10-K
1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
1994 FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994 Commission file number 1-164
----------------- -----
ASARCO Incorporated
--------------------
(Exact name of registrant as specified in its charter)
New Jersey 13-4924440
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
180 Maiden Lane, New York, N. Y. 10038
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 510-2000
--------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
-----------------------------------------------------------
Name of each exchange on
Title of each class which registered
------------------------------- ------------------------
Common Stock, without par value New York Stock Exchange
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 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]
As of February 28, 1995, there were of record 42,170,882 shares of Common Stock,
without par value, outstanding, and the aggregate market value of the shares of
Common Stock (based upon the closing price of Asarco Common Stock on the New
York Stock Exchange - Composite Transactions) of ASARCO Incorporated held by
nonaffiliates was approximately $1.1 billion.
PORTIONS OF THE FOLLOWING DOCUMENTS ARE INCORPORATED BY REFERENCE:
------------------------------------------------------------------
Part III: Proxy statement in connection with the Annual Meeting to be held
on April 26, 1995.
Part IV: Exhibit index is on pages D1 through D3.
A1
PART I
Item 1. Business
Asarco, a New Jersey corporation organized in 1899, is one of the world's
leading producers of nonferrous metals, principally copper, lead, zinc and
silver, from its own mines and through its 52.3% interest in Southern Peru
Copper Corporation (SPCC). Asarco also produces specialty chemicals and
construction aggregates and provides environmental services. Asarco has
substantial interests in two mining companies: a 15.4% interest in M.I.M.
Holdings Limited (MIM) in Australia; and a 23.6% interest in Grupo Mexico, S.A.
de C.V. (Grupo Mexico).
Asarco or its associated companies operate mines in the United States, Peru,
Australia and Mexico. Asarco and its associated companies together in 1994
accounted for about 13% of western world mine production of copper, 12% of
silver, 19% of lead and 9% of zinc.
All tonnages are in short tons. All ounces are troy ounces. Dollar amounts are
in U.S. dollars unless otherwise indicated. A$=Australian dollars. "Asarco" or
"the Company" includes Asarco and subsidiaries.
Reference is made to the following Financial Statement footnotes included in
this report: Investments on pages A42 through A45, and Business Segments on
pages A51 through A52.
Additional business information follows:
PRIMARY METALS
Principal Products and Markets
Copper Operations
The primary domestic uses of copper are in the building and construction
industry, electrical and electronic products and, to a lesser extent, industrial
machinery and equipment, consumer products and the automotive and transportation
industries. A substantial portion of Asarco's copper sales are made under annual
contracts to industrial users.
Asarco's copper operations consist of its Mission and Ray mines, smelters in
Hayden, Arizona and El Paso, Texas and a refinery in Amarillo, Texas. The
Company also owns a 49.9% interest in Montana Resources, which supplies copper
concentrates to the Company's smelters, and the Silver Bell mine in Arizona
where a solvent extraction/electrowinning (SX/EW) project is being considered
for development.
The principal focus of copper operations management in 1994 was to increase
production and to reduce costs. Operating goals have been defined for each
operation and each employee which will permit the Company to meet its long-term
production and cost objectives. Daily cost and production information measure
actual operating results against goals. In 1994, specific attention was directed
to reducing copper production costs at the Ray mine and the El Paso smelter.
At Ray, Asarco's largest mine, a 15-month development program was begun in July
1994, to restore operating flexibility and production capacity lost as a
consequence of water accumulated in 1992 and early in 1993 from unusually heavy
rains. The rain events affected operations at the Ray mine throughout much of
1993. Despite the limitations placed on mine planning by the stored water, full
production was restored at Ray by late 1993. In early 1994, however, problems
developed in the area being mined, including unexpectedly low ore grades, wet,
sticky ore which created handling problems and unusual ore types which
suppressed recoveries and reduced concentrate grades. The stored water limited
the availability of ore to blend with the difficult ores. To deal with these
issues, on July 1, the Company curtailed production at the older, higher-cost
sections of the Hayden mill and acquired additional mining equipment to
accelerate waste removal at the Ray mine to restore mining flexibility. The
program included acquiring seven new 240-ton trucks, a new shovel and a new
drill.
A2
Production increases resulting from the Ray development program were realized
during the last half of 1994. Company mine production of copper had declined to
67,000 tons per quarter in the first half of the year due to the problem at Ray.
During the 15-month development program, copper mine production is planned at
72,000 tons per quarter. In the third and fourth quarters, production averaged
74,000 tons, which totaled 4,000 tons better than planned. Beginning in the
fourth quarter of 1995, mine production of copper will increase to 78,000 tons
per quarter at which time the Hayden mill will be returned to full production.
Refined production, which includes copper-bearing materials purchased from
outside the Company for refining, will remain unchanged at approximately 500,000
tons per year.
At the El Paso smelter, the Company replaced the original CONTOP reactors with
simpler ones designed by Asarco. The continuous top-feed oxygen process
technology (CONTOP) was installed in 1993 to increase production and to reduce
sulfur emissions. Startup difficulties with the original design were resolved
with the installation in May of new stainless steel reactors. The plant is now
operating at design availability and production rates.
At the Amarillo refinery, operation of the new electrolyte purification facility
installed in late 1993 improved the quality of refined copper production. The
refinery received ISO-9002 quality certification in August 1994, the first
copper refinery to be so certified in the United States.
In late 1994, the market price of molybdenum rose sharply. The molybdenum price,
which had averaged $3.50 per pound during the first three quarters of the year,
averaged $8.31 in the fourth quarter and was $15.50 per pound at year-end.
Montana Resources produced 7.6 million pounds of molybdenum in 1994 and the
Company plans to restart the molybdenum plant at the Mission mine by March 1995.
This facility has the capacity to produce 130,000 pounds of molybdenum per
month. It has been on standby since 1982.
Full production at the El Paso copper smelter during the fourth quarter of 1994
marked completion of the Company's copper mine/smelter production integration
program begun in 1985. Following completion of the expansions of the Mission and
Ray mines in 1993, the Company became self-sufficient in the production of
concentrates required by its smelters. In 1985, it produced only 25% of the
concentrate feed for its smelters. Since 1985, the Company has spent over $1
billion in acquiring operating properties and undeveloped reserves and in
modernizing and expanding its copper business. As a result, copper mine
production has increased four-fold to 314,800 tons in 1994 and ore reserves have
increased eight times to over two billion tons at the end of 1994.
With the completion of the integration program, Asarco now earns the full margin
between the cost of copper produced at its mines and the market price. Thus, as
the market price for copper increased steadily during the year, from an average
of 87 cents per pound in the first quarter to $1.30 per pound in the fourth
quarter, the added mine production and reduced costs added significantly to the
Company's earnings.
In 1994, the Company began development of a new five million ton high-grade ore
body at the Mission mine using underground mining methods. The ore lies outside
and below the ultimate open-pit limits of the Mission mine. Declines are being
driven from the base of the Mission pit to reach the ore. Production of an
additional 12,500 tons per year of copper is planned to begin in mid-1996.
The Company also has two new copper projects in the early stages of development.
Permits were received in 1994 for construction of an 18,000 tons of copper per
year SX/EW plant at the Company's Silver Bell mine in Arizona. Once the decision
to proceed is made, construction is expected to take 18 months.
A3
Permits also were received for construction of an experimental SX/EW plant at
the Santa Cruz In-Situ Copper Mining Research Project in Arizona. This
experimental project is a co-operative program between the Santa Cruz joint
venture, in which the Company has a 50% interest, and the United States Bureau
of Mines. The project, which is managed by Asarco, seeks to leach copper in
place from this ore body and to recover copper from the leach solutions at the
surface. This technology has the potential of extracting copper from the deep
ore with very little impact on the environment. Production from the experimental
plant, if successful, could begin in 1996.
Southern Peru Copper Corporation
Asarco holds a 52.3% interest in Southern Peru Copper Corporation (SPCC), Peru's
largest copper producer. SPCC contributed $44.9 million in 1994 to the Company's
net earnings. Asarco received $11.2 million in dividends from SPCC in 1994 and
$9.4 million in 1993.
SPCC operates two open-pit copper mines, Toquepala and Cuajone, and a copper
smelter and refinery at Ilo in the southern part of Peru. Copper production in
1994 from the two mines was 267,800 tons and the smelter produced a record
322,100 tons of blister copper. In May 1994, SPCC acquired the Ilo refinery,
making SPCC a fully integrated producer. SPCC refined 123,000 tons of copper at
its refinery during the seven-month period following its acquisition. The
refinery was acquired as part of the Peruvian government's privatization program
for $65 million and a commitment to make $20 million of capital improvements. In
1994, SPCC also produced 6.1 million pounds of molybdenum and 3.5 million ounces
of silver.
With the improved economic conditions in Peru since 1990, SPCC has increased its
copper production and lowered its costs. SPCC is midway through a $445-million
modernization and expansion program, begun in 1992, which is expected to be
substantially completed by the end of 1995. The program will increase copper
production 15% and further reduce production costs. The expansion and
modernization program includes the addition of 40,000 tons of low-cost SX/EW
production, the construction of a sulfuric acid plant and other facilities to
improve environmental protection, and the acquisition of new equipment and
technology to improve existing operations. The SX/EW production and the acid
plant will start up in late 1995. With its low-cost production and large ore
reserve position, SPCC is an important operating investment for Asarco.
Ore reserves at December 31, 1994, totaled 588 million tons at an average grade
of .79% copper. SPCC has a drilling program to identify additional ore reserves
at Toquepala and Cuajone which will be completed in early 1996. To date,
approximately 1.3 billion tons of additional mineralized material have been
identified with an average grade of .7% copper.
SPCC reported net earnings of $91.2 million in 1994 compared with $194.2 million
in 1993. Excluding the effect of the accounting change in 1993 of $165 million,
SPCC's net earnings in 1994 increased by $62.0 million over 1993 due to improved
metal prices, lower costs and lower income tax rates. Sales of products and
services in the full year of 1994 for SPCC were $701.7 million compared with
$547.5 million in 1993. SPCC has secured $255 million of financing for its
capital expenditure program of which $118 million had been drawn down at
year-end. At December 31, 1994, SPCC also had $197 million in cash.
In November 1994, SPCC filed a registration statement with the Securities and
Exchange Commission for a public offering of its stock by three of its founding
stockholders. Neither SPCC nor Asarco were to have participated in the offering.
In early 1995, a decision was made to defer the offering due to prevailing
market conditions.
A4
Lead, Zinc, Silver and Gold Operations
Asarco's strategy in the lead and zinc businesses has been to lower costs,
increase production and improve productivity. Each unit made progress toward
meeting its goals in 1994.
Lead
The primary domestic uses of lead are for automotive and industrial batteries
and, to a lesser extent, for lead oxide for glass, solder and other industrial
uses. A substantial portion of Asarco's lead sales are made under annual
contracts to industrial users.
In Missouri, the Company operates an integrated lead circuit consisting of the
West Fork and Sweetwater mines which provide over 90% of the feed for the nearby
Glover smelter and refinery. In the west, the Company operates a custom lead
business, processing concentrates produced by others at the East Helena smelter
and the Omaha refinery. This circuit is largely dependent on lead concentrates
purchased from mines located in the United States and South America. A small
portion of its feed comes from the Company's mines in Leadville, Colorado and
Quiruvilca, Peru.
In 1994, lead was produced by the Missouri operations at the lowest cost in the
history of the operations. The West Fork and Sweetwater mines produced 119,400
tons of lead contained in concentrates in 1994. Refined lead production set a
record of 132,700 tons as the Glover refinery implemented new operating and
maintenance programs which allowed it to produce in excess of design capacity.
The Company's custom lead business relies on complex concentrates containing
lead, zinc, silver, gold, bismuth and other metals largely acquired from outside
sources. In 1994, transportation delays affected the supply of complex
concentrates from South America and a temporary shutdown by the principal U.S.
supplier cut off shipments for four months. Inventories were depleted and
consistent production levels were difficult to maintain. As a result, production
at East Helena was reduced and lead bullion was purchased to maintain production
levels at Omaha. Cost-reduction efforts during the year offset some of the lost
revenues. Programs have been implemented to improve delivery schedules from
South America in 1995 and the U.S. supplier has resumed full production.
Zinc
Zinc is primarily used in the United States to make galvanized metal products,
zinc-based alloys, brass products, zinc oxide, rolled zinc and for other
industrial uses. The Company's zinc production is sold in the form of
concentrates under contracts of one to three years' duration.
The Tennessee mines division accounted for 57% of the zinc concentrates produced
by the Company. The remaining 43% is produced as a co-product at the Company's
West Fork and Sweetwater lead mines in Missouri and at the Leadville and
Quiruvilca mines.
Ore grade at the Tennessee mines is low by world standards. Therefore,
satisfactory results can be obtained only by maintaining high-volume production
and low costs at the mines. In 1994, tons mined and milled increased over 1993
by 21% due to improved equipment availability, and expanded working areas in the
mines. In 1995, programs to increase the number of available working areas and
to improve equipment availability will be continued in order to increase the
amount of zinc metal mined and to lower unit costs further.
Silver
The principal uses for silver in the United States are for photographic,
electrical and electronic products and, to a lesser extent, brazing alloys and
solder, jewelry, coinage, silverware and catalysts. Silver is sold under monthly
contracts or in spot sales principally to industrial users.
A5
Asarco has a substantial amount of silver mine production capacity which has
been on standby due to the low silver price. The Coeur and Galena mines in Idaho
and the Troy copper-silver mine in Montana are not operating. The Company
currently produces 7.2 million ounces of silver as a by-product of its other
mining operations.
In January 1995, the Company completed the restructuring of its leased interests
in the Coeur and Galena silver mines with Coeur d'Alene Mines Company which
owned both mines.
Each company now has a 50% ownership in a newly formed company, Silver Valley
Resources. Asarco will continue to manage the properties. The new company has
the capacity to produce five million ounces of silver a year. Silver Valley
Resources is currently evaluating a development program to expand reserves at
the properties. Production could restart when the silver price approaches $7 per
ounce. At year-end 1994, the price of silver was $4.87 per ounce.
Gold
Early in 1994, Asarco completed the sale of its remaining 45.3% interest in
Asarco Australia Limited, a gold-mining and exploration company. From an
original investment of $4 million between 1982 and 1986, the Company received a
cash return of $106.7 million.
In late 1994, Asarco and a joint venture partner acquired the right to develop a
gold deposit on the Kamchatka peninsula in the far east of Russia. The deposit
contains proven ore reserves of 1.1 million tons, grading an ounce of gold per
ton. The Company has obtained a license and is in the process of finalizing
other agreements and securing financing for the venture. Asarco holds a 25%
interest in the joint venture and is the manager and operator of the project.
Aggregates and Specialty Chemicals
Asarco's specialty chemicals and construction aggregates businesses are
profitable and provide a growing source of diversified earnings. Earnings
improved significantly in 1994 and together, the aggregates and specialty
chemicals businesses contributed $22.0 million in earnings.
Aggregates
American Limestone Company, Inc. is a wholly-owned subsidiary which operates in
the southeastern part of the United States and produces construction aggregates,
ready-mixed concrete and agricultural limestone. The earnings of American
Limestone improved in 1994 due to increased construction activity and lower unit
costs.
Specialty Chemicals
Enthone-OMI, Inc., a wholly-owned subsidiary, has grown through acquisitions and
internal investment from a relatively small participant in the U.S. specialty
chemicals business with revenue of $38 million in 1987, into a worldwide firm
with $278 million of revenue in 1994. Enthone-OMI produces high-performance
coating chemicals and technologies for engineering, functional and decorative
applications. It supplies these products and services to the electronics and
metal finishing industries throughout the world. Its earnings improved sharply
in 1994 due to cost reductions made during the last three years and to improved
economic activity in the U.S. and Europe.
A6
Associated Company Investments
The Company's objectives have been to improve the liquidity of its investments
in associated companies and to enhance their visibility and value to Asarco
shareholders. During 1994, substantial progress was made in realizing these
goals.
MIM Holdings Limited
Asarco holds 15.4% of M.I.M. Holdings Limited (MIM) of Australia, a major
producer of copper, lead, zinc, silver, gold and coal. MIM held a 24.7% interest
in Asarco until November 1994, when it sold its entire interest in a broadly
distributed international stock offering. Following the sale, the two directors
representing MIM on the Asarco Board of Directors resigned.
MIM reported a net loss of A$195.1 million in its latest fiscal year compared
with prior year earnings of A$74.0 million. Results for the most recent year
included provisions for the writedown of the value of certain assets and losses
on the disposition of investments. MIM has substantially completed a divestiture
program to raise funds and allow it to focus on rationalizing its core operating
properties and to develop several promising new projects. These projects include
the McArthur River lead/zinc mine, the Ernest Henry copper/gold project and the
Cannington silver/lead/zinc mining project in Australia, and the Bajo de la
Alumbrera copper/gold prospect in Argentina.
Asarco received $9.3 million in dividends from MIM in 1994 and $8.3 million in
1993. In January 1995, Asarco exercised its right to appoint two directors to
the MIM Board of Directors. The Company plans to work with the MIM Board to
enhance the value of its investment.
Grupo Mexico, S.A. de C.V.
Grupo Mexico is the largest publicly held mining company in Mexico with 13 mines
and nine metallurgical plants in Mexico.
In August 1994, Asarco completed the restructuring of its 28.3% investment in
Mexico Desarrollo Industrial Minero, S.A. de C.V. (MEDIMSA) by exchanging its
interest for a 23.6% interest in publicly traded Grupo Mexico, S.A. de C.V.
(Grupo Mexico), the assets of which are substantially the same as MEDIMSA. The
transaction achieves the Company's objective of converting a privately held
investment into a publicly listed investment. Since the investment has not
generated a cash return since 1988, and the Company has a minority ownership
position, the Company may, depending on market conditions, sell a portion of its
investment in order to realize value.
As part of the restructuring, Asarco has agreed, for a period of two years, not
to sell the majority of its shares in the public market until Grupo Mexico
completes an international public offering. Asarco can participate in an
offering by Grupo Mexico and after August 1996 is free of restrictions.
Approximately one third of Asarco's shares, representing about 17% of the
estimated value of the investment in Grupo Mexico, are subject to a fixed-price,
seven-year option.
Environmental and Safety Activities
Environmental and Safety & Health Policy
Asarco recognizes and believes that all operations and activities of the Company
should be conducted responsibly and in a manner designed to protect the health
and safety of its employees, its customers, the public and the environment.
Asarco's operations interact with the environment daily, and consideration of
these concerns must be a way of life within the Company. Asarco is committed to
responsible management of our natural resources.
A7
Implementation
Day-to-day environmental protection and worker safety are an integral part of
Asarco's operations. Operating plans include provisions for environmental
protection and site reclamation. Asarco voluntarily participates in industry
conservation plans, such as EPA's Waste-Wise and 33/50 programs, and Asarco's
environmental engineers work with operating staffs at all Company locations to
ensure compliance with environmental regulations.
Safety is a continuing commitment at Asarco. In 1994, two Asarco mines, the
Sweetwater mine in Missouri and the New Market mine in Tennessee, won industry
awards for safety with the Sweetwater mine taking the top honors in the nation.
Resolution of Past Problems
In the third quarter of 1994, Asarco increased its reserve for environmental
costs by $45.5 million, reducing after-tax earnings by $30.7 million. This
charge brought the Company's total reserves to $122.4 million at year-end.
Management believes that this reserve is sufficient to remediate the most
important historical sites dealt with by the Company since enactment of the
Superfund law in 1980.
In 1994, the Company reached an agreement in principle at its former smelter in
Tacoma, Washington with the City of Tacoma, the Town of Ruston and the
Metropolitan Park District on a remediation and master redevelopment plan for
Asarco's former smelter site. This agreement is subject to final acceptance by
the U.S. Environmental Protection Agency. Early in 1995, the Company also
reached a settlement, subject to court approval, of a class action lawsuit on
behalf of residents in the vicinity of the old smelter site.
Environmental Research
Asarco also conducts extensive environmental research and testing. The Company
has constructed a new bioremediation pilot facility at its West Fork mine.
Metal-bearing mine waste water is introduced into a bioreactive containment
facility filled with natural organic materials. In-situ chemical reactions
within the system remove the metals and the water discharged from the reactor
meets all water discharge standards. Other environmental projects include
revegetation and slope stabilization programs at mine sites and in-situ
surface-soil lead stabilization programs at smelter sites.
Environmental Businesses
Asarco has two Environmental Services businesses: Encycle/Texas, Inc. of Corpus
Christi, Texas and Hydrometrics, Inc. of Helena, Montana. Encycle operates a
waste recycling facility which recovers and recycles nonferrous metals from
hazardous and nonhazardous inorganic solids and solutions. The recovered metals
are refined and returned to commerce. Hydrometrics provides a wide range of
professional environmental consulting services for industrial clients,
municipalities and public agencies. The construction division of Hydrometrics
provides complete remediation and cleanup services for contaminated industrial
sites. Both businesses, while small, are growing and profitable.
BACKLOG OF ORDERS
Substantially all of the Company's metal production is sold under annual
contracts. To the extent not sold under annual contracts, production can be sold
in terminal markets or on commodities exchanges. Sales values cannot be
determined until the sale is priced based on prevailing commodity prices at the
time the price is fixed under the terms of the contract. The backlog for other
product classes and services is not material.
A8
COMPETITIVE CONDITIONS
In the United States and abroad, Asarco and its foreign nonconsolidated
associated companies are subject to competition from other producers in all
major product lines. Asarco's metal products also compete with other materials,
including aluminum, stainless steel, plastics, glass and wood.
Competition in nonferrous metals is principally on a price and service basis,
with price being by far the most important consideration when supplies of the
commodities involved are ample. In construction aggregates, geographic location
of facilities in relation to the point of consumption, and price are by far the
most important competitive factors. In specialty chemicals, Asarco competes
against a substantial number of large and small companies both in the United
States and overseas.
EMPLOYEES
At December 31, 1994, Asarco employed about 8,000 persons, of whom about 4,500
were covered by contracts with various unions, most of which were affiliated
with the AFL-CIO.
ENERGY MATTERS
Asarco's energy requirements are met from a variety of sources, including fuel
oil, diesel fuel, gasoline, natural gas, coke and electric power. Asarco has a
large number of contracts of varying duration for its energy needs, typically
negotiated on an individual basis from time to time. Generally, substitute
sources are available except where requirements are guaranteed by local utility
companies.
No reductions or interruptions of any operations because of energy shortages
were experienced in 1994. The cost of fuel oil, diesel fuel, gasoline, and
electric power decreased; natural gas and coke increased.
ENVIRONMENTAL, SAFETY AND HEALTH MATTERS
Asarco's operations are subject to environmental regulation by various federal,
state, local, and foreign governments. Asarco's principal involvement in this
area concerns compliance by its existing and former operations with federal and
state air and water quality and solid and hazardous waste regulations. The
Company believes that its operations are currently in substantial compliance
with the applicable environmental laws and regulations.
As of December 31, 1994, there remained $7.0 million of previously appropriated
funds yet to be expended for ongoing environmental control projects at the
Company's operating units. The majority of these funds are scheduled to be
expended during 1995. Capital expenditures by Asarco at its operating U.S. mines
and plants in order to comply with environmental standards in the past three
years have been (in millions): 1994-$22.6; 1993-$21.3; 1992-$8.3. Estimated
environmental operating costs before taxes and depreciation, but including
interest on environmental improvement bonds and other debt incurred for
environmental control facilities, reduced pre-tax earnings by (in millions):
1994-$79; 1993-$96; 1992-$87.
