31, 1995. /s/ ERNST & YOUNG LLP ----------------------- ERNST & YOUNG LLP Chicago, Illinois March 27, 1996 EX-24 11 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 25th day of March, 1996. (Seal) /s/ Michael C. Kilanowski, Jr. ------------------------------ Michael C. Kilanowski, Jr. Secretary EX-24 12 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, 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, 1995, 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 6th day of February, 1996. /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, 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, 1995, 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 6th day of February, 1996. /s/ Charles W. Goodyear ----------------------- Charles W. Goodyear 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, 1995, 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 29th day of February, 1996. /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, 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, 1995, 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 6th day of February, 1996. /s/ Richard C. Adkerson ----------------------- Richard C. Adkerson 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, 1995, 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 6th day of February, 1996. /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, 1995, 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 6th day of February, 1996. /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, 1995, 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 6th day of February, 1996. /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, 1995, 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 6th day of February, 1996. /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, 1995, 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 6th day of February, 1996. /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, 1995, 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 6th day of February, 1996. /s/ Bobby Lee Lackey -------------------- Bobby Lee Lackey POWER OF ATTORNEY ----------------- BE IT KNOWN: That the undersigned, in her 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, her 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 her, in her name and in her capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1995, 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 6th day of February, 1996. /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, 1995, 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 6th day of February, 1996. /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, 1995, 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 6th day of February, 1996. /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, 1995, 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 6th day of February, 1996. /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, 1995, 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 12th day of February, 1996. /s/ Ward W. Woods, Jr. ---------------------- Ward W. Woods, Jr. EX-27 13
5 This schedule contains summary financial information extracted from Freeport-McMoRan Inc. financial statements at December 31, 1995 and 1994 and for the 12 month periods then ended, and is qualified in its entirety by reference to such financial statements. The 1994 amounts have been restated. 0000351116 FREEPORT-MCMORAN INC. 1,000 YEAR YEAR DEC-31-1995 DEC-31-1994 DEC-31-1995 DEC-31-1994 23,496 13,810 0 0 58,220 46,831 0 0 119,010 109,677 247,999 220,845 1,978,065 1,905,410 978,225 940,871 1,320,470 1,649,442 180,766 191,553 359,501 1,122,070 0 0 50,084 250,000 337 166,365 141,516 (646,832) 1,320,470 1,649,442 995,857 770,112 995,857 770,112 735,044 613,157 735,044 613,157 0 6,672 0 0 49,655 71,565 142,849 19,094 (50,983) (13,138) 92,400 (35,132) 340,424 107,715 0 (9,108) 0 0 432,824 63,475 14.97 1.79 14.20 1.79
EX-99 14 Exhibit 99.1 Report of Ernst & Young LLP We have audited the balance sheets of IMC-Agrico Company (a Partnership) as of December 31, 1995, 1994 and 1993, and June 30, 1995 and 1994 and the related statements of earnings, changes in partners' capital and cash flows for the six-month periods ended December 31, 1995, 1994 and 1993, and the years ended June 30, 1995 and 1994 (not presented separately herein). These financial statements are the responsibility of IMC-Agrico Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. 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 provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of IMC-Agrico Company as of December 31, 1995, 1994 and 1993, and June 30, 1995 and 1994 and the results of its operations and its cash flows for the six-month periods ended December 31, 1995, 1994 and 1993 and the years ended June 30, 1995 and 1994 in accordance with generally accepted accounting principles. /s/ ERNST & YOUNG LLP --------------------- ERNST & YOUNG LLP Chicago, Illinois January 15, 1996 -----END PRIVACY-ENHANCED MESSAGE-----