Environmental matters, including a discussion on the Company's reserve for
closed plants and environmental costs, are set forth in the Contingencies and
Litigation Note to the Financial Statements on pages A45 and A46 of this report
and in Management's Discussion and Analysis of Operations and Financial
Condition on pages A29 through A34 and are incorporated herein by reference.
A9
In August 1994, at Tacoma, Washington, where the Company has been named a
potentially responsible party under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA" or "Superfund") for the
Commencement Bay and related areas, the Company reached an agreement in
principle with the City of Tacoma, the Town of Ruston and the Metropolitan Park
District on a remediation and master redevelopment plan for the former smelter
site (the "Agreement"). Shortly, thereafter, the Environmental Protection Agency
("EPA") issued its proposed plan for the site. The proposal contains a preferred
alternative involving treatment of plant soils and disposal on site. However,
the proposal also states that the remediation set forth in the Agreement --
placement of untreated soils in an on-site containment facility -- would also be
protective of human health and the environment. Public comment on which of the
two alternatives is preferred by the community was concluded on November 11,
1994. Public comment was largely in support of the Agreement. The EPA is
expected to issue a Record of Decision selecting an alternative in the near
future.
At Ruston, Washington, also part of the Commencement Bay Superfund site, in
November 1994 the Company signed a Consent Decree with the EPA in which the
Company agreed to sample and, where necessary, remediate the residential area
within one mile of the former smelter site. The Consent Decree has been lodged
with the United States District Court. In 1994, remediation of approximately 75
residences was completed at a cost of approximately $3 million.
Also with respect to the Commencement Bay Superfund site, by the end of 1994 the
Company had completed 95 percent of the former plant site stabilization and
demolition activities pursuant to a court approved Consent Decree. Additional
remediation by the Company for the Commencement Bay Superfund site will continue
for several years and certain issues at the site will not be addressed until
additional studies are completed.
With respect to the Tacoma log sort yard cases, in 1991 a federal court and jury
in Tacoma found Asarco responsible for the majority of remediation costs at six
log yards and a landfill at which slag from Asarco's Tacoma facility had been
deposited. Appeal to the United States Court of Appeals for the Ninth Circuit
resulted in the lower court rulings being affirmed in most respects. The United
States Supreme Court denied Asarco's petition for further review in January
1995. By January 1995, settlements between the Company and certain of the log
yards resolved a substantial portion of the total uncertainties arising from the
log sort yard cases. A substantial part of the settlement cost was recovered by
the Company from insurance.
In addition, during 1994 the Company was sued in United States District Court
for the Western District of Washington at Tacoma by five log sort yard owners
and operators for damages and contribution to the cost of remediation of, and
natural resources damages to, a waterway on which the log sort yards and the
landfill are located. The litigation alleges that the slag at the yards and
landfill leached metals into the waterway.
In March 1993, a lawsuit was filed in United States District Court in Tacoma,
Washington on behalf of classes of persons who own or rent residential property
within approximately two miles of the Company's former Tacoma plant. In May
1993, it was transferred to the United States District Court in Seattle,
Washington. The action asserted claims of trespass, nuisance, negligence, strict
liability, and unjust enrichment, as well as under CERCLA, for property damage
due to past emissions of metals from the plant. The action also sought the
establishment of a fund to pay for the medical monitoring of a class of persons
who now reside or who in the future will reside on property located within two
miles of the plant. In September 1993, the court certified the action to proceed
as a class action, and in January 1995 the Company reached an agreement with
class counsel to settle the case. Under the settlement, which is subject to
court approval, the Company will establish a Medical Monitoring Fund and a
Property Value Assurance Fund for the benefit of class members, through the year
2005, against any adverse health effects and diminution in property values
arising from past smelter operations. The stated settlement amount is $67.5
million. The Company will pay the class in cash $5 million and $2 million to the
two funds. The Company will in the future replenish cash held in the two funds
to the extent necessary. In addition, Asarco will pay class counsel's attorneys'
fees as approved by the court. The balance of the settlement, $5 million of
which is guaranteed to be paid by Asarco, will be payable from insurance
proceeds that Asarco is currently pursuing in connection with the class action,
with the class to receive 75 percent of Asarco's total recoveries from insurers.
A10
In November 1994, at the Bunker Hill Superfund site in Idaho, the Company and
two other mining companies entered into a Consent Decree with the EPA, which was
approved by the United States District Court. Pursuant to the Decree, the
companies will remediate approximately 1,350 residential yards over a period of
approximately seven years.
On March 15, 1994, a citizens' suit was filed in the federal district court in
Omaha, Nebraska claiming the Company was illegally discharging untreated water
from the Omaha plant without a National Pollution Discharge Elimination System
("NPDES") permit. The suit sought to enjoin further discharges from the Omaha
lead refinery, penalties of up to $25,000 per day for past and future
discharges, and costs and fees. On March 31, 1994, the EPA filed a suit against
the Company involving the same allegations. The cases have been consolidated in
Omaha. The Company is negotiating with the EPA and the United States Department
of Justice to resolve this matter.
In August 1994 at the Leadville Superfund site in Colorado, a Consent Decree
with the EPA and other potentially responsible parties was approved by the
United States District Court. The Consent Decree resolved many of the liability
issues at the site. Final remedy selection must await the issuance of the Record
of Decision which is expected in two years. Prior to 1994 the Company had
substantially completed a remediation program of the Yak drainage tunnel at a
cost of approximately $13.7 million. Remaining issues at Leadville will not be
addressed for several years when additional studies are completed.
In 1994 at the East Helena Superfund site in Montana, the Company completed the
remediation of approximately 120 residences at a cost of approximately $2.4
million. Approximately 325 additional residences are yet to be remediated at an
estimated cost of $7.0 million. Remediation is expected to be completed by
December 1997. In addition, other remediation activities at East Helena are
taking place at the plant site.
In 1994 at the Globe proposed Superfund site in Denver, Colorado the Company
completed the remediation of 58 properties, including residences, several parks,
and open spaces, at a cost of approximately $3 million pursuant to a Consent
Decree and a settlement of a lawsuit entered in 1993. Remediation has also been
commenced at the plant site itself. Remediation of additional properties and the
plant site will continue for the next several years.
In 1994 at the site of the Company's former Everett Smelter in Washington State,
the Company, as part of a voluntary remediation program, purchased approximately
20 residences and is negotiating to purchase two additional properties.
Additional remediation will be required over the next several years. Pending
litigation concerning the site has been stayed.
In 1994, the Company completed remediation of another former smelter site in
Kansas City, Kansas at a total cost of approximately $3 million.
The Company and certain of its subsidiaries are cooperating with environmental
authorities to undertake studies of certain other sites and remediate where
necessary.
In 1994, the Company received a notice of potential liability pursuant to CERCLA
from EPA regarding one site. Prior to 1994, the Company and certain subsidiaries
received notices of potential liability pursuant to CERCLA from the EPA or
federal agencies regarding 14 sites in eight states. Further, prior to 1994 the
Company received notices from state agencies regarding five other sites in four
states. Significant developments at certain of these sites during 1994 are
described above. Also, the Company has received notification of potential
liability or information requests from EPA and state agencies regarding various
other sites where the Company's liability is considered minor.
A11
Other environmental matters involving potential civil penalties are as follows.
1) In 1992, the United States Department of Justice on behalf of the EPA
notified the Company that it intends to sue seeking civil penalties for alleged
violation of the Company's water discharge permit at the Company's Ray Complex.
Under the Clean Water Act, civil penalties are sought for up to $25,000 per day
for each violation. The Company is negotiating with EPA and the Department of
Justice to resolve this matter.
2) In 1993, the Company's Glover Smelter and West Fork Mine were issued Notices
of Violation of their NPDES permits by the State of Missouri Department of
Natural Resources. The Company is negotiating with the state agency to resolve
both matters.
3) In January 1994, the Company received a notice from the EPA regarding alleged
violations of the Resource Conservation and Recovery Act ("RCRA") at its smelter
in El Paso, Texas. The proposed civil penalty in this matter is $140,400. The
citation relates to sand-blasting material left on site by a contractor prior to
May 1993. The Company is cooperating with the EPA to resolve this matter.
4) In July and August 1994, the EPA notified the Montana Department of Health
and Environmental Sciences and the Company that it considers the Company's East
Helena plant to be in violation of the federal Clean Water Act because of
unauthorized discharges into a nearby creek. The Company is in discussions with
the EPA and the State of Montana regarding this matter.
5) In 1992 and 1993, the Company's Glover, Missouri lead smelter and refinery
received several Notices of Violation for monitored levels of lead in excess of
the ambient air standard. The Company is investigating the cause of these excess
levels and has been working with the Missouri Department of Natural Resources to
develop a new State Implementation Plan ("SIP") for lead. Additionally, the
Missouri Department of Natural Resources ordered the Company to conduct stack
testing at the plant to determine whether the plant is in compliance with
applicable emission regulations. In January 1995, the Company's control strategy
for attainment of the SIP was submitted to the EPA and the state.
6) In March 1994, the Company was notified by the United States Department of
Justice that the Department of Justice is seeking a civil penalty of $389,000 in
connection with emissions from the ore storage building baghouse at the East
Helena plant. The Company has settled the matter and agreed to pay a penalty of
$200,000.
State implementation plans designed to achieve compliance by January 6, 1997,
with the EPA ambient air quality standard for lead of 1.5 micrograms per cubic
meter of air are in the process of being finalized in each state in which Asarco
has a lead smelter or refinery. These plans will require the construction of
additional controls at Asarco's East Helena, Omaha and Glover facilities. The
Omaha Plant has been issued a complaint and compliance order by the Nebraska
Department of Environmental Quality for exceeding the lead standard. A hearing
has been held, and pending a final decision in the matter, the Company and the
state are attempting to reach a settlement.
The Company is studying means of compliance with RCRA through process changes at
its facilities, where feasible, to manage the wastes not presently excluded from
regulation. Mine tailings, slag and slag tailings from primary copper
processing, calcium sulfate wastewater treatment plant sludge from primary
copper processing, and slag from primary lead processing at the Company's
operations are excluded from RCRA regulation. The Company is a party to a court
approved Consent Decree with the Missouri Department of Natural Resources, in
which the Company has agreed to implement certain process changes and conduct
various sampling and testing plans to remain in compliance with RCRA
requirements at its Glover smelter.
Asarco is subject to federal and state legislation and regulations pertaining to
plant and mine safety and health conditions, including the Occupational Safety
and Health Act of 1970 and the federal Mine Safety and Health Act of 1977.
Asarco has made, and is likely to continue to make, expenditures to comply with
such legislation and regulations.
A12
Item 2. Properties
ASARCO Worldwide Operations
METALS
COPPER
MINES(1)
Mission; Sahuarita, Arizona
Ray; Hayden, Arizona
Silver Bell; Silver Bell, Arizona
Montana Resources; Butte, Montana
PLANTS
Amarillo, Texas (Refinery)
(Also Selenium, Tellurium)
El Paso, Texas (Smelter)
(Also Sulfuric Acid)
Hayden, Arizona (Smelter)
(Also Sulfuric Acid)
Ray; Hayden, Arizona (Smelter (2))
(Electrowinning Plant)
LEAD
MINES (1)
Leadville; Leadville, Colorado
Sweetwater; Reynolds County,
Missouri
West Fork; Reynolds County,
Missouri
PLANTS
East Helena, Montana
(Smelter) (Also Sulfuric Acid)
Glover, Missouri (Smelter, Refinery)
Omaha, Nebraska (Refinery)
(Also Bismuth)
ZINC
MINES (1)
Coy; Jefferson County,
Tennessee
Immel; Knox County,
Tennessee
New Market; Jefferson
County, Tennessee
Young; Jefferson County,
Tennessee
SILVER
MINES (1)
Coeur(2); Wallace, Idaho
Galena(2); Wallace, Idaho
Troy(2); Troy, Montana
Quiruvilca (Corporacion
Minera Nor Peru, S.A.), Peru
(Also Copper, Lead and
Zinc)
A13
GOLD
MINES (1)
Aquarius(2); Timmins,
Ontario, Canada
Aginskoe (3); Kamchatka, Russia
(25% Asarco interest) (4)
PRECIOUS METALS PLANTS
Silver and Gold
Amarillo, Texas (Refinery)
Palladium and Platinum (Crude)
Amarillo, Texas
SPECIALTY CHEMICALS
Enthone-OMI, Inc.
North America
Long Beach, California
Bridgeview, Illinois
West Haven, Connecticut
Orange, Connecticut
Warren, Michigan
Toronto, Canada
Mexico City, Mexico
Europe
Barcelona, Spain
s-Hertogenbosch, Netherlands
Woking, United Kingdom
Milan, Italy
Marne-La-Vallee, France
Brunn Am Gebirge, Austria
Erkrath, Germany
Norrkoping, Sweden
Geneva, Switzerland
Pacific Rim
Melbourne, Australia
Kowloon, Hong Kong
Singapore
Shen Zhen, People's Republic
of China (4)
Yokohama, Japan
Taipei, Taiwan
AGGREGATES
American Limestone Company, Inc.
Construction Aggregates
Concrete, Agricultural Limestone
Knoxville, Tennessee
Tri-Cities, Tennessee
Nashville, Tennessee
Abingdon, Virginia
OTHER
ENVIRONMENTAL SERVICES Encycle/Texas, Inc.
Corpus Christi, Texas
Hydrometrics, Inc.
Helena, Montana
Antimony Oxide
Omaha, Nebraska
A14
High Purity Metals
Denver, Colorado
Lead Fabrication
Lone Star Lead Construction Corp.
Houston, Texas
ASSOCIATED COMPANIES
Southern Peru Copper Corporation (52.3%)
Cuajone (Copper, Silver,
Molybdenum)
Toquepala (Copper, Silver,
Molybdenum)
Ilo (Copper Smelter and Refinery)
M.I.M. Holdings Limited (15.4%)
Argentina
Bajo de la Alumbrera (3) (Copper, Gold) (50% MIM interest)
Australia
Mount Isa (Copper, Silver, Lead, Zinc)
Townsville (Copper Refinery)
Oaky Creek (Coal)
Ravenswood, Tick Hill (Gold)
McArthur River (3) (Zinc, Lead, Silver)
Ernest Henry (3) (Gold, Copper) (51% MIM interest)
England
Northfleet
(Lead and Silver Refiners, Secondary
Lead Plant)
Bloxwich (Zinc)
Avonmouth (Zinc and Lead Smelter)
Hamburg, Germany
(Copper Smelter, Copper, Lead and
Gold Refineries) (35% MIM interest)
Duisburg, Germany
(Zinc-Lead Smelting/Refining)
Brixlegg, Austria
(Copper Refinery, Recycling)
(40.4% MIM interest)
Papua New Guinea
Highlands Gold Limited
(65% MIM interest)
25% Porgera mine (Gold)
Investments in resources companies:
Metallgesellschaft Limited (9.1%)
Grupo Mexico, S.A. de C.V. (23.6%)
Thirteen mines and nine metallurgical
plants throughout Mexico,
including: La Caridad and Cananea
(Copper, Lead, Zinc, Silver, Gold,
Coal, Coke, Fluorspar, Sulfuric Acid)
(1) Interest in mines is shown in Mineral Reserves tables starting on page A17
(2) On standby (3) Planned (4) Joint venture interests
(Percent ownership of companies shown in parentheses)
A15
Coeur, Galena and Leadville
During 1994, these mines were operated by Asarco under lease and joint venture
agreements. In Leadville (60.0%), Asarco has an interest in operating expenses
and profits or losses in proportion to the related ownership interest. In Coeur
(50%), Asarco had an interest in operating expenses and profits or losses in
proportion to the related ownership interest. In Galena, Asarco received 75% of
profits remaining after royalty payments to the lessor of 50% of operating
profits before depletion, depreciation and Idaho tax. The Coeur mine was
temporarily shut down commencing in April 1991 and the Galena mine was
temporarily shut down commencing in July 1992 in order to conserve ore reserves
during a period of depressed silver prices.
In January 1995, Asarco completed the restructuring of its leased interests in
Coeur and Galena with Coeur d'Alene Mines Corporation which owned both mines.
Each company now has a 50% ownership in a newly formed Company, Silver Valley
Resources Corporation.
Troy
Troy is operated by Asarco under a lease agreement. Asarco retains 75% of net
proceeds after operating expenses but before depletion, depreciation and income
taxes. The Troy mine was temporarily shut down commencing in April 1993 due to
depressed silver prices.
Quiruvilca
The Quiruvilca mine is operated under a Peruvian government concession held by
Corporacion Minera Nor Peru, S.A., an 80% owned subsidiary of a wholly owned
Asarco subsidiary.
Mission
A portion of the mine is held under long-term leases in which the lessors have
retained a royalty interest.
Silver Bell
Only copper precipitates are currently produced.
West Fork
A portion of the mine is held under a long-term lease in which the lessor has
retained a royalty interest.
Associated Companies
Southern Peru Copper Corporation, a 52.3% owned associated company, operates the
Cuajone and Toquepala mines under Peruvian government concessions.
Grupo Mexico, S.A. de C.V., a 23.6% owned associated company, operates thirteen
mines under concessions granted by the Mexican government.
A16
The following production information is provided:
1994 1993 1992
---- ---- ----
Avg Mill Avg Mill Avg Mill
Ore Milled Recovery Ore Milled Recovery Rate Ore Milled Recovery Rate
ASARCO (000s Tons) Rate (%) (000s Tons) (%) (000s Tons) (%)
----------- -------- ----------- -------- ----------- -----
Domestic
Mission 15,722 81.4 13,973 83.8 14,322 84.2
Mission South 7,574 80.6 7,556 79.3 5,537 81.7
Hayden
Concentrator 7,533 80.9 9,807 80.3 10,714 83.0
Ray Concentrator 12,143 82.3 11,594 84.6 8,512 85.4
Montana Resources 15,202 78.6 16,829 84.1 17,751 88.6
Leadville 223 89.7 219 91.2 226 91.8
Sweetwater 1,255 98.3 1,148 98.5 1,195 97.4
West Fork 1,009 97.8 1,018 98.0 1,034 98.1
Tennessee 3,193 92.9 2,850 92.1 3,061 93.3
Troy - - 668 85.7 2,735 84.7
Galena - - - - 92 95.7
Foreign
Quiruvilca 513 84.5 440 84.0 374 81.9
Wiluna (a) - - 1,033 83.0 1,453 86.6
SPCC
Toquepala 15,737 88.8 15,835 87.6 15,338 87.4
Cuajone 21,688 86.0 21,405 85.1 21,596 85.1
Productive Capacity
Defined Defined
Smelters Capacity (b) Refineries Capacity (b)
Anode Copper (tons) Copper (tons)
El Paso 115,000 Amarillo 483,000
Hayden 175,000 Ray SX-EW 40,000
------- -------
Total 290,000 Total 523,000
Lead Bullion (tons) Lead (tons)
East Helena 75,000 Omaha 132,000
Glover 130,000 Glover 130,000
------- -------
Total 205,000 Total Lead 262,000
Silver (000s ounces)
Amarillo 60,000
Gold (ounces)
Amarillo 600,000
(a) Wiluna is owned by Asarco Australia, Limited. The Company sold its
remaining interest in Asarco Australia Limited in January, 1994.
(b) Asarco's estimate of actual capacity under normal operating conditions
with allowance for normal downtime for repairs and maintenance and
based on the average metal content of input material for the three
years shown. No adjustment is made for shutdowns or production
curtailments due to strikes or air quality emissions restraints.
A17
METAL PRODUCTION STATISTICS
COPPER Average
Associated Mineral Mineral Metal Production &
Asarco Company's Reserves Content Sales Contained Metal
Interest Interest (000s tons) (%) (000s tons)
-----------
(%) (%) 12/31/94 12/31/94 1994 1993 1992
--- --- -------- -------- ---- ---- ----
MINES
Domestic
Mission 100 519,639 .67 114.7 117.9 103.2
Ray 100 1,075,087 .63 139.3 159.3 165.2
Montana Resources 49.9 532,000 .34 56.1 47.2 52.4
Silver Bell 100 101,344 .47 3.6 3.6 3.3
Troy 75 11,328 .65 - 3.6 13.1
Others Various 2,062 Various - - 0.5
----- ----- -----
Total Domestic 313.7 331.6 337.7
Foreign
Quiruvilca-Peru 80 2,383 .42 1.1 1.0 0.8
----- ----- -----
Total 314.8 332.6 338.5
----- ----- -----
Asarco Beneficial
Production 286.6 307.8 308.4
SMELTERS
El Paso 100 98.0 91.9 107.9
Hayden 100 200.1 194.2 208.4
----- ----- -----
Total 298.1 286.1 316.3
----- ----- -----
REFINERIES
Amarillo 100 460.6 460.0 467.2
Ray (a) 100 32.0 36.6 42.2
----- ----- -----
Total 492.6 496.6 509.4
----- ----- -----
SALES OF REFINED COPPER
Tons of Refined Copper
Sold 539.4 528.1 502.6
Toll Metal Deliveries 45.1 45.3 43.6
Realized Price
($/lb.)(b) $1.06 $0.86 $1.03
Refined Copper Sold
($ in millions) 1,164 917 1,045
ASSOCIATED COMPANIES
MIM 15.4
Mount Isa 100 76,059 3.48 204.9 173.9 158.6
Bajo de la Alumbrera 50 620,601 .51 - - -
SPCC 52.3
Toquepala 100 213,618 .78 111.8 115.0 113.2
Leachable Reserves 555,354 .20 - - -
Cuajone 100 374,076 .80 156.0 150.4 157.9
Leachable Reserves 15,109 1.01 - - -
From Concentrates
Purchased 53.7 47.7 35.5
GRUPO MEXICO 23.6 (c) (c) (c)
Base Metal Mines 100 66,306 .66 22.9 22.9 19.5
Mexicana de Cobre 96.0 608,000 .53 173.1 173.1 166.7
Leachable Reserves 161,000 .25 - - -
Mexicana de Cananea 76.1 1,336,000 .62 84.7 84.7 73.0
Leachable Reserves 648,000 .25 - - -
Asarco's & associated companies'
share of western world mine
production 13% 13% 13%
(a) SX/EW production also included above under mine production.
(b) Represents Asarco's realized prices per pound of mine production sold.
(c) Reflects 1993 production and mineral reserve data, 1994 data not available.
A18
METAL PRODUCTION STATISTICS
(continued)
LEAD
Average
Associated Mineral Mineral Metal Production &
Asarco Company's Reserves Content Sales Contained Metal
Interest Interest (000s tons) (%) (000s tons)
-----------
(%) (%) 12/31/94 12/31/94 1994 1993 1992
--- --- -------- -------- ---- ---- ----
MINES
Domestic
Leadville 60 985 3.07 4.8 5.4 6.1
Sweetwater 100 12,251 4.78 67.1 69.9 50.9
West Fork 100 5,636 5.56 52.3 53.6 56.2
----- ----- -----
Total Domestic 124.2 128.9 113.2
Foreign
Quiruvilca-Peru 80 2,383 1.55 6.9 6.1 4.1
----- ----- -----
Total 131.1 135.0 117.3
----- ----- -----
Asarco Beneficial
Production 127.8 131.1 113.6
SMELTERS
East Helena 100 61.7 69.7 71.6
Glover 100 132.7 124.1 130.1
----- ----- -----
Total 194.4 193.8 201.7
----- ----- -----
REFINERIES
Glover 100 132.7 124.2 130.1
Omaha 100 73.1 73.5 75.0
----- ----- -----
Total 205.8 197.7 205.1
----- ----- -----
SALES OF REFINED LEAD
Tons of Refined
Lead Sold 198.5 211.5 201.6
Toll Metal Deliveries - - 0.7
Asarco Realized
Price ($/lb.) $0.28 $0.20 $0.26
Refined Lead Sold
($ in millions) $112 $87 $106
ASSOCIATED COMPANIES
MIM 15.4
Mount Isa/Hilton 100 50,706 5.40 209.2 242.6 215.5
McArthur River 70 28,660 6.26 - - -
GRUPO MEXICO 23.6
Base Metal Mines 100 66,306(a) 45.2(a) 45.2 39.4
Asarco's & associated
companies' share of western
world mine production
19% 22% 14%
(a) Reflects 1993 production and mineral reserve data, 1994 data not available.
A19
METAL PRODUCTION STATISTICS
(continued)
ZINC
Average
Associated Mineral Mineral Metal Production &
Asarco Company's Reserves Content Sales Contained Metal
Interest Interest (000s tons) (%) (000s tons)
-----------
(%) (%) 12/31/94 12/31/94 1994 1993 1992
--- --- -------- -------- ---- ---- ----
MINES
Domestic
Leadville 60 985 8.44 15.4 15.3 16.3
Sweetwater 100 12,251 .43 8.9 4.6 1.7
Tennessee 100 5,029 3.27 74.6 61.8 74.9
West Fork 100 5,636 1.39 11.8 12.9 13.6
----- ----- -----
Total Domestic 110.7 94.6 106.5
Foreign
Quiruvilca-Peru 80 2,383 4.25 20.6 18.6 13.6
----- ----- -----
Total 131.3 113.2 120.1
----- ----- -----
Asarco Beneficial
Production 120.5 102.4 109.6
ZINC Sales Price
(LME-HG $/lb.) $0.45 $0.44 $0.56
ASSOCIATED COMPANIES
MIM 15.4
Mount Isa/Hilton 100 50,706 7.13 281.7 271.3 251.8
McArthur River 70 28,660 13.96 - - -
GRUPO MEXICO 23.6
Base Metal Mines 100 66,306 189.8(a) 189.8 174.9
Asarco's & associated
companies' share of western
world mine production
9% 10% 9%
-----------------------------------------------------------------------------------------------------------------------------------
(000's pounds)
MOLYBDENUM 1994 1993 1992
---- ---- ----
MINES
Domestic
Mission 100 519,639 .02 - - -
Montana Resources 49.9 532,000 .03 7,600 7,200 9,800
Asarco Beneficial Production
3,800 3,600 4,900
ASSOCIATED COMPANIES
SPCC 52.3
Toquepala 100 213,618 .06 3,000 2,600 3,600
Cuajone 100 374,076 .03 3,100 3,700 3,500
GRUPO MEXICO 23.6
Mexicana de Cobre 96.0 608,000(a) .03(a) 3,200(a) 3,200 2,800
Asarco's & associated
companies' share of western
world mine production 10% 13% 12%
(a) Reflects 1993 production and mineral reserve data, 1994 data not available.
A20
METAL PRODUCTION STATISTICS
(continued)
SILVER
Average
Associated Mineral Mineral Metal Production &
Asarco Company's Reserves Content Sales Contained Metal
Interest Interest (000s tons) (oz/ton) (000s troy ounces)
------------------
(%) (%) 12/31/94 12/31/94 1994 1993 1992
--- --- -------- -------- ---- ---- ----
MINES
Domestic
Coeur 50 360 17.32 - - -
Galena 37.5 951 15.07 - - 1,573
Leadville 60 985 2.06 381 338 339
Mission 100 519,639 .16 2,355 1,869 1,661
Montana Resources 49.9 532,000 .07 546 763 893
Ray 100 1,075,087 - 570 827 872
Sweetwater 100 12,251 .10 238 159 92
Troy 75 11,328 1.43 - 812 3,044
West Fork 100 5,636 .30 256 251 306
Silver Bell 100 101,344 .10 - - -
Others Various - Various - 5 6
----- ----- -----
Total Domestic 4,346 5,024 8,786
Foreign
Quiruvilca-Peru 80 2,383 5.66 2,807 2,468 1,814
----- ----- ------
Total 7,153 7,492 10,600
----- ----- ------
Asarco Beneficial Production
6,143 6,252 7,883
REFINERY
Amarillo 100 36,126 35,666 39,805
SALES OF REFINED SILVER
Ounces Sold 33,320 32,754 34,775
Toll Metal Deliveries 500 816 631
Realized Price ($/oz) $5.25 $4.22 $3.97
Refined Silver Sold
($ in millions) $175 $138 $138
ASSOCIATED COMPANIES
MIM 15.4
Mount Isa/Hilton 100 50,706 3.90 17,001 19,354 18,375
McArthur River 70 28,660 1.84 - - -
SPCC 52.3
Toquepala 100 213,618 1,401 1,400 1,191
Cuajone 100 374,076 1,579 1,413 1,484
From Concentrates Purchased 556 445 346
GRUPO MEXICO 23.6 (a) (a)
Base Metal Mines 100 66,306 11,131 11,131 10,564
Mexicana de Cobre 96.0 608,000 2,787 2,787 2,471
Mexicana de Cananea 76.1 1,336,000 388 388 276
Asarco's & associated companies'
share of western world mine
production
12% 13% 12%
(a) Reflects 1993 production and mineral reserve data, 1994 data not available.
A21
METAL PRODUCTION STATISTICS
(continued)
GOLD
Average
Associated Mineral Mineral Metal Production &
Asarco Company's Reserves Content Sales Contained Metal
Interest Interest (000s tons) (oz/ton) (000s troy ounces)
------------------
(%) (%) 12/31/94 12/31/94 1994 1993 1992
--- --- -------- -------- ---- ---- ----
MINES
Domestic
Leadville 60 985 .05 9.2 13.3 13.7
Other - 0.4 0.2
---- ----- -----
Total Domestic 9.2 13.7 13.9
Foreign
Quiruvilca-Peru 80 2,383 .01 1.1 0.8 0.5
Wiluna and Jundee-
Australia (a) 45.3 - 98.5 110.4
Aquarius-Canada 100 179 .18 - - -
---- ----- -----
Total Foreign 1.1 99.3 110.9
---- ----- -----
Total 10.3 113.0 124.8
---- ----- -----
Asarco Beneficial Production
6.2 39.9 74.0
REFINERY
Amarillo 100 265.2 226.9 225.4
SALES OF REFINED GOLD
Ounces Sold 141.1 162.3 191.2
Toll Metal Deliveries - - 0.4
Realized Price ($/oz) $385.22 $358.59 $360.53
Refined Gold Sold
($ in millions) $54 $58 $69
ASSOCIATED COMPANIES
MIM 15.4
Porgera 25 64,154 .15 1,170.5 1,269.3 1,461.7
Tick Hill 100 186 .23 149.9 191.1 109.1
Ravenswood 100 43.9 27.5 21.8
Nolan's 50.1 13,305 .04 - - -
Bajo de la Alumbrera 50 620,601 .02 - - -
GRUPO MEXICO 23.6 (b) (b)
Base Metal Mines 100 66,306 14.7 14.7 8.7
Mexicana de Cobre 96.0 608,000 9.6 9.6 7.8
Mexicana de Cananea 76.1 1,336,000 5.7 5.7 8.1
Asarco's & associated companies'
share of western world mine
production
2.4% 3.2% 3.1%
(a) Wiluna and Jundee are owned by Asarco Australia Limited. The Company sold
its remaining interest in Asarco Australia in January, 1994.
(b) Reflects 1993 production and mineral reserve data, 1994 data not
available.
A22
All mineral reserves represent 100% of the reserves for that mine and the
percentage ownership of Asarco and associated companies is separately indicated.
All mineral reserves are at December 31, 1994, except for M.I.M. Holdings
Limited which are as of June 30, 1994, and Grupo Mexico which are at December
31, 1993. Reserves are estimated quantities of proven and probable ore that
under present and anticipated conditions may be economically mined and processed
for the extraction of their mineral content. The data for MIM and Grupo Mexico
are as published by those companies and supplemental information to support the
reserves for those companies has not been reviewed by the U.S. Securities and
Exchange Commission. Controlled mineral deposits include those owned, directly
or indirectly through subsidiaries, partnerships or joint ventures, optioned,
leased, or held under government concession.
All production figures represent entire amounts of operations, including those
under lease, joint venture, government concessions or operated by subsidiaries
or associated companies. Metal production figures for associated companies are
from mines. Data for MIM are based on its June 30 fiscal year.
Other Operations
The principal activities included in the business segment entitled "Other" are
those of Capco Pipe Company, Inc. ("Capco"), a wholly-owned subsidiary that
manufacturers polyvinyl chloride pipe ("PVC"), the environmental services
operations of other subsidiaries and the zinc oxide production of a unit
operating in Hillsboro, Illinois. None of these operations constitute a
significant portion of the total operations of the Company. In 1993, Capco
permanently shut down its asbestos cement pipe business. In 1994, the Company
sold its PVC and zinc oxide operations.
Item 3. Legal Proceedings
Reference is made to the Contingencies and Litigation Note to the Consolidated
Financial Statements on pages A45 through A46 of this report.
The following is additional information with respect to the asbestos personal
injury litigation. While no one personal injury action is exactly like any
other, the following three pending lawsuits are typical of those in which
employees of other companies allege death or injury resulting from alleged
exposure to asbestos fiber supplied by Lac d'Amiante du Quebec, Ltee ("LAQ"), a
wholly-owned subsidiary, and other suppliers to their employers' manufacturing
operations:
1) In Pogorzelski, et al. v. Amtorg Trading Corporation, et al., Docket No.
L-12274-91, pending since October 31, 1991 in the Superior Court of New Jersey,
Middlesex County, 19 primary and 8 secondary plaintiffs sued LAQ and 25 other
defendants that allegedly supplied asbestos fiber or asbestos containing
products to Johns-Manville's Manville, New Jersey facility for substantial
compensatory and punitive damages for death or injuries allegedly resulting from
the primary plaintiffs' exposure to asbestos fiber while employed at that
facility. The claims of seven of the primary plaintiffs were dismissed as to LAQ
in June 1992. The plaintiffs allege a broad range of respiratory and other
injuries including disabling lung changes, asbestosis, cancer, and mesothelioma.
Liability is alleged on theories of strict liability, negligence, breach of
warranty, misrepresentation, ultra hazardous activity and conduct, conspiracy,
concert of action, market share or enterprise liability, and alternative
liability. The thrust of the complaint is that the defendants, individually or
collectively, failed to warn the primary plaintiffs of the possible hazards
associated with inhalation of asbestos fibers while working with or being
exposed to such fibers.
A23
2) In Campbell v. W.R. Grace and Company, et al., Docket No. CV-92-0295147S,
pending since May 14, 1992 in the Superior Court of Connecticut for the Judicial
District of Fairfield at Bridgeport, one primary and one secondary plaintiff
sued LAQ and 14 other defendants that allegedly supplied asbestos fiber or
asbestos containing products to various job sites in Connecticut including the
Raybestos-Manhattan facility in Stratford, Connecticut. Plaintiffs seek
substantial compensatory and punitive damages for pleural plaques allegedly
resulting from primary plaintiff's exposure to asbestos fiber while employed at
these job sites.
3) In Rettberg v. Armstrong World Industries, Inc., et al., Case No. May Term
1993, No. 1734, pending since May 11, 1993 in the Pennsylvania Court of Common
Pleas, Philadelphia County, one primary and one secondary plaintiff sued LAQ and
nine other defendants that allegedly supplied asbestos fiber or asbestos
containing products to Owens-Corning Fiberglas Corporation's Berlin, New Jersey
facility or various other job sites including Quaker Shipyard, R.T.C. Shipyard,
Universal-Dundle, New York Shipyard, and RCA. The plaintiffs demand substantial
compensatory and punitive damages for "bilateral pleural thickening" allegedly
resulting from primary plaintiff's exposure to asbestos fiber while employed at
these facilities.
In addition to these personal injury lawsuits arising out of alleged asbestos
exposure to employees of other companies using asbestos fiber in their
manufacturing operations, included in the asbestos product liability lawsuits
pending against LAQ and Asarco are numerous lawsuits arising from products (such
as insulation and brake linings) manufactured by others. These cases typically
allege a failure to warn of possible health hazards associated with those
products and proceed on theories similar to those asserted in the Pogorzelski
case. In many such cases LAQ and Asarco, having never manufactured such
products, have obtained dismissals. Typical of lawsuits in which plaintiffs
allege asbestos exposure due to products manufactured by others are:
1) Abbott, et al. v. Unidentified Defendants, Case Nos. 94-003151-NP-5 to
94-004526-NP-5, pending since October 25, 1994 in the Circuit Court of Michigan,
Saginaw County, where 1,375 primary and 957 secondary plaintiffs sued LAQ and
numerous other unidentified defendants that allegedly supplied asbestos and/or
products containing asbestos to the primary plaintiffs' employers in Michigan.
The plaintiffs demand substantial compensatory and punitive damages for injuries
allegedly resulting from their exposure to asbestos. The thrust of the complaint
is similar to the Pogorzelski case.
2) E. Adkins, et al. v. 20th Century Glove Corporation of Texas, et al., Case
No. 94-C-290, pending since August 25, 1994 in the Circuit Court of West
Virginia, Monongalia County, where 91 primary and 76 secondary plaintiffs sued
LAQ and 110 other defendants that allegedly supplied asbestos and/or products
containing asbestos to the primary plaintiffs' employers in West Virginia. The
plaintiffs demand substantial compensatory and punitive damages for injuries
allegedly resulting from their exposure to asbestos. The thrust of the complaint
is similar to the Pogorzelski case.
3) Abel, et al. v. Pittsburgh Corning Corporation, et al., Case No. 94-C-2550,
pending since November 10, 1994 in the 23rd Judicial District Court of Brazoria
County, Texas, where 3,984 primary and 3,088 secondary plaintiffs sued LAQ and
Asarco and 50 other defendants that allegedly supplied asbestos and/or products
containing asbestos to the primary plaintiffs' employers in Alabama, Texas, and
perhaps other states. The plaintiffs demand substantial compensatory and
punitive damages for injuries allegedly resulting from their exposure to
asbestos. The thrust of the complaint is similar to the Pogorzelski case.
The Bittinger v. Acme Safety Products, et al., Abrams v. Owens-Corning Fiberglas
Corp., et al., and Abernathy v. AC&S, Inc., et al., cases described in Item 3 of
Asarco's 1993 Form 10-K were settled by Asarco or LAQ. In addition, Capco
separately settled the Abernathy and three other Texas cases involving a total
of approximately 4,250 primary plaintiffs during July 1994. As of December 31,
1994, Capco remains a defendant in 23 cases with 23 primary plaintiffs.
A24
In 1991, the Judicial Panel on Multidistrict Litigation transferred all asbestos
cases pending in federal court to the United States District Court for the
Eastern District of Pennsylvania for coordinated and consolidated pretrial
proceedings. Cases containing approximately three percent of LAQ's primary
plaintiffs are affected by this action.
As of December 31, 1994, LAQ, Asarco, and Capco, have settled or been dismissed
from a total of approximately 4,845 asbestos personal injury lawsuits brought by
approximately 33,908 primary and approximately 21,354 secondary plaintiffs.
With respect to the actions relating to asbestos-containing products in
structures reported in the Contingencies and Litigation Note to the Consolidated
Financial Statements on pages A45 through A46, the following supplemental
information is provided.
The four actions currently pending against LAQ, including actual and purported
class actions, involve colleges and universities, private buildings under lease
to the federal government, and public buildings in cities. In general these
actions seek substantial compensatory and punitive damages.
As of December 31, 1994, LAQ has settled a total of four and been dismissed from
another 80 actions involving asbestos in structures. Asarco has been dismissed
from all twelve actions in which it had been named.
In 1987, LAQ began litigation against certain excess liability insurers for a
declaration of insurance coverage for its asbestos cases similar to the one that
had been obtained by LAQ against certain other insurers in a 1985 court ruling
that held that the comprehensive continuous theory of coverage applies to those
insurers' policies as regards LAQ's asbestos personal injury and property damage
litigation. Settlements have been reached with certain of these insurers and the
case remains pending in federal district court in the Southern District of New
York.
In June 1993, the Company was sued by two of its liability insurance carriers,
the Insurance Company of North America and California Union Insurance Company,
in state court in New Brunswick, New Jersey for a declaration that the insurance
companies have no insurance obligation for environmental matters for which the
Company is seeking coverage. The insurance companies also included Asarco's
other liability insurers in the lawsuit, and those insurers have sought similar
declaratory relief. Asarco has filed cross claims and counterclaims seeking a
court declaration that insurance coverage of its environmental matters does
exist. In November 1990, the Company filed a lawsuit against several of its
liability insurers in state court in King County, Washington seeking insurance
coverage for the Tacoma log sort yard cases. The Company has entered into
settlement agreements with several of the insurers in that case.
On February 15, 1994, Asarco and two of its subsidiaries were sued in an action
now pending in state court in Duval County, Texas by plaintiffs now numbering
approximately 320 seeking compensatory and punitive damages for personal
injuries, increased risk of disease and medical monitoring, as well as property
damage, allegedly resulting from exposure to materials, including metals,
shipped to a landfill near the plaintiffs' residences. The lawsuit includes
several other defendants, including the landfill operators.
A25
On June 17, 1994, the Company and one of its wholly-owned subsidiaries,
Encycle/Texas, Inc., were sued in state court in Nueces County, Texas in three
purported class actions on behalf of persons residing in neighborhoods around
the Company's Corpus Christi, Texas property. These actions seek compensatory
and punitive damages for diminution of property values, annoyance, loss of use
and enjoyment, loss of income from commercial uses, remediation costs, emotional
distress, and medical monitoring due to alleged contamination of plaintiffs'
properties by metals emitted from the Corpus Christi facility. On December 14,
1994 two additional suits alleging contamination of plaintiffs' properties by
metals emitted by the Corpus Christi facility were filed against the Company and
two of its wholly-owned subsidiaries, Encycle, Inc. and Encycle/Texas, Inc. and
several other defendants in state court in Duval County, Texas. In one suit, 20
plaintiffs who resided and/or owned property near the Corpus Christi facility
seek compensatory and punitive damages for diminution in property values,
personal injuries, mental anguish, lost wages, medical expenses and medical
monitoring. In the second suit, two plaintiffs who owned and operated a business
near the Corpus Christi facility seek compensatory and punitive damages for
diminution in property value and loss of profits.
On March 11, 1994, Asarco and a subsidiary were sued, together with over 200
other defendants, in state court in Cameron County, Texas by 63 plaintiffs
seeking compensatory and punitive damages for birth defects and other personal
injuries allegedly resulting from exposure to toxic contaminants, including
metals. Asarco and the subsidiary have reached an agreement in principle to
settle this action.
On October 8, 1991, ARCO Incorporated ("ARCO") filed suit in federal court in
Montana against Montana Resources and its partners, including Asarco and one of
its subsidiaries, alleging breach of contract resulting from defendants' failure
to reclaim contaminated water in an inactive mining pit (the Berkeley Pit) at
partnership-owned property in Butte, Montana. ARCO demanded compensation for
study costs under CERCLA with respect to such water, and a determination that
defendants are responsible for reclamation of the pit. The defendants assert
that ARCO is responsible for such CERCLA and reclamation costs.
Trial has been set for late 1995.
In April 1993, the State of Texas notified the Company that it and ten other
persons were potentially responsible parties with respect to the Col-Tex
Refinery State Superfund site in Mitchell County, Texas where the Company stored
diesel fuel in the mid-1970's. The Company has also been named as one of a
number of other defendants in twelve lawsuits filed on or behalf of 295 persons
who have lived or owned property near the Col-Tex Refinery site seeking
compensatory and punitive damages for alleged wrongful death, personal injury,
and property damage.
In September 1994, the Company received notice from the State of Texas that it
is a potentially responsible party for remediation of the site of a former
pesticide manufacturing plant in Hunt County, Texas. In addition, in September
1994 the Company was sued by 346 individuals who live near that site for
compensatory and punitive damages, including damages for alleged personal injury
and property damage due to alleged exposure to arsenic products that Asarco sold
to the manufacturer at the site.
In October 1992, the owner of a property leased by a subsidiary of the Company
filed suit in New Jersey state court in Essex County seeking declaratory
judgment and compensatory and punitive damages for alleged contamination of the
property during the lease term by the subsidiary and others. The pending
litigation concerns the extent to which the subsidiary and predecessor operators
of the business are responsible for contamination that existed on site prior to
1968. Trial is scheduled for mid-1995.
A26
In May 1989, a lawsuit was filed in state court in Butte, Montana by Montana
Mining Properties ("MMP") which claims to have had a contractual first right of
refusal on the 49.9 percent interest in the Montana copper mining business of
Montana Resources, Inc. that was sold to Asarco in June 1989. MMP sought an
injunction and compensatory and punitive damages from Asarco for alleged
tortious interference with its contract with Montana Resources, Inc. In June
1994, the court granted summary judgment in favor of defendants, including
Asarco. Plaintiff has taken an appeal from that ruling but has since indicated
that it is abandoning its appeal as to Asarco.
The opinion of management regarding the outcome of legal proceedings and
environmental contingencies, set forth in the Contingencies and Litigation Note
to the Consolidated Financial Statements on pages A45 through A46, is based on
considerations including experience relating to previous court judgments and
settlements and remediation costs and terms. The financial viability of other
potentially responsible parties has been considered when relevant and no credit
has been assumed for any potential insurance recoveries when availability of
insurance is not established. The Company considered such factors in
establishing its environmental reserve in December of 1990 and in determining
modifications to its reserve in 1991, 1992, 1993 and 1994.
See also Item 1, "Environmental, Safety and Health Matters," for further
information concerning pending legal or administrative proceedings involving
Asarco.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
A27
EXECUTIVE OFFICERS OF ASARCO AND BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
(As of February 22, 1995)
Officer
Name Office and Experience Age Since
---- --------------------- --- -----
Richard de J. Osborne 1990-1995 Chairman of the Board, President 60 1975
and Chief Executive Officer
Francis R. McAllister 1993-1995 Executive Vice President, Copper 52 1978
Operations
1992-1993 Executive Vice President, Finance
and Administration and Chief
Financial Officer
1990-1992 Vice President, Finance and
Administration and Chief
Financial Officer
James J. Kerr 1992-1995 Vice President, Commercial 64 1991
1991-1992 Vice President, Ore
1990-1991 Vice President-Elders Raw
Materials Limited
Augustus B. Kinsolving 1990-1995 Vice President, General Counsel 55 1983
and Secretary
Kevin R. Morano 1993-1995 Vice President, Finance and Chief 41 1993
Financial Officer
1991-1993 General Manager, Ray Complex
1990-1991 Treasurer
Robert J. Muth 1990-1995 Vice President, Government and 61 1977
Public Affairs
Robert M. Novotny 1993-1995 Vice President, Lead, Zinc, 46 1988
Silver and Mineral Operations
1990-1993 Vice President, Operations
Gerald D. Van Voorhis 1992-1995 Vice President, Exploration 56 1992
1990-1992 Vice President-Socorro Mining
Company
Michael O. Varner 1993-1995 Vice President, Environmental 53 1993
Operations
1992-1993 General Manager, Western Metals
1990-1992 Director, Technical Services
David B. Woodbury 1993-1995 Vice President, Human Resources 54 1993
1990-1993 Vice President, Human Resources -
Ferro Corporation
Thomas J. Findley, Jr. 1991-1995 Treasurer 47 1991
1990-1991 Director of Management
Information Services
Ronald J. O'Keefe 1990-1995 Controller 53 1982
James L. Wiers 1990-1995 General Auditor 50 1987
A28
PART II
Item 5 - Market for Registrant's Common Stock and Related Stockholder Matters
At December 31, 1994, there were 9,192 common stockholders of record. The
principal market for Asarco's Common Stock is the New York Stock Exchange. The
Stock Exchange symbol for Asarco's common stock is AR. High and low stock prices
and dividends for last two years were:
1993 1994
---- ----
QUARTERS 1ST 2ND 3RD 4TH YEAR 1ST 2ND 3RD 4TH YEAR
--- --- --- --- ---- --- --- --- --- ----
DIVIDENDS PAID
PER COMMON SHARE .20 .10 .10 .10 .50 .10 .10 .10 .10 .40
STOCK MARKET PRICE:
HIGH 28-5/8 23-1/4 20-1/4 22-7/8 28-5/8 27-5/8 30-5/8 34-7/8 33-7/8 34-7/8
LOW 23-1/2 17-3/4 16-7/8 16-5/8 16-5/8 21-3/8 21-5/8 27-1/2 24-3/4 21-3/8
Item 6 - Selected Financial Data
FIVE-YEAR SELECTED FINANCIAL AND STATISTICAL DATA (in millions, except per share
data)
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Consolidated Statement of Earnings Data
Net sales $2,032 $1,736 $1,908 $1,912 $2,210
Operating income (loss) 17(a) (111)(c) (42)(e) 61(f) 127(g)
Earnings (loss) before equity earnings and
cumulative effect of changes in accounting
principles 16 (98) (32) 36 99
Equity earnings 48 27 3 10(f) 36
Net earnings (loss) 64(b) 16(d) (83) 46 136
Net earnings (loss) per share $ 1.53 $ 0.38 $(2.01) $ 1.12 $ 3.28
Dividends paid per share $ 0.40 $ 0.50 $ 0.80 $ 1.60 $ 1.60
Consolidated Statement of Cash Flows
Data
Cash provided from (used for) operating
activities $ (7) $ 39 $ 106 $ 67 $ 150
Dividends paid 17 21 33 66 66
Property additions 98 112 135 283 237
Business acquisitions, net of cash acquired
- - - 17 6
Depreciation and depletion 83 81 87 75 75
Consolidated Balance Sheet Data
Total assets $3,291 $3,153 $2,946 $2,954 $2,790
Inventories - replacement cost in excess of
LIFO inventory costs 143 114 125 130 157
Total debt 933 901 869 802 543
Common stockholders' equity 1,517 1,472 1,357 1,475 1,490
Common Stock Data
Common shares outstanding 42.1 41.7 41.5 41.2 41.1
Price-high $34-7/8 $28-5/8 $31-3/8 $30-1/2 $34-1/8
-low $21-3/8 $16-5/8 $19-7/8 $18-1/4 $22-1/4
Book value per common share $36.04 $35.27 $32.74 $35.75 $36.29
Price/Earnings ratio 18.65 60.92 - 19.13 8.27
Dividends paid as a percent of earnings
26.2% 133.2% - 143.2% 48.8%
Financial Ratios
Current assets to current liabilities
1.6 1.5 1.6 1.8 2.0
Debt as % of capitalization 38.1% 38.0% 39.0% 35.2% 26.7%
Employees (at year-end) 8,000 8,500 8,900 9,100 9,300
A29
Notes to Selected Financial Data
(a) Includes a $51.2 pre-tax charge to add to the Company's reserve for
environmental matters and $2.8 of LIFO profits.
(b) Includes a $58.5 pre-tax ($31.9 after-tax) gain from the sale of the
Company's remaining interest in Asarco Australia Limited.
(c) Includes a $25.6 pre-tax provision for the valuation of inventories and
additions to reserves for closed plants, $9.2 of LIFO profits and $8.2 of
previously unrecognized losses of Nor Peru.
(d) Includes $26.4 (net of taxes of $.4) of previously unrecognized equity
earnings of Southern Peru Copper Corp. ("SPCC") and $86.3 as the result of
the cumulative effect of a change in accounting principle at SPCC.
(e) Includes a $72.4 pre-tax provision for environmental matters and a $31.9
pre-tax provision to reduce the carrying value of certain facilities.
(f) Includes a $10.6 pre-tax provision for doubtful accounts for a copper
customer receivable. Effective the second quarter of 1991, MEDIMSA is
accounted for on the cost basis.
(g) Includes a $75.5 pre-tax provision for closed plants and environmental
matters and $7.0 for increased State of Arizona royalties.
Item 7 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
EARNINGS: The Company reported net earnings for the year ended December 31, 1994
of $64.0 million, or $1.53 per share, compared with net earnings of $15.6
million, or $.38 per share in 1993 and a net loss of $83.1 million, or $2.01 per
share, in 1992. Net earnings in 1994 include an after-tax gain of $31.9 million
on the sale of Asarco Australia Limited (Asarco Australia) and a $30.7 million
after-tax charge to add to the Company's environmental reserves.
Net earnings in 1993 include the recognition of $18.2 million related to
previously unrecognized earnings of the Company's investments in Peru and $86.3
million for the cumulative effect of a change in accounting principle resulting
from Southern Peru Copper Corporation's (SPCC's) adoption of SFAS 109,
"Accounting for Income Taxes". In addition, 1993 results include an after-tax
charge of $10.8 million related to the valuation of certain inventories and
additions to reserves for closed plants and environmental matters, an after-tax
gain of $7.6 million related to the sale of a portion of its shares of Asarco
Australia and the issuance of new shares by Asarco Australia and a $2.8 million
charge to reflect an increase in income tax rates.
The net loss of $83.1 million in 1992 includes an after-tax charge of $122.1
million consisting of $56 million for the adoption of SFAS 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions", $44 million for
environmental costs, and $21.1 million for the reduction in carrying value of
certain facilities.
The improvement in earnings in 1994 as compared to 1993 was due principally to
higher prices for all major metals and from higher equity earnings of SPCC.
SPCC, 52.3% owned by Asarco, contributed $44.9 million after-tax to the
Company's earnings for 1994, compared to $26.4 million in 1993. Higher metal
prices, a $12.4 million after-tax gain on the sale of certain investments in
Peru and a reduction in Peruvian income tax rates benefited earnings of SPCC in
1994. The Company resumed equity accounting for its 52.3% interest in SPCC and
recorded the results of its 80% owned subsidiary, Corporacion Minera Nor Peru,
S.A. (Nor Peru) in 1993 following improvements in the political, economic and
operating conditions in Peru. Such conditions included the ratification of a new
constitution and the successful completion of financing for SPCC's capital
program, which restored management's influence over its Peruvian operations.
Equity accounting for SPCC and consolidation of Nor Peru had been suspended in
1988. To reflect this change, the Company recorded $18.2 million of previously
unrecognized earnings relating to the period 1988 through 1993 from its
investments in Peru. These results are presented on page A-55, "Accounting for
Investments in Peru".
A30
Asarco's earnings are heavily influenced by the metals markets. The markets for
most of the Company's products improved substantially in 1994 from the lows
reached in 1993 when the economic recovery in the United States created
increasingly strong demand for the Company's products domestically, but economic
weakness in Europe and Japan persisted. Price declines experienced from 1992 to
1993 decreased earnings by $96 million and the recovery of prices from 1993 to
1994 improved earnings by $87 million.
ASSET SALES, DISPOSALS AND CLOSURES: In January 1994, the Company sold its
remaining 45.3% interest (66.5 million shares) in Asarco Australia, a gold
mining and exploration company, for $79.5 million which resulted in a pre-tax
gain of $58.5 million ($31.9 million after-tax). In August 1993, the Company
sold a 9.9% interest in Asarco Australia for $13.8 million which resulted in a
pre-tax gain of $10.3 million ($5.4 million after-tax) and in September 1993,
Asarco Australia offered 13.3 million shares of previously unissued common stock
to the public, resulting in net cash proceeds of A$16.4 million. As a result of
this share issuance, the Company's ownership was reduced to 45.3% and a $3.3
million pre-tax gain ($2.2 million after-tax) was recognized as the shares were
sold at a price exceeding the book value per share of the Company's interest in
Asarco Australia. From an original investment, representing exploration costs
from 1982 through 1986, of $4 million in Asarco Australia, the Company received
cash of more than $106 million.
The reduction of the Company's investment in Asarco Australia had the effect of
reducing sales by $20 million from 1993 to 1994 ($25 million from 1992 to 1993),
cost of sales by $17 million from 1993 to 1994 ($21 million from 1992 to 1993)
and depreciation and depletion by $2 million from 1993 to 1994 ($3 million from
1992 to 1993).
In the fourth quarter of 1993, the Company also began a program to divest itself
of certain non-core businesses. As part of this program the Company recorded a
charge to reduce the value of a PVC and asbestos pipe company which was
ultimately sold in the third quarter of 1994. In the first quarter of 1994 the
Company sold its zinc oxide operation. Sales and cost of sales were each reduced
by $80 million from 1993 to 1994, reflecting these divestitures.
In April 1993, the Company's Troy, Montana, copper-silver mine was put on
standby due to low silver prices. The Troy shutdown followed the suspension of
production at the Galena mine in 1992 and the Coeur mine in 1991. The impact of
these shutdowns was to reduce cost of sales by $7 million from 1993 to 1994 ($9
million from 1992 to 1993) and depreciation by $2 million from 1993 to 1994 ($3
million from 1992 to 1993). These operations will be reactivated when silver
prices improve.
PRICES: Prices for the Company's metals are established principally on the New
York Commodity Exchange (COMEX) or the London Metal Exchange (LME). Thus, it is
not possible to predict prices for future metal sales.
Price/volume data:
Average Metal Prices 1994 1993 1992
-------------------- ---- ---- ----
Copper (per pound - COMEX) $ 1.07 $ .85 $ 1.03
Lead (per pound - LME) .25 .18 .25
Silver (per ounce) 5.29 4.30 3.94
Zinc (per pound - LME) (1) .45 .44 .56
Gold (per ounce) 384.01 359.77 343.73
Molybdenum (per pound - Metals
Week Dealer Oxide) 4.50 2.28 2.18
Sales Volume (in thousands)
Copper (pounds) 1,078,900 1,056,200 1,005,200
Lead (pounds) 396,900 423,000 403,200
Silver (ounces) 33,320 32,754 34,775
Zinc (pounds) (1) 227,800 192,500 212,000
Gold (ounces) 141 162 191
Molybdenum (pounds) (2) 3,790 3,568 4,901
A31
(1) Volume represents pounds of zinc metal contained in concentrate. The
Company fully hedged its zinc mine production for 1994 and 1993 at an
average price of 46 cents per pound and 55 cents per pound, respectively.
(2) Volume represents pounds of molybdenum contained in concentrate.
Substantially all of the Company's copper and lead production is sold under
annual contracts. To the extent not sold under annual contracts, production can
be sold on commodity exchanges or to merchants or consumers on a spot sale
basis. The Company's zinc production is sold in the form of concentrates under
contracts of one to three years' duration. Silver and gold are sold under
monthly contracts or in spot sales. Sales prices are generally based on the
average of prevailing commodity prices for the scheduled month of delivery or
shipment according to the terms of the contracts.
Depending on the market fundamentals of a metal and other conditions, the
Company may enter into forward sales or purchase put options to reduce or
eliminate the risk of metal price declines on its anticipated future production.
Put options purchased by the Company establish a minimum price for the
production covered by such put options and permit the Company to participate in
price increases above the strike price of such put options. At December 31,
1994, the Company had copper put options with an average strike price of 91.9
cents per pound covering 137,600 tons or approximately 47% of its expected 1995
copper production at a cost of $4.4 million and put options with an average
strike price of 95.0 cents per pound covering 6,900 tons or approximately 2% of
its expected 1996 copper production at a cost of $0.2 million. The cost of the
put options are amortized during the period in which the options are
exercisable.
Forward sales establish a selling price for future production at the time they
are entered into, thereby eliminating the risk of declining prices but also
eliminating potential gains on price increases. At December 31, 1994, the
Company did not have any forward sales of anticipated production.
The pre-tax gain on the Company's hedging activities, net of transaction costs,
were $5.7 million in 1994, $19.2 million in 1993 and $2.2 million in 1992. See
note 13 to the Financial Statements for a further description.
SALES: Sales in 1994 were $2,031.8 million, compared with $1,736.4 million in
1993 and $1,908.5 million in 1992. Higher prices for all major metals accounted
for $297 million of the increase in sales in 1994. Increased sales volume of
copper and increased specialty chemical sales were offset by the impact of asset
sales and disposals. Lower prices for copper and lead accounted for the decline
in sales of $198 million in 1993 from 1992, partially offset by increased
volumes for both metals. Accounting for the Company's investment in Asarco
Australia as an equity investment rather than as a consolidated subsidiary
reduced 1993 sales as compared to 1992 by approximately $25 million.
COST OF PRODUCTS AND SERVICES: Cost of products and services in 1994 were
$1,781.1 million compared with $1,638.0 million in 1993 and $1,647.3 million in
1992. The increase in 1994 was caused principally by higher volume and price of
refined copper purchases to meet customer demand and higher costs in specialty
chemicals due to increased sales volume. These cost increases were partially
offset by reduced operating costs and by lower costs due to asset sales,
disposals and closures previously discussed. The decrease in 1993 was caused
principally by asset sales, disposals and closures partially offset by increased
purchases of refined copper. Previously unrecognized losses of Nor Peru of $8.2
million also increased cost of products and services in 1993. The Company's cost
for purchased refined copper approximates the market price at which it is sold.
A32
In early 1994, the Company experienced unexpectedly low grades, wet sticky ore
which created handling problems, and unusual ore types which suppressed
recoveries and reduced concentrate grades at the Ray mine. The heavy rains in
late 1992 and early 1993 resulted in excess stored water which limited the
availability of other ore faces to blend with the difficult ores. As a
consequence, copper production dropped sharply at Ray in the first half of 1994
and at mid year the Company began a fifteen month program to accelerate the
development of additional mining areas to provide flexibility in blending
difficult ores and to increase copper production and reduce costs. New equipment
was acquired to develop ore faces in areas in the mine unaffected by the
accumulated water and as part of the program, the older higher cost sections of
one of the two concentrators at the Ray mine were shutdown in order to reduce
costs. The program is expected to be completed by the end of the third quarter
of 1995, at which time the shutdown portion of the concentrator will be
restarted and production will be increased by 6,000 tons per quarter and unit
costs will be reduced. The Hayden Smelter will continue to operate at full
capacity by smelting concentrates from Ray, Mission and Montana Resources mines
as well as outside purchases.
OTHER EXPENSES: Selling, administrative and other costs decreased by $9.1
million in 1994 and $2.4 million in 1993, principally as a result of cost
reduction programs. Also included in 1994 is a recovery of $4.0 million from the
settlement of litigation related to a bad debt previously written off in 1991.
Depreciation and depletion expense increased by $2.5 million in 1994 as a result
of higher tons of ore mined, a higher asset base at the Ray complex and higher
depreciation related to the completion of the modernization at the El Paso,
Texas copper smelter partially offset by lower depreciation from asset sales,
disposals and closures. Depreciation and depletion expense decreased by $6.0
million in 1993 as a result of asset sales, disposals and closures and lower
production at the Ray mine due to the heavy rains.
NONOPERATING ITEMS: Interest expense increased by $5.2 million in 1994 after
having increased by $6.1 million in 1993. Lower capitalized interest as a result
of the completion of the El Paso modernization program increased interest
expense by $2.8 million in 1994 and $1.2 million in 1993. The remaining increase
is a result of a higher level of borrowing. The increase in 1993 was principally
due to a higher level of borrowing and lower capitalized interest as a result of
the completion of portions of the copper expansion program. The copper expansion
program, begun in 1989, included the expansion of the Mission and Ray mines and
the modernization of the El Paso smelter. Other income is comprised principally
of dividends from SPCC and MIM Holdings as described in Note 2.
TAXES ON INCOME: The Company's effective tax rate in 1994 was lower than the
statutory rate primarily because of deductions for percentage depletion and the
dividends received deduction which are permitted for tax purposes. The tax
benefit in 1993 resulted principally from an operating loss. Taxes in 1993 and
1994 were also affected by a higher gain for tax purposes on the sale of shares
of Asarco Australia, as a result of providing taxes on earnings previously
treated as permanently reinvested while Asarco Australia was a consolidated
subsidiary. Net operating loss carryforwards have reduced the Company's deferred
tax liability by $156.2 million at December 31, 1994. The Company believes that
these carryforwards, which expire in years 2006 through 2009, will reduce future
federal income taxes otherwise payable and, if necessary, the Company could
implement available tax planning strategies, including the sale of certain
assets, to realize the tax benefit of the carryforwards.
EQUITY IN EARNINGS OF NONCONSOLIDATED ASSOCIATED COMPANIES: Equity earnings in
1994 and 1993 are principally from SPCC. SPCC contributed $44.9 million
after-tax in 1994, and $26.4 million after-tax in 1993 of previously
unrecognized results of SPCC recorded in the fourth quarter of 1993. In November
1994, SPCC filed a registration statement with the Securities and Exchange
Commission relating to the proposed sale, in a secondary public offering, of its
shares. Three of SPCC's shareholders had announced plans to sell a portion of
their shares representing a total 15% interest in SPCC. Asarco would have
retained its 52.3% interest in SPCC. In February 1995, SPCC announced that it
and the selling shareholders had deferred the offering as a result of prevailing
stock market conditions.
A33
In 1991, the Company announced that it was considering the sale or other form of
disposition of some or all of its investment in Mexico Desarrollo Industrial
Minero S.A. de C.V. (MEDIMSA). In light of this action, the fact that Asarco has
little influence over the operating and financial activities of MEDIMSA, and
other factors, the Company changed from the equity method of accounting for its
interest in MEDIMSA to the cost method. In August 1994, the Company exchanged
its shares in MEDIMSA for shares of Grupo Mexico S.A. de C.V. (Grupo Mexico), a
publicly traded company on the Mexican Stock Exchange. The assets of Grupo
Mexico are substantially the same as those of MEDIMSA. Under the terms of this
agreement, the Company has a 23.6% interest in Grupo Mexico. Also, as part of
this agreement, the Company has granted a 7-year option to purchase part of its
Grupo Mexico shares aggregating 8.2% of Grupo Mexico at a price of U.S. $1.40
per share and agreed not to sell the majority of its remaining shares for up to
two years or until an international offering of additional shares by Grupo
Mexico. The Company has the right to participate in any international offering
by Grupo Mexico.
CASH FLOWS - OPERATING ACTIVITIES: Net cash used for operating activities was
$7.2 million in 1994 compared with cash provided from operating activities of
$38.9 million in 1993 and $105.7 million in 1992. The change in net cash
provided from (used for) operating activities from 1993 to 1994 was principally
due to the effect of higher metal prices on trade receivables and inventories
partially offset by trade payable financing on outside material purchases.
The decrease in net cash provided from operating activities from 1992 to 1993
was due to higher operating losses principally due to lower metal prices
partially offset by cash provided from inventory and receivable reductions,
which occur as metal prices decline and accounts payable increases.
CASH FLOWS - INVESTING ACTIVITIES: Capital expenditures were reduced to $98.5
million in 1994 from $112.3 million in 1993 and $134.6 million in 1992. Capital
expenditures in 1993 include $23.8 million for the completion of the El Paso
copper smelter modernization begun in 1990 at a total cost of $102.3 million,
including capitalized interest of $9.6 million. Capital expenditures in 1992
include $38.3 million for the copper expansion and modernization program at the
Ray mine begun in 1990 at a total cost of $237.1 million, including capitalized
interest of $10.3 million. The Company's planned capital expenditures in 1995
are estimated to be about $170 million.
The proceeds and purchases of available-for-sale securities principally
represents the investment portfolio of Geominerals Insurance Company, Ltd., a
wholly-owned subsidiary, which for the most part is reinvested by purchasing
additional securities. Proceeds of $79.5 million in 1994 and $13.8 million in
1993, from the sale of Asarco Australia are included in "Sale of securities,
investments and property".
LIQUIDITY AND CAPITAL RESOURCES: The Company has two revolving credit agreements
that permit borrowings of up to $670 million. At December 31, 1994, the
Company's debt as a percentage of total capitalization was 38.1%, compared with
38.0% at the end of 1993 and 39.0% at the end of 1992. Debt at the end of 1994
was $933.1 million, compared with $900.5 million in 1993 and $868.8 million in
1992. Debt has increased primarily due to the funding of the copper expansion
and modernization program at the Mission and Ray mines and El Paso smelter.
Additional indebtedness permitted under the terms of the Company's revolving
credit loan agreements totaled $374 million at the end of 1994, $260 million
available under the revolving credit loan agreements and $114 million from
additional debt financing.
Debt securities in the amount of $250 million were issued in 1993 including $100
million of 7 3/8% Notes due in 2003, $100 million of 7 7/8% Debentures due in
2013 and $50 million of 7% Notes due in 2001. Proceeds of these debt issues were
used to reduce borrowings under the Company's revolving credit loan agreements.
In January 1994, the Company prepaid its 9 3/4% Sinking Fund Debentures at par
value plus a premium of .9%, using a portion of the proceeds of the 7% notes
issued in 1993. The Company adopted SFAS 115, "Accounting for Certain
Investments in Debt and Equity Securities" in 1993, which increased
stockholders' equity by $112.7 million after-tax in 1993. In 1994, the
adjustment to stockholders' equity was reduced by $21.1 million after-tax to
$91.6 million after-tax principally to reflect the decrease in net value of its
cost investments.
A34
In October 1994, Asarco filed a universal shelf registration statement with the
Securities and Exchange Commission covering the future issuance of up to $300
million in equity and debt securities. The shelf registration also registered
the sale by M.I.M. Holdings Limited of all of its holdings totaling 10.353
million shares of Asarco, which was completed in November 1994. Asarco has no
immediate plans to issue securities and the registration is intended to provide
the Company with financial flexibility to access the market when conditions are
appropriate.
The Company expects that it will meet its cash requirements in 1995 and beyond
from internally generated funds, cash on hand and from borrowings under its
revolving credit agreements or from additional debt or equity financing.
DIVIDENDS AND CAPITAL STOCK: The Company paid dividends of $16.8 million, or 40
cents per share, in 1994, $20.8 million, or 50 cents per share, in 1993 and
$33.0 million, or 80 cents per share, in 1992. At the end of 1994, the Company
had 42,102,000 common shares issued and outstanding, compared with 41,718,000 at
the end of 1993 and 41,467,000 at the end of 1992.
CLOSED FACILITIES AND ENVIRONMENTAL MATTERS: During 1994, the reserve for closed
plant and environmental matters was increased by $51.2 million for costs
associated with previously closed facilities and current operations. This
addition to the reserve, together with prior accruals, accommodates resolutions
reached during the year at a number of sites, particularly at Asarco's former
smelter in Tacoma, Washington, where an agreement on remediation remains subject
to final acceptance by the EPA. During 1993, the reserve for environmental
matters was increased by $6.2 million for ongoing evaluations of environmental
costs. As a result of developments during 1992, at a number of the Company's
properties where it was probable that an environmental liability had been
incurred, the Company was able to further refine previous estimates with
requisite certainty for a substantial portion of the anticipated costs at those
sites. Accordingly, in 1992, the Company recorded a pre-tax charge of $72.4
million to provide additional reserves for these environmental costs.
At the end of 1994, the reserve for closed plant and environmental matters
totaled $122.4 million. Cash expenditures charged to these reserves, net of
recoveries, were $45 million in 1994, $44 million in 1993 and $36 million in
1992. Future environmental related expenditures cannot be reliably determined in
many circumstances due to the early stages of investigation, the uncertainties
relating to specific remediation methods and costs, the possible participation
of other potentially responsible parties, insurance coverage issues and changing
environmental laws and interpretations. It is the opinion of Management that the
outcome of these environmental matters will not materially adversely affect the
financial position of Asarco and its consolidated subsidiaries. However, it is
possible that future environmental contingencies could have a material effect on
quarterly or annual operating results when they are resolved in future periods.
This opinion is based on considerations including experience related to previous
court judgments and settlements and remediation costs and terms. The financial
viability of other potentially responsible parties has been considered when
relevant and no credit has been assumed for any potential insurance recoveries
when the availability of insurance has not been determined.
In 1992, the Company concluded that certain facilities, primarily at the El
Paso, Texas smelter, were unlikely to be used following completion of its
modernization and expansion program in 1993. Accordingly, the Company recorded a
pre-tax charge of $31.9 million to reduce the carrying value of these
facilities.
ACCOUNTING MATTERS: In 1994, the Company reflected the requirements of SFAS 119,
"Disclosure about Derivative Financial Instruments and Fair Value of Financial
Instruments", which had no effect on net earnings.
A35
Item 8 - Financial Statements and Supplementary Data
ASARCO Incorporated
and Subsidiaries
CONSOLIDATED STATEMENT OF EARNINGS
For the years ended December 31, 1994 1993 1992
---- ---- ----
(in thousands, except per share amounts)
Sales of products and services $ 2,031,846 $ 1,736,358 $ 1,908,492
----------- ----------- -----------
Operating costs and expenses:
Cost of products and services 1,781,141 1,637,959 1,647,263
Selling, administrative and other 79,136 88,249 90,631
Depreciation and depletion 83,097 80,641 86,642
Research and exploration 19,775 20,871 21,410
Provision for plant closures and
disposals (7) - 13,156 31,900
Provision for environmental matters (8) 51,205 6,241 72,400
--------- --------- ---------
Total operating costs and expenses 2,014,354 1,847,117 1,950,246
--------- --------- ---------
Operating income (loss) 17,492 (110,759) (41,754)
Interest expense (9) (62,529) (57,321) (51,230)
Other income (2) 12,281 19,961 23,911
Gain from sale by Asarco Australia
of capital stock (6) - 3,270 -
Gain on sale of Asarco Australia (6) 58,512 10,286 -
--------- --------- --------
Earnings (loss) before taxes, equity
earnings and cumulative effect of
changes in accounting principles 25,756 (134,563) (69,073)
Taxes on income (benefit) (3) 9,375 (36,503) (37,371)
-------- --------- --------
Earnings (loss) before equity earnings
and cumulative effect of changes in
accounting principles 16,381 (98,060) (31,702)
Equity in earnings of nonconsolidated
associated companies, net of taxes of
$4,863 in 1994 and $406 in 1993 (6) 47,653 27,384 2,575
------ ------ -----
Earnings (loss) before cumulative
effect of changes in accounting
principles 64,034 (70,676) (29,127)
Cumulative effect of changes in
accounting principles, net of taxes of
$27,800 in 1992 (6) (11) - 86,295 (53,964)
---------- ---------- -----------
Net earnings (loss) $ 64,034 $ 15,619 $ (83,091)
========== ========== ===========
Per share amounts:
Earnings (loss) before cumulative
effect of changes in accounting
principles $ 1.53 $ (1.70) $ (0.70)
Cumulative effect of changes in
accounting principles - 2.08 (1.31)
---------- ---------- -----------
Net earnings (loss) $ 1.53 $ 0.38 $ (2.01)
========== ========== ===========
Dividends paid $ 0.40 $ 0.50 $ 0.80
Weighted average number of shares
outstanding 41,905 41,594 41,364
() See notes to financial statements
A36
ASARCO Incorporated
and Subsidiaries
CONSOLIDATED BALANCE SHEET
At December 31, 1994 1993
---- ----
(dollars in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 18,321 $ 12,500
Accounts receivable, net of allowance for
doubtful accounts of $6,249 and $4,579 383,724 312,178
Inventories (4) 299,148 245,034
Other assets 46,124 31,537
Investment in Asarco Australia Limited (6) - 18,573
---------- ----------
Total current assets 747,317 619,822
---------- ----------
Investments: (6)
Cost method 751,888 783,417
Equity method 391,489 346,927
---------- ----------
Total investments 1,143,377 1,130,344
---------- ----------
Property (7) 2,509,072 2,497,605
Less: Accumulated depreciation and depletion (1,203,573) (1,192,153)
----------- -----------
Net property 1,305,499 1,305,452
----------- -----------
Intangible and other assets, net (5) 94,832 96,880
----------- -----------
Total assets $ 3,291,025 $ 3,152,498
=========== ===========
LIABILITIES
Current liabilities:
Bank loans $ 5,125 $ 16,875
Current portion of long-term debt (9) 13,330 14,801
Accounts payable 296,983 264,738
Salaries and wages 20,159 15,759
Taxes on income (3) 43,152 29,516
Reserve for closed plant and environmental
matters (8) 55,946 46,409
Other current liabilities 30,838 30,582
--------- ---------
Total current liabilities 465,533 418,680
Long-term debt (9) 914,601 868,871
Deferred income taxes (3) 156,450 147,864
Reserve for closed plant and environmental
matters (8) 66,458 69,694
Postretirement benefit obligation (11) 95,186 92,943
Other liabilities and reserves 75,410 82,848
--------- ---------
Total liabilities 1,773,638 1,680,900
--------- ---------
Contingencies (8)
PREFERRED STOCKHOLDERS' EQUITY (10)
Authorized-10,000,000 shares without par
value; none issued - -
COMMON STOCKHOLDERS' EQUITY (10)
Authorized-80,000,000 common shares
without par value: Issued shares: 1994 and 1993-45,039,878
679,991 679,991
Unrealized gain on securities reported at
fair value, net of tax (6) 91,627 112,729
Retained earnings 853,169 808,143
Treasury stock (at cost) - common shares
1994 - 2,937,788; 1993 - 3,321,478 (107,400) (129,265)
----------- -----------
Total common stockholders' equity 1,517,387 1,471,598
----------- -----------
Total liabilities, preferred and
common stockholders' equity $ 3,291,025 $ 3,152,498
=========== ===========
() See notes to financial statements
A37
ASARCO Incorporated
and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended December 31, 1994 1993 1992
---- ---- ----
(dollars in thousands)
OPERATING ACTIVITIES
Net earnings (loss) $ 64,034 $ 15,619 $(83,091)
Adjustments to reconcile net earnings (loss) to net cash provided from operating
activities:
Depreciation and depletion 83,097 80,641 86,642
Provision (benefit) for deferred income taxes 10,084 (19,639) (60,200)
Treasury stock used for employee benefits 5,964 4,743 4,140
Undistributed equity earnings (38,214) (26,114) (1,772)
Net gain on sale of investments and property (59,837) (18,823) (2,600)
Cumulative effect of changes in accounting
principles - (86,295) 81,764
Increase (decrease) in reserves for closed plant
and environmental matters 6,301 (24,856) 68,681
Cash provided from (used for) operating assets
and liabilities:
Accounts receivable (70,673) 21,765 (5,255)
Inventories (53,171) 37,462 (19,200)
Accounts payable and accrued liabilities 45,584 42,231 13,553
Other operating liabilities and reserves (513) 12,149 6,960
Other operating assets (2,248) (709) 15,620
Foreign currency transaction losses 2,369 687 447
-------- -------- --------
Net cash provided from (used for) operating
activities (7,223) 38,861 105,689
-------- -------- --------
INVESTING ACTIVITIES
Capital expenditures (98,464) (112,315) (134,574)
Sale of securities, investments and property 91,611 176,024 72,389
Sale of available-for-sale securities 177,574 - -
Purchase of available-for-sale securities (175,712) - -
Purchase of investments (676) (139,592) (73,374)
--------- --------- ---------
Net cash used for investing activities (5,667) (75,883) (135,559)
--------- --------- ---------
FINANCING ACTIVITIES
Debt incurred 115,058 387,788 84,781
Debt retired (82,752) (349,371) (20,195)
Net treasury stock transactions 4,418 321 1,209
Dividends paid (16,765) (20,792) (33,043)
--------- --------- ---------
Net cash provided from financing activities 19,959 17,946 32,752
Effect of exchange rate changes on cash (1,248) (1,672) (4,844)
--------- --------- ---------
Increase (decrease) in cash and cash equivalents 5,821 (20,748) (1,962)
Cash and cash equivalents at beginning of year 12,500 33,248 35,210
--------- --------- ---------
Cash and cash equivalents at end of year $ 18,321 $ 12,500 $ 33,248
========= ========= =========
See notes to financial statements
A38
ASARCO Incorporated
and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN
COMMON STOCKHOLDERS' EQUITY
For the years ended December 31, 1994 1993 1992
---- ---- ----
(dollars in thousands)
COMMON STOCK
Balance at beginning and end of year
45,039,878 shares $ 679,991 $ 679,991 $ 679,991
---------- ---------- ----------
UNREALIZED GAIN ON SECURITIES REPORTED
AT FAIR VALUE
Balance at beginning of year 112,729 - -
At adoption of SFAS 115 - 112,729 -
Net decrease in fair value (21,102) - -
---------- --------- ---------
Balance at end of year 91,627 112,729 -
---------- --------- ---------
RETAINED EARNINGS
Balance at beginning of year 808,143 821,072 950,791
Net earnings (loss) 64,034 15,619 (83,091)
Dividends paid (16,765) (20,792) (33,043)
Treasury stock issued at less than cost (11,484) (9,243) (7,035)
Foreign currency adjustment 9,241 1,487 (6,550)
--------- -------- --------
Balance at end of year 853,169 808,143 821,072
--------- -------- --------
TREASURY STOCK
Balance at beginning of year (129,265) (143,570) (155,954)
Purchased (245) (127) (166)
Used for corporate purposes 22,110 14,432 12,550
--------- --------- ---------
Balance at end of year (107,400) (129,265) (143,570)
--------- --------- ---------
1994 - 2,937,788 shares;
1993 - 3,321,478 shares;
1992 - 3,572,705 shares
TOTAL COMMON STOCKHOLDERS' EQUITY $1,517,387 $1,471,598 $1,357,493
========== ========== ==========
See notes to financial statements
A39
ASARCO Incorporated and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements include all
significant subsidiaries in which the Company has voting control. Subsidiaries
over which the Company has significant influence but does not have voting
control are accounted for by the equity method.
Cash Equivalents: The Company considers all highly liquid investments with a
maturity of three months or less, when purchased, to be cash equivalents.
Inventories: Company-owned metals processed by smelters and refineries are
valued at the lower of last-in, first-out (LIFO) cost or market. All other
inventories are valued at the lower of first-in, first-out (FIFO) or average
cost or market.
Property: Assets are valued at cost or net realizable value. Annually, or more
frequently as circumstances warrant, property carrying values are evaluated. If
it is determined that the net property value is significantly less than the net
carrying value and the impairment in value is likely to be permanent, an
impairment reserve is established with a corresponding charge to earnings.
The Company evaluates the carrying value of assets based on undiscounted future
cash flows considering expected metal prices based on historical metal prices
and price trends, as well as, structural changes and technological obsolescence.
Betterments, renewals, costs of bringing new mineral properties into production,
and the cost of major development programs at existing mines are capitalized as
mineral land. Maintenance, repairs, development costs to maintain production at
existing mines, and gains or losses on assets retired or sold are reflected in
earnings as incurred. Plant assets are depreciated over their estimated useful
lives, generally by the units-of-production method. Depreciation and depletion
of mine assets are computed generally by the units-of-production method using
proven and probable ore reserves.
Revenue Recognition: Substantially all of the Company's copper and lead
production is sold under annual contracts. To the extent not sold under annual
contracts, production can be sold on commodity exchanges or to merchants or
consumers on a spot sale basis. The Company's zinc production is sold in the
form of concentrates under contracts of one to three years duration. Silver and
gold are sold under monthly contracts or in spot sales. Revenue is generally
recognized based on the average of prevailing commodity prices for the scheduled
month of delivery or shipment according to the terms of the contracts.
Derivative Contracts: The Company reflected the requirements of Statement of
Financial Accounting Standards (SFAS) 119 "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments," in 1994. Depending on the
market fundamentals of a metal and other conditions, the Company may enter into
forward sales or purchase put or call options to reduce or eliminate the risk of
metal price declines on its anticipated future production. The cost of options
is amortized during the period in which the options are exercisable. The Company
also periodically uses futures contracts to hedge the effect of price changes on
a portion of the metals it sells. Gains and losses on hedge contracts are
reported as a component of the underlying transaction.
Exploration: Tangible and intangible costs incurred in the search for mineral
properties are charged against earnings when incurred.
A40
Taxes on Income: Deferred income taxes reflect the future tax consequences of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year end. No U.S. deferred income taxes have been
provided for the income tax liability which would be incurred on repatriation of
the undistributed earnings of the Company's consolidated foreign subsidiaries
and the undistributed earnings of Southern Peru Copper Corporation ("SPCC")
prior to the adoption of SFAS 109 because the Company intends indefinitely to
reinvest these earnings outside the United States. General business credits are
accounted for by the flow-through method.
Subsidiary Stock Issuance: Gains or losses arising from the sale of previously
unissued shares to an unrelated party by a subsidiary are recognized in net
earnings to the extent that the net book value of the shares owned by the parent
after the sale exceeds or is lower than the net book value per share immediately
prior to the sale of the shares by the subsidiary.
(2) Other Income
Other income consists of the following:
For the years ended December 31, 1994 1993 1992
---- ---- ----
(in millions)
Dividend income
-MIM $ 9.3 $ 8.3 $ 8.8
-SPCC - 9.4 7.8
-Other .1 .1 .3
------ ------ ------
Total Dividend income $ 9.4 $ 17.8 $ 16.9
Interest income 2.5 2.0 3.7
Miscellaneous .4 .2 3.3
------ ------ ------
Total $ 12.3 $ 20.0 $ 23.9
====== ====== ======
Prior to the resumption of equity accounting in the fourth quarter 1993,
dividends received from SPCC were recorded as dividend income.
(3) Taxes on Income
Earnings (loss) before taxes on income is as follows:
For the years ended December 31, 1994 1993 1992
---- ---- ----
(in millions)
Domestic operations $ (39.7) $ (129.9) $ (153.6)
Foreign operations 118.0 109.4 5.3
------- --------- ---------
Total $ 78.3 $ (20.5) $ (148.3)
======= ========= =========
Tax Expense:
The components of the provision for taxes on income are as follows:
For the years ended December 31, 1994 1993 1992
---- ---- ----
(in millions)
U.S. Federal:
Current tax (benefit) $ (0.3) $(20.7) $ (8.5)
Deferred tax (benefit) 10.1 (19.6) (60.0)
------ ------ ------
U.S. Federal income tax provision (benefit) 9.8 (40.3) (68.5)
------ ------ ------
Foreign and State:
Current tax provision 4.4 4.2 3.5
Deferred tax (benefit) - - (0.2)
------ ------- -------
Foreign and state income tax provision 4.4 4.2 3.3
------ ------- -------
Total income tax provision (benefit) $ 14.2 $(36.1) $(65.2)
======= ======= =======
A41
Total taxes paid (refunded) were: 1994-$(11.2) million; 1993-$(3.1) million and
1992-$2.6 million.
Reconciliation of Statutory Income Tax Rate:
For the years ended December 31, 1994 1993 1992
---- ---- ----
U.S. statutory income tax rate (benefit) 35.0% (35.0%) (34.0%)
Adjustment for entities for which no U.S. tax
is required (0.4) 23.2 (0.2)
Percentage depletion (13.1) (12.1) (6.8)
Undistributed equity earnings of SPCC
permanently reinvested - (183.4) -
Dividends received deduction (17.8) (21.0) -
Foreign taxes, net of federal benefit 4.4 15.4 0.5
Effect of increase in statutory tax rate on
deferred tax liability - 15.6 -
Effect of net operating loss on foreign tax
credits previously recognized - 13.6 -
Excess of tax over book gain on sale of shares 8.0 6.1 -
Reversal of taxes previously accrued (1.2) - (4.7)
Other 3.3 1.3 1.2
----- -------- -------
Effective income tax rate (benefit) 18.2% (176.3%) (44.0%)
===== ======== =======
Temporary differences and carryforwards which give rise to deferred tax assets
and liabilities are as follows:
Deferred Tax Assets (Liabilities)
At December 31, 1994 1993
---- ----
(in millions)
Current:
Reserve for closed plant and environmental matters $ 20.5 $ 11.4
Inventories 8.9 7.6
Miscellaneous accrued expenses (4.0) (2.8)
Other 7.8 7.0
----- -----
Net deferred tax asset 33.2 23.2
----- -----
Noncurrent:
Tax effect of regular net operating losses 156.2 127.6
Reserve for closed plant and environmental matters 21.2 24.4
Postretirement benefit obligation 33.3 32.5
Alternative minimum tax credits 6.8 7.4
Previously taxed income 5.3 8.2
Capitalized leases 32.2 35.2
Pension obligation (11.6) (10.8)
Property, plant and equipment (211.1) (151.1)
Investments - Grupo Mexico/MEDIMSA (93.8) (92.8)
Investments - MIM (109.1) (121.0)
Other 14.2 (7.5)
-------- --------
Net deferred tax liability (156.4) (147.9)
-------- --------
Total net deferred tax liability $(123.2) $(124.7)
======== ========
At December 31, 1994, the Company had $446.4 million of net operating loss
carryforwards which expire, if unused, in years 2006 through 2009 and $6.8
million of alternative minimum tax credits which are not subject to expiration.
The Company believes that these carryforwards will be available to reduce future
federal income tax liabilities and has recorded the tax benefit of these
carryforwards as noncurrent deferred tax assets. The Company's net operating
loss carryforwards for state purposes are not significant and, therefore, have
not been recorded as deferred tax assets.
A42
U.S. deferred tax liabilities have not been provided on approximately $251.9
million in 1994 ($267.0 million in 1993 and $167.0 million in 1992) of
undistributed earnings of foreign subsidiaries and nonconsolidated associated
companies more than 50% owned, because assets representing those earnings are
permanently invested. It is not practicable to determine the amount of income
taxes that would be payable upon remittance of assets that represent those
earnings. The amount of foreign withholding taxes that would be payable upon
remittance of assets that represent those earnings would be approximately $.3
million in 1994 ($2.8 million in 1993 and $3.4 million in 1992).
(4) Inventories
At December 31, 1994 1993
---- ----
(in millions)
Inventories of smelters and refineries at LIFO
cost or market $ 12.5 $ 12.7
Provisional cost of metals received for which
prices have not yet been fixed 78.5 44.2
Mine inventories at FIFO cost or market 119.8 98.6
Materials and supplies (average cost or less) 65.9 62.4
Other 22.4 27.1
-------- -------
Total $ 299.1 $ 245.0
======== =======
Replacement cost exceeds inventories valued at LIFO cost by approximately $143.2
million in 1994 (1993-$114.1 million). Liquidation of LIFO inventories resulted
in pre-tax earnings of $2.8 million in 1994 and $9.2 million in 1993.
(5) Goodwill
The excess of the purchase price over the fair value of net assets acquired of
$59.1 million at December 31, 1994 is recorded as goodwill in "Intangible and
other assets". Goodwill is generally amortized over either the mine life up to a
maximum of 40 years on a units-of-production basis or over 40 years on a
straight-line basis. Accumulated amortization was $10.8 million and $9.3 million
at December 31, 1994 and 1993, respectively.
(6) Investments
The Company has substantial interests in associated companies in Mexico, Peru
and Australia, which are engaged principally in mining, smelting and refining
nonferrous metals. These companies are Grupo Mexico, S.A., de C.V. (Grupo
Mexico), Southern Peru Copper Corporation (SPCC) and M.I.M. Holdings Limited
(MIM). The Company sold its remaining investment in Asarco Australia Limited in
1994.
Grupo Mexico: In 1991, the Company announced that it was considering the sale or
other form of disposition of some or all of its investment in Mexico Desarrollo
Industrial Minero S.A. de C.V. (MEDIMSA). In light of this action, the fact that
Asarco had little influence over the operating and financial activities of
MEDIMSA, and other factors, the Company changed from the equity method of
accounting for its interest in MEDIMSA to the cost method.
A43
In August 1994, the Company exchanged its 28.3% interest in MEDIMSA for a 23.6%
interest in the publicly traded Grupo Mexico, the assets of which are
substantially the same as MEDIMSA. As part of the restructuring, the Company
granted a 7-year option to purchase part of its Grupo Mexico shares aggregating
8.2% of Grupo Mexico at a price of U.S. $1.40 per share and agreed not to sell
the majority of its remaining shares for up to two years or until an
international offering of additional shares is completed by Grupo Mexico. The
Company has the right to participate in an international offering by Grupo
Mexico for up to 7.8% of the 690.0 million total shares outstanding at December
31, 1994.
MIM: In the fourth quarter of 1993, the Company adopted SFAS 115. Accordingly,
certain of the Company's investments have been classified as available-for-sale
securities and are reported at their fair value. MIM has been classified as
available-for-sale securities for this purpose and is reported at a fair value
of $405.2 million at December 31, 1994. The unrealized gain of $138.5 million,
before deferred taxes of $48.5 million, is reported as a separate component of
stockholders' equity.
SPCC: In 1988, the Company changed from the equity method of accounting for SPCC
to the cost method. This change followed the deterioration in the economy of
Peru, inflation and level of foreign exchange reserves, the economic uncertainty
for the near term outlook and the foreign exchange restrictions on the
remittance of profits then in place. In addition, the Company discontinued
consolidating its interest in Corporacion Minera Nor Peru, S.A. (Nor Peru) for
similar reasons. In 1993, conditions stabilized and improved to the point where
the Company was able to reassert influence and act without the governmental
oversight that previously existed. Economic and political conditions improved
significantly as indicated by the ratification of a new constitution by voters
in Peru in October 1993 and the successful completion in December 1993 of SPCC's
financing of its then $300 million capital program. Therefore, in the fourth
quarter of 1993, the Company resumed equity accounting and recorded $26.4
million of previously unrecognized equity earnings for SPCC and resumed
consolidation of Nor Peru by recording $8.2 million of previously unrecognized
losses. Effective January 1, 1993, SPCC adopted SFAS 109, "Accounting for Income
Taxes" which increased retained earnings as of January 1, 1993 and reduced
deferred tax liabilities by $165 million. Asarco's share was $86.3 million,
which is reported as the cumulative effect of a change in accounting principle.
Dividends received from SPCC (prior to the resumption of equity accounting) of
$9.4 million in 1993 and $7.8 million in 1992 were recorded as dividend income.
Asarco Australia Limited (Asarco Australia): In August 1993, the Company sold a
9.9% interest in Asarco Australia, a gold mining subsidiary for $13.8 million.
The sale resulted in a gain of approximately $10.3 million and reduced the
Company's interest in Asarco Australia to 49.8%. As a result of this sale, the
Company began to account for its investment in Asarco Australia using the equity
method. In September 1993, Asarco Australia offered 13.3 million shares of
previously unissued common stock to the public, resulting in net cash proceeds
of A$16.4 million. As a result of this share issuance, the Company's ownership
interest was reduced to 45.3% and a $3.3 million pre-tax gain was recognized as
the shares were sold at a price exceeding the book value per share of the
Company's investment. In January 1994, the Company sold its remaining 45.3%
interest (66.5 million shares) in Asarco Australia for $79.5 million, which
resulted in a pre-tax gain of $58.5 million.
Available-for-sale securities reported as a component of stockholders' equity:
(in millions)
At December 31, 1994 1993
---- ----
Equity Debt Equity Debt
------ ---- ------ ----
Amortized Cost/Cost basis $ 273.7 $ 40.8 $ 266.7 $ 42.4
Unrealized holding gains 143.0 - 172.3 1.1
Unrealized holding losses - (2.0) - -
------- ------- ------- -------
Fair Value $ 416.7 $ 38.8 $ 439.0 $ 43.5
======= ======= ======= =======
A44
The net realized losses on available-for-sale securities in 1994 was $.8
million. The net decrease in unrealized holding gains and losses excluding
realized gains and losses in stockholders' equity was $31.6 million in 1994. The
debt securities have maturity dates ranging from 1995 to 2017 at December 31,
1994, and from 1995 to 2004 at December 31, 1993.
The average cost method has been used to determine the realized gain or loss on
securities sold.
Investment in Associated Companies
(in millions - U.S. dollars)
At December 31, 1994 SPCC(a) MIM Grupo Mexico
-------------------- ------- --- ------------
Method of Accounting Equity Cost Cost
Asarco's Ownership 52.3% 15.4% 23.6%
Shares held 34.4 243.0 162.6
Asarco's Carrying Value $332.1 $405.2(b) $302.1(c)
Dividends to Asarco
1994 $ 11.2 $ 9.3 -
1993 9.4 8.3 -
1992 7.8 8.8 -
(a) Quoted market price of Asarco's investment in SPCC is not available since
the shares are not publicly traded. It is not cost effective to estimate
fair value; however, in management's opinion, the fair value is equal to
or exceeds the carrying amount.
(b) Investment classified as available-for-sale security under SFAS 115, and
is reported at fair value, including unrealized gain of $138.5 million
before deferred taxes of $48.5 million. The unrealized gain is based on
the December 30, 1994 closing market price of MIM's shares on the Sydney
(Australia) Stock Exchange and is not necessarily indicative of the amount
that may be realized in the event of a sale.
(c) Under the terms of the agreement with Grupo Mexico, of the 162.6 million
shares which the Company owns, 160.5 million shares are restricted as to
their sale and therefore are carried at cost. 56.3 million of the
restricted shares are subject to a 7-year option at a purchase price of
$1.40 per share. The remaining 2.1 million unrestricted shares are
classified as available-for-sale and are reported at fair value, including
an unrealized gain of $3.8 million before deferred taxes of $1.3 million.
The unrealized gain is based on the December 30, 1994 closing market price
of Grupo Mexico on the Mexican Stock Exchange and is not necessarily
indicative of an amount that may be realized in the event of a sale.
Financial Position of SPCC
(in millions - U.S. dollars)
At December 31, 1994 1993 (a)
--------------- -------- ----------
Current assets $ 365.0 $ 242.7
Property-net 522.9 390.7
Other assets 80.6 94.6
------- -------
Total assets $ 968.5 $ 728.0
------- -------
Current liabilities $ 118.7 $ 57.9
Long-term debt 114.1 17.3
Other liabilities 14.9 20.8
Deferred Peruvian income taxes 6.2 5.6
Minority interests 79.8 61.4
------ -------
Total liabilities 333.7 163.0
Stockholders' equity 634.8 565.0
------- -------
Total liabilities and stockholders' equity $ 968.5 $ 728.0
------- -------
A45
For the Years Ended December 31,
------------------- ------------
Net Sales 100% U.S. GAAP
1994 $ 701.7
1993 547.5(a)
1992 622.0(a)
Net Earnings 100%
1994 $ 91.2
1993 194.2(b)
1992 45.6
Equity Earnings Reported by Asarco
1994 $ 48.3
1993 112.7(c)
1992 -
(a) Certain items were reclassified in SPCC's prior year financial statements
to conform to current year classifications.
(b) Includes $165 million relating to the adoption of SFAS 109.
(c) Includes $26.4 million of previously unrecognized equity earnings and $86.3
million (Asarco's share) relating to the adoption of SFAS 109.
(7) Property
At December 31, 1994 1993
---- ----
(in millions)
Buildings and equipment $ 1,990.0 $ 2,006.7
Capital leases-equipment 122.8 122.7
Mineral land 320.2 293.9
Land, other than mineral 70.0 68.2
Other 6.1 6.1
---------- ---------
Total property $ 2,509.1 $ 2,497.6
========== =========
Accumulated depreciation applicable to capitalized leases amounted to $51.7
million in 1994, $39.9 million in 1993 and $27.0 million in 1992.
In 1993, the Company recorded a pre-tax charge of $13.2 million to provide for
the closure and sale of a secondary metals processing plant, a zinc oxide plant,
and its pipe business. In 1992, the Company recorded a pre-tax charge of $31.9
million to reduce the carrying value of certain facilities, primarily at the El
Paso, Texas smelter, which were unlikely to be used following the completion of
the modernization and expansion program at the copper smelter in 1993.
(8) Contingencies and Litigation
The Company and two subsidiaries, at December 31, 1994, are defendants in 726
lawsuits brought by 6,399 primary and 4,761 secondary plaintiffs seeking
substantial actual and punitive damages for personal injury or death allegedly
caused by exposure to asbestos as well as four lawsuits for removal or
containment of asbestos-containing products in structures. In addition, the
Company and certain subsidiaries are defendants in product liability lawsuits
involving various other products, including metals.The Company is a defendant in
lawsuits in Arizona brought by indian tribes and some other Arizona water users
contesting the right of the Company and numerous other individuals and entities
to use water and, in some cases, seeking damages for water usage and
contamination of ground water. The lawsuits could potentially affect the
Company's use of water at its Ray Complex, Mission Complex and other Arizona
operations.
A46
The Company is defendant in a lawsuit brought on behalf of classes of persons
who live or have lived within a two mile radius from the site of the Company's
former smelter located in Tacoma, Washington, seeking damages and medical
monitoring due to substances allegedly emitted from the smelter. Also, see
subsequent event footnote 14. Additionally, the Company and certain subsidiaries
are defendants in seven class and non-class lawsuits in Texas seeking
substantial compensatory and punitive damages for personal injury and
contamination of property allegedly caused by present and former operations of
the Company and its subsidiaries.
The Company and certain of its subsidiaries have received notices from the
United States Environmental Protection Agency ("EPA") that they and in most
cases numerous other parties are potentially responsible to remediate alleged
hazardous substance releases at certain sites under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA" or
"Superfund"). In addition, the Company and certain of its subsidiaries are
defendants in lawsuits brought under CERCLA or state laws which seek substantial
damages and remediation. Remedial action is being undertaken by the Company at
some of these sites. In connection with the sites referred to above, as well as
at other closed plants and sites where the Company is working with the EPA and
state agencies to resolve environmental issues, the Company has made reasonable
estimates, where possible, of the extent and cost of necessary remedial action
and damages. As a result of feasibility studies, public hearings, engineering
studies and discussions with the EPA and similar state agencies, for sites where
it is probable that liability has been incurred and the amount of cost could be
reasonably estimated, the Company recorded charges to earnings in 1992 of $72.4
million, and in 1994 of $51.2 million. Reserves for these matters total $122.4
million at December 31, 1994. The Company anticipates that expenditures relating
to these reserves will be made over the next several years. Net cash
expenditures charged to these reserves were $44.7 million in 1994, $44.3 million
in 1993 and $35.6 million in 1992.
Future environmental related expenditures cannot be reliably determined in many
circumstances due to the early stages of investigation, the uncertainties
relating to specific remediation methods and costs, the possible participation
of other potentially responsible parties, insurance coverage issues, and
changing environmental laws and interpretations. It is the opinion of management
that the outcome of the legal proceedings and environmental contingencies
mentioned, and other miscellaneous litigation and proceedings now pending, will
not materially adversely affect the financial position of Asarco and its
consolidated subsidiaries. However, it is possible that future environmental
contingencies could have a material effect on quarterly or annual operating
results, when they are resolved in future periods. This opinion is based on
considerations including experience related to previous court judgments and
settlements and remediation costs and terms. The financial viability of other
potentially responsible parties has been considered when relevant and no credit
has been assumed for any potential insurance recoveries when the availability of
insurance has not been determined.
A47
(9) Debt and Available Credit Facilities
Long-Term Debt
At December 31, 1994 1993
---- ----
(in millions)
Revolving credits $ 410.0 $ 315.0
Pollution control bonds, 1995/2006 - rates from
7 1/8% to 8.9% 170.4 171.1
Capital lease obligations, 1995/2006-rates from
7.3% to 12.0% 93.9 102.2
9 3/4% Sinking Fund Debentures, 1996/2000 - 40.0
7% Notes due 2001 50.0 50.0
7 3/8% Notes due 2003 99.4 99.4
7 7/8% Debentures due 2013 99.7 99.7
Other 4.5 6.3
------- -------
Total long-term debt 927.9 883.7
Less current portion 13.3 14.8
Long-term debt $ 914.6 $ 868.9
======= =======
The fair value of the debt instruments excluding capitalized lease obligations
was $825.4 million at December 31, 1994 and $798.6 million at December 31, 1993
and was determined using quoted market prices of publicly traded securities, or
securities of similar maturities and credit ratings.
Interest paid (excluding amounts capitalized of $0.9 million in 1994, $4.0
million in 1993 and $7.4 million in 1992) was $61.9 million in 1994, $51.1
million in 1993 and $52.6 million in 1992.
Maturities of debt instruments and future minimum payments under capital leases
are as follows:
(in millions) Debt Instruments Capital Leases
---------------- --------------
1995 $ 4.3 $ 16.4
1996 1.2 16.8
1997 0.7 18.6
1998 242.9 18.3
1999 190.7 16.5
Thereafter 394.2 39.2
Less interest - (31.9)
------- -------
$ 834.0 $ 93.9
======= =======
Debt securities in the amount of $250 million were issued in 1993 including $100
million of 7 3/8% Notes due in 2003, $100 million of 7 7/8% Debentures due in
2013 and $50 million of 7% Notes due in 2001. In addition, the Company has two
revolving credit agreements that permit borrowings of up to $670.0 million, of
which $260.0 million was available at December 31, 1994. One facility for $350
million expires in April 1999 and the other facility for $320 million expires in
March 1998. Borrowings under these agreements bear interest based on LIBOR, the
CD or the prime rate, and averaged 6.5% at December 31, 1994. Rates may vary
based upon the Company's debt rating. A facility fee of .2% per annum is payable
on the full amount of the $350 million facility. A commitment fee of 1/4% per
annum is payable on the unused portion of the $320 million facility.
The highest level of revolving credit borrowings during 1994 was $410.0 million
($535.0 million in 1993 and 1992). Borrowings under these agreements averaged
$338.2 million for 1994 ($397.7 million in 1993 and $465.4 million in 1992),
with a weighted average interest rate of 5.0% in 1994 (3.7% in 1993 and 4.2% in
1992).
A48
Under the most restrictive terms of the agreements, the Company must maintain a
tangible net worth, as defined, of at least $1 billion and the percentage of
current assets to current liabilities cannot be less than 125%. Tangible net
worth was $1.5 billion at December 31, 1994 and the percentage of current assets
to current liabilities was 165%.
The highest level of short-term borrowings during 1994 was $34.6 million ($33.4
million in 1993 and $38.7 million in 1992). Short-term borrowings averaged $20.8
million for 1994 ($24.0 million in 1993 and $26.6 million in 1992), with a
weighted average interest rate of 8.0% in 1994 (9.4% in 1993 and 12.1% in 1992).
The weighted average interest rate on short term borrowings was 10.1% at
December 31, 1994 and 7.4% at December 31, 1993.
In January 1994, the Company prepaid its 9 3/4% Sinking Fund Debentures at par
value plus a premium of .9%, using a portion of the proceeds of the 7% Notes
issued in December 1993.
(10) Stockholders' Equity
The Company purchased 9,250 of its common shares in 1994 (5,393 shares in 1993
and 5,649 shares in 1992). In 1994, 392,940 common shares (256,620 shares in
1993 and 223,568 shares in 1992) were used for employee benefit plans. The
effect on the calculations of net earnings per common share of the Company's
common stock equivalents (shares under option) was insignificant.
Retained earnings at December 31, 1994, included undistributed earnings of
$298.6 million for nonconsolidated subsidiaries and $262.7 million for all other
investments. Retained earnings has been increased by cumulative foreign currency
adjustments of $10.8 million at December 31, 1994 ($1.6 million in 1993; $0.1
million in 1992). In 1994, a charge of $2.2 million (1993 - $0.6 million) was
recognized in determining the gain from cumulative unrealized foreign currency
adjustments on the sale of the Company's interest in Asarco Australia Limited.
Stockholders' equity at December 31, 1994 has been increased by $91.6 million
for the unrealized gains on securities classified as available-for-sale (net of
deferred taxes of $49.3 million) as compared to $112.7 million in 1993 (net of
deferred taxes of $60.7 million).
Stock Options: The Company has two stockholder-approved plans, a Stock Incentive
Plan and a Stock Option Plan. The Stock Incentive Plan replaced the Stock Option
Plan. No additional options will be granted under the Stock Option Plan and
unexpired options continue to be governed by, and exercised under, the Stock
Option Plan. The Stock Incentive Plan provides for the granting of nonqualified
or incentive stock options, as defined, under the Internal Revenue Code of 1986,
as amended, as well as for the award of restricted stock and bonuses payable in
stock. The price at which options may be granted under the Stock Incentive Plan
shall not be less than 100% of the fair market value of the Common Stock on the
date of grant in the case of incentive stock options, or 50% in the case of
other options. In general, options expire after 10 years and are not exercisable
for six months from the date of grant.
Options granted may provide for "Stock Appreciation Rights" (SARs). An SAR
permits an optionee, in lieu of exercising the option, to receive from the
Company payment in an amount equal to the difference between the market value of
the stock on the date of exercise of the SAR and the purchase price of the stock
under the terms of the option. Effective November 30, 1994, the Organization and
Compensation Committee of the Board of Directors made a decision not to grant
SARs in the future and most of the Company's officers voluntarily surrendered,
without compensation, their previously awarded SARs. The associated liability of
approximately $1.1 million was credited to stockholders' equity. At December 31,
1994, 4 individuals held SARs with respect to 62,730 shares, ranging in price
from $22.31 to $28.94 per share.
A49
The authorized number of shares under the Stock Incentive Plan is 2,000,000 of
which 300,000 shares may be awarded as restricted stock. At December 31, 1994,
1,019,850 shares (1,228,000 shares - December 31, 1993) are available for future
grants under the Stock Incentive Plan. Stock option activity over the past three
years under the Stock Incentive Plan and Stock Option Plan is summarized as
follows:
Option Price
Number of shares (range per share)
---------------- -----------------
Outstanding at
January 1, 1992 861,677 $20.57 to $38.13
Granted 163,000 $22.31 to $22.31
Exercised (26,534) $20.57 to $27.88
Canceled or expired (64,557) $20.57 to $38.13
--------
Outstanding at
January 1, 1993 933,586 $20.57 to $38.13
Granted 186,500 $18.00 to $26.13
Exercised (900) $22.31 to $22.31
Canceled or expired (98,200) $20.57 to $38.13
--------
Outstanding at
January 1, 1994 1,020,986 $18.00 to $33.19
Granted 234,600 $23.75 to $23.75
Exercised (304,070) $18.00 to $28.94
Canceled or expired (71,400) $22.31 to $33.19
---------
Outstanding at
December 31, 1994 880,116 $20.57 to $29.38
=======
In 1989, the Company adopted a Shareholder Rights plan and declared a dividend
of one Right for each of its Common Shares. In certain circumstances, if a
person or group becomes the beneficial owner of 15% or more of the outstanding
common shares, with certain exceptions, these rights vest and entitle the holder
to certain share purchase rights. In connection with the Rights dividend,
800,000 shares of Junior Participating Preferred Stock were authorized for
issuance upon exercise of the Rights.
(11) Benefit Plans
The Company maintains several noncontributory, defined benefit pension plans
covering substantially all employees. Benefits for salaried plans are based on
salary and years of service. Hourly plans are based on negotiated benefits and
years of service.
The Company's funding policy is to contribute amounts to the plans sufficient to
meet the minimum funding requirements set forth in the Employee Retirement
Income Security Act of 1974, plus such additional amounts as may be deductible
for income tax purposes. Plan assets are invested principally in commingled
stock funds and securities issued by the United States.
Net pension costs consist of the following:
For the years ended December 31, 1994 1993 1992
---- ---- ----
(in millions)
Service cost $ 8.5 $ 7.2 $ 7.0
Interest cost on projected benefit obligations 8.8 7.9 7.1
Actual return on plan assets 0.5 (8.1) (5.5)
Other items (7.6) 1.6 1.1
------ ----- -----
Net pension costs $ 10.2 $ 8.6 $ 9.7
====== ===== =====
A50
The actuarial present value of benefit obligations and funded status for the
Company's plans were as follows:
At December 31, 1994 1993
---- ----
(in millions)
Assets and obligations:
Vested benefit obligation $ 85.9 $ 89.3
Nonvested benefits 4.9 6.1
------- ------
Accumulated benefit obligation 90.8 95.4
------- ------
Projected benefit obligation 109.8 127.8
Less, Plan assets at fair value 101.4 93.3
------- ------
Funded status of plan (8.4) (34.5)
Items not yet recognized in earnings:
Prior service cost 9.0 9.6
Initial net plan obligation 1.5 1.9
Effect of changes in assumptions and actuarial losses 5.7 27.2
Minimum liability - (6.3)
------- -------
Pension asset (liability) reflected in consolidated
balance sheet $ 7.8 $ (2.1)
======= =======
The actuarial assumptions used in developing the projected benefit obligation at
December 31 were a discount rate on benefit obligations of 8.75% in 1994, 7% in
1993 and 8% in 1992; an expected long-term rate of return on plan assets of 10%;
and annual salary increases of 4% in 1994 and 1993 and 5% in 1992.
Noncontributory postretirement health care coverage under the Asarco Health Plan
is provided to substantially all retirees not eligible for Medicare. A cost
sharing Medicare supplement plan is available for retired salaried employees and
life insurance coverage is provided to substantially all retirees. In 1992, the
Company adopted SFAS 106 "Employers' Accounting for Postretirement Benefits
Other Than Pensions", as a result the projected benefit obligation of $54.0
million (net of a tax benefit of $27.8 million) related to prior service cost
was recognized as the cumulative effect of a change in accounting principle as
of January 1, 1992.
The following sets forth the plan's status reconciled with amounts reported in
the Company's Consolidated Balance Sheet:
At December 31, 1994 1993
---- ----
(in millions)
Accumulated postretirement benefit obligation (APBO):
Retirees $ 57.7 $ 59.9
Fully eligible active plan participants 15.0 17.4
Other plan participants 29.3 36.2
------ ------
Total APBO 102.0 113.5
Item not yet recognized in earnings:
Effect of changes in assumptions and actuarial losses (6.8) (20.6)
------ ------
Postretirement benefit obligation $ 95.2 $ 92.9
====== ======
Net periodic postretirement benefit cost included the following:
For the years ended December 31, 1994 1993 1992
---- ---- ----
(in millions)
Service cost $ 3.1 $ 2.2 $ 2.5
Interest cost 7.8 7.9 6.9
Amortization of loss 1.5 - -
------ ------- -----
Net periodic postretirement benefit cost $ 12.4 $ 10.1 $ 9.4
====== ======= =====
A51
The annual assumed rate increase in the per capita cost of covered benefits
(i.e., health cost trend rate) is 9% for 1994 (10% for 1993, 11% for 1992) and
is assumed to decrease gradually to 5% for 1999 and remain at that level
thereafter. The health care cost trend rate assumption has a significant effect
on the amounts reported. For example, increasing the assumed health care cost
trend rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation at December 31, 1994 by $9.0 million, and the
aggregate of the service and interest costs of net periodic postretirement
benefit cost for 1994 by $0.9 million. The discount rate used in determining the
accumulated postretirement benefit obligation was 8.75% at December 31, 1994
(7%-1993). The plans are unfunded.
(12) Business Segments
The Company operates principally in the nonferrous metals industry, involving
mining, smelting, refining and selling of copper, silver, lead, and gold and the
mining of ore containing zinc and molybdenum which is sold as concentrate. The
Company also produces specialty chemicals for the metals plating and electronics
industries and aggregates comprising limestone, sand and gravel. The caption
"Other" includes the Company's polyvinyl chloride pipe and cement pipe
businesses and its environmental services operations. The cement pipe business
was shutdown in 1993 and the polyvinyl chloride pipe business was sold in 1994.
General corporate administrative expenses are allocated among the segments
generally in proportion to their operating expenses. Exploration expenses are
attributable to the metals segment, while research expenses are attributable to
metals and specialty chemicals. Identifiable assets are those directly used in
the operations of each segment. Corporate assets are principally cash and
investments. Export sales from the United States to unaffiliated customers were
$280.2 million in 1994, $278.3 million in 1993, and $297.7 million in 1992.
There can be no assurance that operations and assets of the Company and
nonconsolidated associated companies that are subject to the jurisdiction of
foreign governments may not be affected adversely by future actions by such
governments.
Metal Sales, excluding intersegment sales
For the years ended December 31, 1994 1993 1992
---- ---- ----
(in millions)
Refined copper $ 1,164 $ 917 $ 1,045
Refined silver 175 138 138
Refined lead 113 87 106
Refined gold 54 58 69
Services 12 7 10
Other 157 131 145
------- ------- -------
$ 1,675 $ 1,338 $ 1,513
======= ======= =======
A52
Business Segments and Lines of Business
For the years ended December 31, 1994 1993 1992
---- ---- ----
(in millions)
Sales
Metals $ 1,675 $ 1,338 $ 1,513
Specialty Chemicals 278 251 256
Aggregates 43 37 36
Other 36 110 103
------- ------- -------
Total $ 2,032 $ 1,736 $ 1,908
======= ======= =======
Domestic 1,867 1,586 1,722
Foreign 165 150 186
Operating Income (Loss) (a), (b), (c)
Metals $ (9) $ (97) $ (28)
Specialty Chemicals 13 3 (1)
Aggregates 7 7 7
Other 6 (24) (20)
------- -------- --------
Total $ 17 $ (111) $ (42)
======= ======== ========
Domestic 17 (101) (37)
Foreign - (10) (5)
Equity in results of nonconsolidated associated companies:
Specialty Chemicals $ 2 $ 3 $ 4
Corporate 46 24 (1)
Interest, taxes and other (1) 13 10
------- ------ ------
Net Earnings (loss) before cumulative effect of changes in
accounting principles $ 64 $ (71) $ (29)
======= ====== ======
Identifiable Assets
Metals $ 1,820 $ 1,679 $ 1,749
Specialty Chemicals (d) 247 231 236
Aggregates 32 30 29
Other 43 112 123
Corporate 1,149 1,100 809
------- ------- -------
Total $ 3,291 $ 3,152 $ 2,946
======= ======= =======
Domestic 3,097 2,981 2,728
Foreign 194 171 218
Depreciation and Depletion
Metals $ 77 $ 71 $ 77
Specialty Chemicals 3 5 5
Aggregates 2 2 2
Other 1 3 3
------- ------- -------
Total $ 83 $ 81 $ 87
======= ======= =======
Capital Expenditures
Metals $ 87 $ 103 $ 126
Specialty Chemicals 3 2 3
Aggregates 2 3 2
Other 5 2 3
Corporate 1 2 1
------- ------- -------
Total $ 98 $ 112 $ 135
======= ======= =======
(a) Includes provision for environmental matters ($62.7 Metals, $9.7 Other,
$72.4 Total) and provision to reduce the carrying value of certain
facilities ($31.9 Metals) in 1992, and provision for environmental
matters of ($53.4 Metals, $.2 Specialty Chemicals, $(2.4) Other, $51.2
Total) in 1994.
(b) Includes in 1993 $8.2 in previously unconsolidated losses for Nor Peru
(Metals), and $25.6 related to the valuation of certain inventories and
additions to closed plants and reserves, principally for assets planned
for disposition ($8.3 Metals, $17.3 Other).
(c) Includes LIFO profits in the "Metals" segment of $2.1 in 1992, $9.2 in
1993, and $2.8 in 1994.
(d) Includes vertically integrated equity method investments of $55.5 in
1994, $48.8 in 1993, and $42.9 in 1992.
A53
(13) Financial Instruments
Derivative Contracts: Depending on the market fundamentals of a metal and other
conditions, the Company may enter into forward sales or purchase put or call
options to reduce or eliminate the risk of metal price declines on its
anticipated future production.
Put options purchased by the Company establish a minimum sales price for the
production covered by such put options and permit the Company to participate in
price increases above the strike price of such put options. At December 31,
1994, the Company had copper put options with an average strike price of 91.9
cents per pound, covering 137,600 tons or approximately 47% of its expected
copper production for 1995 at a cost of $4.4 million and put options with an
average strike price of 95.0 cents per pound, covering 6,900 tons or
approximately 2% of its expected copper production for 1996 at a cost of $0.2
million. The cost of the put options are amortized during the period in which
the options are exercisable.
Forward sales establish a selling price for future production at the time they
are entered into, thereby eliminating the risk of declining prices but also
eliminating potential gains on price increases if not bought back. Synthetic put
options are established by entering into a forward sale and purchasing a call
option for the same quantity of the relevant metal and for the time period
relating to such forward sale. The forward sale establishes a minimum price that
will be realized, while the call option permits the Company to participate in
price increases. At December 31, 1994, the Company had no forward sales or
synthetic put options outstanding.
The pre-tax earnings effect of the Company's derivative and anticipatory hedging
activities, net of transaction costs, are as follows:
Hedging Gains (Losses)
(in millions)
For the years ending December 31, 1994 1993 1992
---- ---- ----
Metal
-----
Copper $ 3.2 $ 3.0 $ -
Zinc 1.8 15.5 1.1
Silver 0.7 0.7 1.1
------ ------ ------
Net Gain $ 5.7 $ 19.2 $ 2.2
====== ====== ======
At December 31, 1994 there were nodeferred hedging profits or losses. At
December 31, 1993 deferred profits on copper and silver hedging were $3.0
million and $.2 million, respectively, which were subsequently recognized in
1994 as the anticipated production was sold.
The estimated fair value of the Company's financial instruments are as follows:
At December 31, 1994 1993
---- ----
(in millions) Carrying Fair Carrying Fair
Value Value Value Value
----- ----- ----- -----
Assets:
Copper put options $ 4.6 $ 0.2 $ 0.2 $ 0.1
Investments accounted for by the cost method of accounting:
Available-for-sale securities $455.5 $455.5 $482.5 $482.5
Restricted investment in
Grupo Mexico / MEDIMSA $294.5 (a) $298.3 (b)
Other $ 1.9 (b) $ 2.6 (b)
Liabilities:
Long-term debt (excluding capital
lease obligations) $834.0 $825.4 $781.5 $798.6
A54
The fair value estimates at December 31, are based on relevant market
information. These estimates are subjective in nature and involve uncertainties
and significant judgment.
(a) In 1994, 160.5 million shares of Asarco's investment in Grupo Mexico had
restrictions limiting the sale of these securities which are further
described in footnote 6. Accordingly, the Company has not determined the
fair value of such securities.
(b) No fair value was available for these investments as they represent an
interest in a private Company. Accordingly, the Company has not
determined the fair value of such securities.
(14) Subsequent Event
On January 27, 1995, the Company entered into an agreement, subject to court
approval, to settle a class action lawsuit pending in the United States District
Court in Seattle alleging damages due to emissions from Asarco's former Tacoma,
Washington smelter. The agreement will not affect the Company's earnings as
reserves previously provided are sufficient to cover the estimated cost of the
settlement to the Company.
Unaudited Quarterly Data
1993 1994
---- ----
QUARTERS 1ST 2ND 3RD 4TH(a) TOTAL 1ST(b) 2ND 3RD(c) 4TH TOTAL
--- --- --- ------ ----- ------ --- ------ --- -----
SALES $457.1 $418.6 $425.2 $435.5 $1,736.4 $442.9 $487.8 $513.0 $588.1 $2,031.8
OPERATING INCOME
(LOSS): (30.5) (22.5) (9.2) (48.6) (110.8) (5.9) 0.8 (31.1) 53.7 17.5
EARNINGS (LOSS)
BEFORE
CUMULATIVE
EFFECT OF CHANGE (30.9) (24.2) (3.0) (12.6) (70.7) 26.6 5.3 (16.1) 48.2 64.0
IN ACCOUNTING
PRINCIPLE
NET EARNINGS (30.9) (24.2) (3.0) 73.7 15.6 26.6 5.3 (16.1) 48.2 64.0
(LOSS)
PER COMMON SHARE
DATA:
EARNINGS(LOSS)
BEFORE
CUMULATIVE
EFFECT OF CHANGE (.74) (.58) (.08) (.30) (1.70) .64 .13 (.39) 1.15 1.53
IN ACCOUNTING
PRINCIPLE
NET EARNINGS (.74) (.58) (.08) 1.78 .38 .64 .13 (.39) 1.15 1.53
(LOSS)
(a) Includes $86.3 million for the cumulative effect of a change in accounting
principle resulting from SPCC's adoption of SFAS 109, $18.2 million
related to previously unrecognized earnings of the Company's investments
in Peru and pre-tax $25.6 million ($16.7 after-tax) related to the
valuation of certain inventories and additions to reserves principally for
assets planned for disposition.
(b) Includes a $31.9 million after-tax gain, $58.5 million pre-tax, on the
sale of the Company's remaining interest in Asarco Australia Limited.
(c) Includes a $30.7 million after-tax charge, $45.5 million on a pre-tax
basis, to add to the Company's reserve for environmental matters.
A55
Accounting For Investments In Peru
The 1993 quarterly and 1992 annual earnings (losses) of SPCC and Nor Peru
including the cumulative effect of the change in accounting principle by SPCC,
which were recognized by Asarco as part of the $104.5 million recorded in the
fourth quarter of 1993 are as follows:
TOTAL
1993 QUARTERS 1ST 2ND 3RD 4TH 1993 1992
----- ----- ----- ----- --------------
(in millions)
SPCC-equity earnings $ 4.0 $ 0.5 $1.9 $(0.7) $ 5.7 $15.9
SPCC-SFAS 109 86.3 - - - 86.3 -
Nor Peru (0.6) (0.7) 0.6 (1.1) (1.8) (2.5)
------ ------ ----- ------ ------ -----
Total $89.7 $(0.2) $2.5 $(1.8) $90.2 $13.4
====== ====== ===== ====== ===== =====
A56
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of ASARCO Incorporated
We have audited the accompanying consolidated balance sheets of ASARCO
Incorporated and Subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of earnings, cash flows, and changes in common
stockholders' equity for each of the three years in the period ended December
31, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We 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 consolidated financial position of ASARCO
Incorporated and Subsidiaries as of December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in Note 6 to the financial statements, the Company changed its
method of accounting for investments classified as available-for-sale, as of
December 31, 1993 and its equity investee Southern Peru Copper Corporation
changed its method of accounting for income taxes as of January 1, 1993. In
addition, in 1992, as discussed in Note 11 to the financial statements, the
Company changed its method of accounting for postretirement benefits other than
pensions.
COOPERS & LYBRAND L.L.P.
1301 Avenue of The Americas
New York, New York
January 24, 1995, except for Note 14, as to which the date is January 30, 1995.
A57
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None
PART III
Items 10, 11, 12 and 13.
Reference is made to Executive Officers of Asarco and Business Experience During
the Past Five Years on page A27. Information in response to the disclosure
requirements specified by these items appears under the captions and pages of
the 1994 Proxy Statement indicated below:
Proxy Statement
Pages
Item Required Information Proxy Statement Section
---- -------------------- ----------------------- ----------------
10. Directors and Executive Election of Directors
Officers 2-5
11. Executive Compensation Executive Compensation
through Option Exercises
and Fiscal Year-End
Values 11-13
Retirement Plans through
Employment Agreements 14-16
12. Security Ownership Beneficial Ownership of
Management 6
13. Certain Relationships and Certain Transactions 16
Related Transactions
The information referred to above is incorporated herein by reference.
A58
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
--------------------------------------------------------------------------
(a) The following documents are filed as part of this report:
1. Financial Statements
The following financial statements of ASARCO Incorporated and
its subsidiaries are included at the indicated pages of the document as stated
below:
Form 10-K
Pages
----------
Consolidated Statement of Earnings for the years
ended December 31, 1994, 1993 and 1992 A35
Consolidated Balance Sheet at December 31,
1994 and 1993 A36
Consolidated Statement of Cash Flows for the
years ended December 31, 1994, 1993 and 1992 A37
Consolidated Statement of Changes in Common
Stockholders' Equity for the years ended
December 31, 1994, 1993 and 1992 A38
Notes to Financial Statements A39-A55
Report of Independent Accountants A56
2. Financial Statement Schedules
Form 10-K
Pages
----------
Schedule II - Valuation and qualifying
accounts B1-B3
Schedules other than those listed above are omitted, as they are not required or
are not applicable, or the required information is shown in the financial
statements or notes thereto. Columns omitted from schedules filed have been
omitted because the information is not applicable. Any other information omitted
from schedules filed has been omitted due to immateriality.
A59
3. Exhibits
Exhibit
No.
-------
3. Certificate of Incorporation and By-Laws
(a) Certificate of Incorporation - restated, filed May 4,
1970
(b) Certificate of Amendment to the Certificate of
Incorporation effective April 23, 1975
(c) Certificate of Amendment of Certificate of
Incorporation executed April 14, 1981
(d) Certificate of Amendment of Restated Certificate of
Incorporation filed on May 6, 1985
(e) Certificate of Amendment of Certificate of
Incorporation filed July 21, 1986
(f) Certificate of Amendment of Restated Certificate of
Incorporation, as amended filed April 22, 1987
(g) Statement of Cancellation filed July 31, 1987 whereby
155,000 shares of Series A Cumulative Preferred Stock
and 862,500 shares of $9.00 Convertible Exchangeable
Preferred Stock were cancelled
(h) Statement of Cancellation filed November 20, 1987
whereby 1,026,900 shares of Series A Cumulative
Preferred Stock were cancelled
(i) Statement of Cancellation filed December 18, 1987
whereby 1,250,000 shares of Series B Cumulative
Convertible Preferred Stock were cancelled
(j) Statement of Cancellation filed March 3, 1988 whereby
27,000 shares of Series A Cumulative Preferred Stock
were cancelled
(k) Certificate of Amendment of Restated Certificate of
Incorporation, as amended, filed August 7, 1989
(l) By-Laws as last amended on June 26, 1991
4. Instruments defining the rights of security holders,
including indentures
(a) There are currently various separate indentures,
agreements or similar instruments under which long-term
debt of Asarco is currently outstanding. The Registrant
hereby agrees to furnish to the Commission, upon
request, a copy of any of the instruments which define
the rights of holders of long-term debt securities.
None of the outstanding instruments represent long-term
debt securities in excess of 10% of the total assets of
Asarco as of December 31, 1994
(b) Form of Rights Agreement dated as of July 26, 1989,
between the Company and First Chicago Trust Company of
New York, as Rights Agent, defining the rights of
shareholders under a July 1989 Shareholders' Rights
plan and dividend declaration
(c) Rights Agreement Amendment dated as of September 24,
1992, between the Company and The Bank of New York, as
Successor Rights Agent under the Rights Agreement
listed above
A60
(d) Second Rights Agreement Amendment dated as of February
23, 1995 between the Company and The Bank of New York
deleting certain special conditions relating to MIM.
The effect of the amendment is to apply to MIM the same
percentage ownership conditions (15%) that apply to all
other shareholders.
(e) Indenture Agreement dated as of February 1, 1993
between the Company and Bankers Trust Company, as
Trustee, covering the issuance of debt securities
registered by the Company in April 1992 not to exceed
$250 million
10.
(a) Stock Option Plan as amended through November 30, 1994
(b) Form of Employment Agreement entered into in 1985, as
amended in March and April 1989, among the Company and
currently 11 of its executive officers, including
Messrs. R. de J. Osborne, F.R. McAllister, K.R. Morano,
R.M. Novotny and R.J. Muth
(c) Deferred Fee Plan for Directors, as amended through
January 26, 1994
(d) Supplemental Pension Plan for Designated Mid-Career
Officers, as amended through January 25, 1995
(e) Retirement Plan for Non-Employee Directors, as amended
through January 25, 1995
(f) Directors' Stock Award Plan, as amended through January
27, 1993
(g) Stock Incentive Plan adopted by the Company's
Shareholders on April 25, 1990 and as amended through
November 30, 1994
11. Statement re Computation of Earnings Per Share
21. Subsidiaries of the Registrant
23. Report of Independent Accountants on Financial
Statement Schedules and Consent of Independent
Accountants
The exhibits listed as 10(a) through (g) above are the management
contracts or compensatory plans or arrangements required to be filed
pursuant to Item 14(c) of Form 10-K.
(b) Reports of Form 8-K filed in the fourth quarter of 1994 and first
quarter of 1995:
(I) Current report filed on November 17, 1994 containing a copy of
the underwriting agreements among the Company, MIM Holdings
Limited, and CS First Boston Corporation and S.G. Warburg & Co.
Inc. for the sale of 6,650,000 shares of common stock of the
Company and a subscription agreement with CS First Boston
Limited and S.G. Warburg Securities Ltd. for the sale of
2,850,000 shares of common stock.
(ii) Current report filed on February 24, 1995 containing a copy of
the Second Rights Agreement Amendment dated as of February 23,
1995 between the Company and The Bank of New York deleting
certain special conditions relating to MIM. The effect of the
amendment is to apply to MIM the same percentage ownership
conditions (15%) that apply to all other shareholders.
A61
(c) Exhibits - The exhibits to this Form 10-K are listed on the Exhibit
Index on pages D1 through D3. Copies of the following exhibits are
filed with this Form 10-K:
10(a) Stock Option Plan
10(d) Supplemental Pension Plan for Designated Mid-Career Officers
10(e) Retirement Plan for Non-Employee Directors
10(g) Stock Incentive Plan
11. Statement re Computation of Earnings Per Share
21. Subsidiaries of the Registrant
23. Report of Independent Accountants on Financial Statement
Schedules and Consent of Independent Accountants are included
in page A62 of this Annual Report on Form 10-K.
Copies of exhibits may be acquired upon written request to the Treasurer and the
payment of processing and mailing costs.
(d) Statements of nonconsolidated subsidiaries, and 50% or less owned
persons accounted for by the equity method:
Southern Peru Copper Corporation and
Consolidated Subsidiaries C1
Individual financial statements of subsidiaries and 50%-or-less owned persons
accounted for by the equity method, other than those for Southern Peru Copper
Corporation have been omitted because such subsidiaries and 50%-or-less owned
persons considered in the aggregate as a single subsidiary would not constitute
a significant subsidiary. Where separate financial statements are presented,
intercompany profits or losses resulting from transactions with related parties
are insignificant.
A62
Item 14
Exhibit 23
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and
Stockholders of ASARCO Incorporated
Our report on the consolidated financial statements of ASARCO Incorporated and
Subsidiaries has been included in this Form 10-K on page A56. In connection with
our audits of such financial statements, we have also audited the related
financial statement schedules which appear on pages B1 through B3 of this Form
10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
New York, New York
January 24, 1995
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectuses constituting
part of the Registration Statements on Form S-3 (File Nos. 33-45631 and
33-55993) and Form S-8 (File Nos. 2-83782, 2-67732 and 33-34606) of ASARCO
Incorporated of our report dated January 24, 1994, except for Note 14, as to
which the date is January 30, 1995, appearing on page A56 of this Annual Report
on Form 10-K. Our report includes an explanatory paragraph that describes the
change in the method of accounting for investments classified as
available-for-sale and its equity investee Southern Peru Copper Corporation's
change in method of accounting for income taxes. In addition, in 1992, the
Company changed its method of accounting for postretirement benefits other than
pensions. We also consent to the incorporation by reference of our report on the
financial statement schedules, which appears above.
COOPERS & LYBRAND L.L.P.
New York, New York
January 24, 1995
A63
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: February 22, 1995
ASARCO Incorporated
(Registrant)
By_/s/ Richard de J. Osborne
-------------------------------
(Richard de J. Osborne, Chairman
of the Board, Chief Executive
Officer and President)
Pursuant to requirements of the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
(a) Principal Executive Officer:
/s/ Richard de J. Osborne Chairman of the Board
-------------------------
(Richard de J. Osborne)
(b) Principal Financial Officer:
/s/ Kevin R. Morano Vice President and
--------------------
(Kevin R. Morano) Chief Financial Officer
(c) Principal Accounting Officer:
/s/ Ronald J. O'Keefe Controller
---------------------
(Ronald J. O'Keefe)
(d) Directors:
/s/ Richard de J. Osborne /s/ Willard C. Butcher
------------------------- ----------------------
(Richard de J. Osborne) (Willard C. Butcher)
/s/ James C. Cotting /s/ David C. Garfield
-------------------- ---------------------
(James C. Cotting) (David C. Garfield)
/s/ E. Gordon Gee /s/ Harry Holiday, Jr.
------------------ ----------------------
(E. Gordon Gee) (Harry Holiday, Jr.)
/s/ James W. Kinnear III /s/ Francis R. McAllister
------------------------ -------------------------
(James W. Kinnear III) (Francis R. McAllister)
/s/ Martha T. Muse /s/ Michael T. Nelligan
------------------ -----------------------
(Martha T. Muse) (Michael T. Nelligan)
/s/ John D. Ong /s/ James Wood
--------------- --------------
(John D. Ong) (James Wood)
Date: February 22, 1995
B1
ASARCO Incorporated
AND SUBSIDIARIES
Schedule II - Valuation and Qualifying Accounts
FOR THE YEAR 1994
(in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions Deductions
Charged to
Balance at costs / expenses Charged Balance at
beginning or (credited) to other end of
Description of period to income Description accounts Descriptions Amount period
----------- --------- --------- ----------- -------- ------------ ------ ------
Accounts and
notes written
Deducted from assets off, net of
on Balance Sheet: recoveries $1,197
Foreign currency
translation
Allowance for doubtful adjustment
accounts: $4,579 $2,525 $(342) $6,249
====== ====== ====== ======
Net amount
transferred
from noncurrent
Current portion of reserve for
reserves for closed closed plants
plants and and Current charges
environmental environmental to reserves
matters $46,409 matters $54,441 $44,904 $55,946
======= ======= ======= =======
Non-current portion of
reserves for closed Net amount
plants and transferred to
environmental current
matters $69,694 $51,205 liabilities $54,441 $66,458
======= ======= ======= =======
Included in caption
"Other liabilities
and reserves" on
Balance Sheet
Other $28,451 $28,435
======= =======
B2
ASARCO Incorporated
AND SUBSIDIARIES
Schedule II - Valuation and Qualifying Accounts
FOR THE YEAR 1993
(in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions Deductions
Charged to
Balance at costs / expenses Charged to Balance at
beginning of or (credited) other end of
Description period to income Description accounts Descriptions Amount period
----------- ------ --------- ----------- -------- ------------ ------ ------
Accounts and
notes written
Deducted from assets off, net of
on Balance Sheet: recoveries $2,161
Net amount
Allowance for doubtful transferred to
accounts: $4,232 $2,901 Other Assets $393 $4,579
====== ====== ==== ======
Net amount
transferred
Current portion of from noncurrent
reserves for closed reserve for
plants and closed plants Current charges
environmental and environmental to reserves
matters $39,997 matters $50,665 $44,253 $46,409
======= ======= ======= =======
Non-current portion of
reserves for closed Net amount
plants and transferred to
environmental current
matters $100,962 $19,397 liabilities $50,665 $69,694
======== ======= ======= =======
Included in caption
"Other Liabilities and
Reserves" on Balance
Sheet
Other $34,165 $28,451
======= =======
B3
ASARCO Incorporated
AND SUBSIDIARIES
Schedule II - Valuation and Qualifying Accounts
FOR THE YEAR 1992
(in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions Deductions
Charged to
Balance at costs / Charged to Balance
beginning of expenses or other at end of
Description period (credited) Description accounts Descriptions Amount period
----------- ------ ----------- -------- ------------ ------ ------
to income
Accounts and
notes written
Deducted from assets off, net of
on Balance Sheet: recoveries $1,404
Allowance for doubtful Net amount
accounts: $3,326 $3,436 transferred
====== ======
to Other Assets $1,126 $4,232
Net amount
Current portion of transferred
reserves for closed from noncurrent
plants and environmental reserve for Current charges
matters closed plants to reserves
and environmental
$34,120 $3,000 matters $30,265 $27,388 $39,997
======= ====== ======= ======= =======
Reserve
transferred to
Accrued Post
Retirement
Benefit Obligation
$8,231
Non-current portion
of reserves for Net amount
closed plants and transferred to
environmental matters current
$70,058 $69,400 liabilities $30,265 $100,962
======= ======= ======= ========
Included in caption
"Other Liabilities
and Reserves" on
Balance Sheet
Other $27,600 $34,165
======= =======
C1
SOUTHERN PERU COPPER CORPORATION
AND CONSOLIDATED SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants C2
Consolidated Balance Sheets as of December 31, 1994 and 1993 C3-4
Consolidated Statements of Operations for the years ended
December 31, 1994, 1993 and 1992 C5
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992 C6
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1994, 1993 and 1992 C7
Notes to Consolidated Financial Statements C8-17
NOTES
The financial statement schedules required by SEC Regulation S-X are omitted
because they are either not applicable, not required or the information is
included in the notes to the financial statements.
The individual financial statements of Southern Peru Copper Corporation have
been omitted since the Company is primarily an operating company and the
subsidiaries included in the consolidation are wholly-owned.
The financial statements referred to above are as submitted to the Registrant by
Southern Peru Copper Corporation.
C2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Southern Peru Copper Corporation:
We have audited the consolidated balance sheets of SOUTHERN PERU COPPER
CORPORATION and CONSOLIDATED SUBSIDIARIES as of December 31, 1994 and 1993, and
the related consolidated statements of operations, changes in stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These 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 consolidated financial position of Southern Peru
Copper Corporation and Consolidated Subsidiaries at December 31, 1994 and 1993,
and the consolidated results of their operations, and their cash flows for each
of the three years in the period ended December 31, 1994 in conformity with
generally accepted accounting principles.
As described in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for income taxes in 1993.
New York, New York
January 24, 1995
COOPERS & LYBRAND L.L.P
C3
SOUTHERN PERU COPPER CORPORATION
and CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, December 31,
ASSETS: 1994 1993
---- ----
(Dollars in Thousands)
Current assets:
Cash and cash equivalents $ 93,336 $ 31,710
Marketable securities 42,997 35,838
Accounts receivable:
Trade:
Stockholders and affiliates 4,025 3,526
Other trade 82,692 38,736
Other 12,062 8,516
Inventories:
Metals:
Finished goods 8,737 9,988
Work-in-process 34,955 24,861
Supplies 71,566 73,940
Prepaid expenses 14,676 15,505
--------- ---------
Total current assets 365,046 242,620
--------- ---------
Property, at cost:
Buildings and equipment 1,125,519 1,033,929
Mine development 114,780 114,780
Mineral land 12,226 12,226
Land, other than mineral 867 863
Construction in progress 96,957 22,042
--------- ---------
Total property 1,350,349 1,183,840
Less, Accumulated depreciation,
amortization and depletion 827,499 793,121
--------- ---------
Net property 522,850 390,719
--------- ---------
Restricted cash 60,450 58,328
Other assets, including $12,026 in escrow deposits at December 31, 1994 and
investments (at cost) of $1,047 and $33,610
at December 31, 1994 and 1993, respectively 20,160 36,284
---------- ----------
Total $ 968,506 $ 727,951
========== ==========
See accompanying notes to consolidated financial statements.
C4
SOUTHERN PERU COPPER CORPORATION
and CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, December 31,
LIABILITIES: 1994 1993
---- ----
(Dollars in Thousands)
Current liabilities:
Current portion of long-term debt $ 3,855
Accounts payable:
Trade 62,437 $ 22,273
Other 3,437 5,248
Deferred Peruvian income taxes, current portion - 3,020
Accrued liabilities:
Interest 2,382 21
Salaries and wages 8,088 6,661
Taxes 18,372 6,872
Other 20,096 13,764
--------- ---------
Total current liabilities 118,667 57,859
--------- ---------
Long-term debt 114,118 15,600
Long-term payable to former Joint Venturer - 1,700
Accrued severance pay 14,806 20,778
Deferred Peruvian income taxes 6,242 5,564
--------- ---------
Total non-current liabilities 135,166 43,642
--------- ---------
Commitments and contingencies (Note 14)
Minority interest of labor shares
in the Peruvian Branch 79,824 61,410
--------- ---------
STOCKHOLDERS' EQUITY (Note 11):
Common stock, par value $0.01; authorized
100,000,000 shares, issued 76,251,193 shares,
outstanding 65,717,493 shares 763 763
Additional paid-in capital 122,477 122,477
Retained earnings 571,609 501,800
Treasury stock at cost, 10,533,700 shares (60,000) (60,000)
--------- ---------
Total stockholders' equity 634,849 565,040
--------- ---------
Total $ 968,506 $ 727,951
========= =========
See accompanying notes to consolidated financial statements.
C5
SOUTHERN PERU COPPER CORPORATION
and CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS of OPERATIONS
for the years ended December 31,
1994 1993 1992
---- ---- ----
(Dollars in Thousands
except for per share amounts)
Net sales:
Stockholders and affiliates $ 78,386 $ 62,617 $117,765
Other 623,292 484,894 504,268
-------- -------- --------
Total net sales 701,678 547,511 622,033
-------- -------- --------
Operating costs and expenses:
Cost of products sold 455,266 395,505 410,294
Administrative and other expenses 50,699 49,593 41,795
Depreciation, amortization and depletion 39,742 34,601 32,491
Provision for workers' participation 13,944 8,774 14,104
Other expense (income) - (11,147) (8,590)
-------- -------- --------
Total operating costs and expenses 559,651 477,326 490,094
-------- -------- --------
Operating income 142,027 70,185 131,939
Interest income 6,521 4,469 4,200
Other income (includes exchange gains of $1,619,
$9,031 and $5,624 in 1994, 1993 and 1992,
respectively) 23,204 11,423 3,163
Interest expense (7,779) (568) (448)
-------- -------- --------
Earnings before taxes on income, minority
interest of labor shares and cumulative effect
of the change in accounting principle 163,973 85,509 138,854
-------- -------- --------
Taxes on income:
Currently payable 56,481 40,080 71,238
Deferred (2,342) 5,081 1,468
-------- -------- --------
54,139 45,161 72,706
Minority interest of labor shares in income
of Peruvian Branch 18,610 11,218 20,510
-------- -------- --------
Earnings before cumulative effect of the
change in accounting principle 91,224 29,130 45,638
Cumulative effect of the change in
accounting principle - 165,092 -
-------- -------- --------
Net earnings $ 91,224 $194,222 $ 45,638
======== ======== ========
Per common share amounts:
Earnings before cumulative effect of the
change in accounting principle $ 1.39 $ 0.45 $ 0.69
Cumulative effect of the change in
accounting principle - 2.51 -
-------- -------- --------
Net earnings $ 1.39 $ 2.96 $ 0.69
======== ======== ========
Cash dividends $ 0.33 $ 0.27 $ 0.23
Weighted average number of shares outstanding
(in thousands) 65,717 65,717 65,717
See accompanying notes to consolidated financial statements.
C6
SOUTHERN PERU COPPER CORPORATION
and CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS of CASH FLOWS
for the years ended December 31,
1994 1993 1992
---- ---- ----
(Dollars in Thousands)
Cash flows from operating activities:
Operations:
Net earnings $ 91,224 $194,222 $ 45,638
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation, amortization and depletion 39,742 34,601 32,491
Provision for severance pay (5,972) (7,200) (18,849)
Deferred income taxes (including related
exchange gains of $489 and $377 in 1993
and 1992, respectively) (2,342) (160,500) 1,091
Minority interest of labor shares, net of
distributions 18,611 7,284 5,888
Foreign exchange gains (224) (2,118) (1,577)
Amortization of loan financing costs 548 - -
Gain on sale of investments (18,431) - -
Write-down of unconsolidated investment - 1,554 -
Changes in operating assets and liabilities:
Accounts receivable (47,705) (1,005) 51,997
Inventories (net of transfers to property
of $3,496, $3,992 and $3,884 in 1994, 1993
and 1992, respectively) 3,502 (15,465) 15,663
Prepaid expenses and other assets (net of
proceeds from the sale of Peruvian tax
credits of $21,026 and $18,341 in 1994 and
1993, respectively) (4,568) (4,418) (6,924)
Accounts payable and accrued liabilities 47,683 (12,277) (3,725)
Interest and income taxes payable 13,618 (8,994) 7,095
-------- -------- --------
Net cash from operating activities 135,686 25,684 128,788
-------- -------- --------
Cash flows used for investing activities:
Capital expenditures (116,912) (31,859) (23,063)
Purchase of refinery (65,000) - -
Investments in unconsolidated companies - (2,732) (489)
Investments in marketable securities (7,159) (33,683) (639)
Proceeds from the sale of investments 50,252 900 -
Other, net - (372) (126)
-------- -------- --------
Net cash used for investing activities (138,819) (67,746) (24,317)
-------- -------- --------
Cash flows provided by (used for) financing activities:
Dividends declared and paid (21,415) (18,000) (15,000)
Proceeds from long-term borrowings 104,176 15,600 -
Repayment of borrowings (1,803) - (37,677)
Escrow deposits on long-term loans (12,026) - -
Installment payment on purchase of Joint
Venture interest (4,200) (4,300) (4,235)
-------- -------- --------
Net cash provided by (used for) financing
activities 64,732 (6,700) (56,912)
-------- -------- --------
Effect of exchange rate changes on cash 27 (446) (1,022)
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents 61,626 (49,208) 46,537
Cash and cash equivalents, beginning of year 31,710 80,918 34,381
-------- -------- --------
Cash and cash equivalents, end of year $ 93,336 $ 31,710 $ 80,918
======== ======== ========
See accompanying notes to consolidated financial statements.
C7
SOUTHERN PERU COPPER CORPORATION
and CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS of CHANGES in STOCKHOLDERS' EQUITY
for the years ended December 31,
1994 1993 1992
---- ---- ----
(Dollars in Thousands)
Common stock:
Balance at beginning and end of year,
76,251,193 shares,(Note 11) $ 763 $ 763 $ 763
-------- -------- --------
Additional paid-in capital:
Balance at beginning and end of year 122,477 122,477 122,477
-------- -------- --------
Treasury stock:
Balance at beginning and end of year,
10,533,700 shares (60,000) (60,000) (60,000)
-------- -------- --------
Retained earnings:
Balance at beginning of year 501,800 325,578 294,940
Net earnings 91,224 194,222 45,638
Dividends paid (21,415) (18,000) (15,000)
-------- -------- --------
Balance at end of year 571,609 501,800 325,578
-------- -------- --------
Total stockholders' equity $634,849 $565,040 $388,818
======== ======== ========
See accompanying notes to consolidated financial statements.
C8
SOUTHERN PERU COPPER CORPORATION
and CONSOLIDATED SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation:
Southern Peru Copper Corporation (the Company) is a Delaware corporation which
prepares its financial statements in accordance with generally accepted
accounting principles in the United States. Investments in companies less than
20% owned or for which the Company does not exercise significant influence over
financial or operating policies are carried at cost. The Company operates two
copper mines, a smelter and a refinery in Peru (Peruvian Branch) and
substantially all of its assets are located there. The consolidated financial
statements include the accounts of the Company and its wholly owned
subsidiaries. Certain reclassifications have been made in the financial
statements from amounts previously reported.
Net sales:
Net sales represent the invoiced value of products containing copper, silver and
molybdenum. Price estimates used for provisionally priced shipments are based on
the Company's judgment of the current price level and its susceptibility to
decline during the settlement period.
Cash equivalents and marketable securities:
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. Marketable securities
include liquid investments with a maturity of more than three months when
purchased and are carried at cost, which approximates market value.
Peruvian tax credits:
Excess Peruvian tax credits are recorded as prepaid expenses and are utilized to
pay Peruvian taxes, are sold or are refunded by the Peruvian Tax Department. The
carrying value of the Peruvian tax credits approximates their market value.
Inventories:
Inventories are carried at the lower of average cost or market value. Costs
incurred in the production of inventory exclude general and administrative
costs.
Property:
Maintenance, repairs and gains or losses on assets retired or sold are reflected
in earnings as incurred. The cost of renewals is capitalized and the property
unit being replaced is retired. The cost of betterments is capitalized. General
and administrative costs incurred in mining exploration and development are
expensed as incurred.
Buildings and equipment are depreciated on the straight-line method over
estimated lives from 5 to 34 years, or the estimated life of the mine if
shorter. Mine development cost and the cost of Toquepala and Cuajone mineral
lands are capitalized and charged to earnings on the unit-of-production method
using economic ore reserves.
Concentration of Credit Risk:
Financial instruments which potentially subject the Company to a concentration
of credit risk consist primarily of cash and cash equivalents, marketable
securities and trade accounts receivable.
C9
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
The Company invests or maintains available cash with various high quality banks
or in commercial paper of highly rated companies. As part of its cash management
process, the Company regularly monitors the relative credit standing of these
institutions, and, by policy, limits the amount of credit exposure to any one
institution.
During the normal course of business, the Company provides credit to its
customers. Although the accounts receivable resulting from these transactions
are not collateralized, the Company has not experienced significant problems
with collection of accounts receivable.
The largest ten trade receivable balances accounted for 57% of the trade
accounts receivable at December 31, 1994, of which one customer represented 13%.
At December 31, 1993, the largest ten trade receivable balances accounted for
50%, of which one customer represented 10%.
Income taxes:
The Company adopted Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" (SFAS No. 109) effective January 1, 1993. SFAS No.
109, issued in February 1992, requires the adoption of the "liability" method of
calculating deferred taxes. Prior to the adoption of SFAS No. 109, the Company
provided for income taxes under the provisions of Accounting Principles Board
Opinion No. 11.
Deferred income taxes reflect the future tax consequences of differences between
the tax bases of assets and liabilities and their financial reporting amounts at
each year-end.
2. CHANGES IN ACCOUNTING PRINCIPLES
The Company adopted SFAS No. 109 effective January 1, 1993. The cumulative
effect as of January 1, 1993 of this change in accounting principle was a credit
to income of $165.1 million and is shown separately on the Company's
Consolidated Statement of Operations for the year ended December 31, 1993. The
adoption of the new method resulted in an additional charge to 1993 net earnings
of $4.1 million.
Effective January 1, 1994 the Company adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities", which requires that
investments in debt securities and equity securities be designated as trading,
held to maturity or available for sale. The Company's investments, consisting
primarily of commercial paper with maturities of 180 days or less, are
classified as held to maturity securities since the Company has the intent and
ability to hold such securities to maturity. The effect of adopting this
statement including the cumulative effect, as of January 1, 1994, is immaterial.
During 1994, the Company adopted SFAS No. 112, "Employer's Accounting for
Postemployment Benefits" which had no impact. In addition, in October 1994, the
Financial Accounting Standards Board issued SFAS No. 119, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments", which
requires disclosures related to derivatives with which the Company has complied
(see Note 7).
3. FOREIGN EXCHANGE
The functional currency of the Company is the U.S. dollar, since this is the
primary economic environment of the Company's operations. The Company's sales,
cash, trade receivables, fixed asset additions, trade payables and debt are
primarily dollar-denominated. A portion of the operating costs of the Company is
denominated in Peruvian Soles.
C10
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
All income, except for dividend and interest income of $5.4 million, $3.9
million and $3.3 million earned in 1994, 1993 and 1992, respectively, and gains
from the sale of certain investments (see Note 4), are derived from operations
conducted by the Company's Peruvian Branch. Export proceeds are deposited
directly to the Company's accounts, which can be maintained either in Peru or
abroad.
4. INVESTMENTS
During 1994, the Company sold three of its investments for $50.3 million. The
sales of these investments, primarily indirect interests in other Peruvian
mining companies carried at cost, resulted in a pretax gain of $18.4 million
($12.4 million after tax).
5. ACQUISITION
On May 31, 1994, the Company purchased the Peruvian government owned Minero Peru
Ilo refinery for $65.0 million in cash and a commitment to make an additional
$20.2 million of capital improvements over three years. Prior to the
acquisition, the Company was required to toll refine copper at the refinery
under a contract with Minero Peru. The costs of operating the refinery have been
included in the consolidated operating results since the date of acquisition.
The purchase price has been allocated to the assets acquired based on
preliminary estimates which will be revised upon finalization of the purchase
price allocation.
6. PERUVIAN AND U.S. TAXES
Taxes on income represent Peruvian income taxes, except for the provision
(benefit) for U.S. taxes of $7.3 million, ($1.5) million and $0.4 million in
1994, 1993 and 1992, respectively. United States taxes have been substantially
eliminated through the utilization of foreign taxes as either credits or
deductions from taxable income. At December 31, 1994, the foreign tax credit
carryforward available to reduce possible future U.S. income taxes amounted to
approximately $45.3 million of which $9.3 million expires in 1996, $20.5 million
expires in 1998 and $15.5 million expires in 1999. The Company has not
recognized the benefit of these foreign tax credits since it is unlikely that
realization will occur.
The components of the Peruvian deferred tax liability are:
December 31,
1994 1993
---- ----
(Dollars in Millions)
Current:
Inventories $ - $ 3.0
------ ------
Non-current:
-----------
Property, plant and equipment 5.9 5.8
Deferred financing costs 1.0 -
Other (0.7) (0.2)
------- -------
Net non-current deferred liability 6.2 5.6
------ ------
Total net deferred tax liability $ 6.2 $ 8.6
====== ======
Peruvian source income in 1994 is taxed at graduated rates up to a maximum of
30%, compared to 37% in 1993, with monthly payments required. Income generated
by the Cuajone mine, however, was subject to the contract rate of 54.5% during
the post-investment recovery period which concluded in October 1993.
C11
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
The results of the Cuajone mine are taxed at the lower general rate following
the conclusion of the post-recovery period.
Income taxes paid were $42.4 million, $47.7 million and $60.0 million in 1994,
1993 and 1992, respectively.
The Peruvian income tax at the maximum statutory rate is reconciled to the
actual tax provisions as follows:
1994 1993 1992
---- ---- ----
(Dollars in Millions)
Peruvian income tax at maximum statutory rates $ 49.2 $ 31.6 $ 51.4
Income taxed at rates higher (lower) than
maximum statutory rates 5.4 (3.5) (5.3)
Effect of decrease in statutory tax rate on
deferred tax liability (1.4) - -
Income taxed at Cuajone contract rate - 11.8 17.1
Effect of exchange transactions 0.9 8.5 13.7
Effect of labor shares - (1.1) (4.2)
Reversal of taxes previously accrued - (2.1) -
------- ------- -------
Taxes on income $ 54.1 $ 45.2 $ 72.7
======= ======= =======
7. NET SALES
Net sales were to the following customers:
1994 1993 1992
---- ---- ----
(Dollars in Millions)
Stockholders and affiliates:
ASARCO Incorporated $ 45.6 $ 34.1 $ 71.0
The Marmon Group, Inc.- Cerro Sales Corporation 16.5 13.1 23.6
Phelps Dodge Refining Corporation 9.6 9.5 23.2
Newmont Mining Corporation 6.7 5.9 -
------ ------ ------
$ 78.4 $ 62.6 $117.8
Other:
Japanese Group (a group of Japanese customers
purchasing under a single sales contract) 78.6 47.7 57.7
Metallgesellschaft Corporation 37.3 61.5 46.8
S.A. Sogem, N.V. (under a long-term
supply contract, see below) 81.8 - -
Others (none of which are individually 10% or
more of annual sales) 425.6 375.7 399.7
------ ------ ------
Net sales $701.7 $547.5 $622.0
====== ====== ======
C12
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
The Company sells copper in blister and refined form at industry standard
commercial terms. Substantially all of the Company's copper is sold under annual
contracts. The pricing is based on prevailing monthly average London Metal
Exchange (LME) copper prices for a quotational period, generally being the month
of, the month prior, or the month following the actual or contractual month of
shipment or delivery according to the terms of the contracts.
Under the terms of a sales contract with Mitsui & Co., Ltd. (Mitsui), the
Company is required to supply Mitsui, at its option, up to 24,000 metric tons of
copper cathodes annually for a seven-year period from January 1, 1994 through
December 31, 2000. Pricing of the cathodes is based upon the LME monthly average
settlement price plus a producer premium for refined copper cathodes which is
agreed upon annually based on world market terms.
Under the terms of a sales contract with Union Miniere, the Company is required
to supply Union Miniere through its agent, S.A. Sogem N.V., with 42,000 metric
tons of blister copper annually for a ten-year period from January 1, 1994
through December 31, 2003. The price of the copper contained in blister copper
supplied under the contract is determined based on the LME monthly average
settlement price less a refining allowance which is agreed upon annually based
on world market terms.
At December 31, 1994, the Company had put options for the second half of 1995
covering 14,250 metric tons of copper production at an average exercise price of
$1.07 per pound. Under the put option contracts, the Company has the right, but
not the obligation to sell copper at the exercise price, thereby effectively
providing the Company with a minimum price for a portion of its production. The
put options are carried at cost ($0.5 million at December 31, 1994), which
approximates fair market value.
8. MINORITY INTEREST OF LABOR SHARES AND WORKERS' PARTICIPATION
The Minority Interest of the Labor Shares and workers' participation in earnings
is based on the earnings of the Company's Peruvian Branch. The amounts payable
in respect of Labor Shares and workers' participation are calculated on the
basis of accounting principles acceptable in Peru and cannot therefore be
directly derived from the consolidated financial statements which are prepared
in accordance with U.S. generally accepted accounting principles. Labor Shares
currently represent 17.5% of the Branch's registered capital and are entitled to
participate in 17.5% of distributions of the Branch's after-tax earnings. The
17.5% share of the Branch's after-tax earnings attributable to the Labor Shares
is recorded as a minority interest on the Company's financial statements. The
holders of Labor Shares receive 17.5% of any cash distribution by the Branch.
Such distributions are recorded as a reduction of the minority interest of the
Labor Shares.
Provisions for workers' participation are calculated at 8% of pre-tax earnings
as required by Peruvian law. This participation is accrued and expensed on a
monthly basis and is recorded on the financial statements as a provision for
workers' participation. The Company distributes the accrued participation to
workers following the final results for the year.
Under Peruvian law, the holders of the Labor Shares are also entitled to
preemptive rights, which require the Branch to offer holders the right to
purchase a sufficient number of shares to maintain their existing ownership
percentage of the Branch whenever the Company invests additional capital in the
Branch. There are no legal requirements for the Company to repurchase Labor
Shares.
C13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
9. DEBT AND AVAILABLE CREDIT FACILITIES
The Company had $118.0 million and $15.6 million outstanding in long-term debt
at December 31, 1994 and 1993, respectively, pursuant to various loan agreements
described below, of which $3.9 million is currently due. There were no
outstanding short-term borrowings as of December 31, 1994. Lines of credit
available for export financing amounted to $73.0 million at December 31, 1994.
Interest paid for short-term borrowings was $0.4 million, $0.6 million and $1.7
million in 1994, 1993 and 1992, respectively. Interest paid for long-term
borrowings was $6.0 million in 1994 of which $1.6 million was capitalized. The
carrying value of the debt approximates its fair market value, since the
interest rates are variable. Fees paid in 1994 relating to the long-term debt
were $3.5 million and are amortized over the respective terms of the loans.
At December 31, 1994 the Company had five loan agreements outstanding that would
permit up to $255.6 million of borrowings, of which $135.8 million was available
to the Company. Two of the facilities would allow drawdowns of $165.0 million
until January 1996, of which $84.8 million was still available as of December
31, 1994; one facility would allow the Company to borrow up to $60.6 million
until May 1995, of which $40.5 million was still available as of December 31,
1994; and two other facilities allowed drawdowns until December 31, 1994 of up
to $30.0 million, of which $10.5 million was still available. The Company has
negotiated an extension of the drawdown period to December 31, 1995 for these
two agreements. Aggregate maturities of the borrowings outstanding at December
31, 1994 are as follows:
Fiscal Year Dollars in Millions
1995 $ 3.9
1996 19.4
1997 24.3
1998 23.6
1999 22.2
and thereafter 24.6
-------
Total $ 118.0
=======
Certain of the financing agreements contain covenants which either limit or in
certain circumstances prohibit dividends paid to stockholders. Under a $115.0
million credit facility, dividends paid cannot exceed certain quarterly and
annual limits. With respect to each of the first three quarters, dividends paid
cannot exceed the lesser of $7.5 million, 50% of net income (as defined therein)
for the prior fiscal quarter or 50% of year-to-date net income less dividends
paid during such year. With respect to the final quarter of a fiscal year,
dividends may be paid to the extent that total dividends for such fiscal year do
not exceed 50% of the first $50 million of net income plus 100% of net income in
excess of $50 million. Another loan restricts the payment of dividends based on
prior and projected cash flow available for debt service (as defined therein).
This loan's restrictions do not currently limit the Company's ability to pay
dividends. Under a third loan, the Company may not declare a dividend if the
aggregate amount of all dividend payments declared in any fiscal quarter is
greater than the sum of 50% of the first $12.5 million of Consolidated Net
Income (as defined therein) of the Company for the prior fiscal quarter and 100%
of the Consolidated Net Income in excess of $12.5 million for such prior fiscal
quarter. However, this agreement permits dividends with respect to the final
quarter of each fiscal year to the extent that total dividends for such fiscal
year do not exceed 50% of the first $50 million of earnings plus 100% of
earnings in excess of $50 million.
C14
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
One of the Company's financing agreements requires it to hedge a portion of its
copper production depending on certain defined conditions. For 1994, the Company
was required to hedge 130,000 metric tons of copper at an exercise price of
$0.70 per pound. To comply with this requirement, the Company purchased put
options at a cost of $1.8 million, which established a minimum price but did not
limit potential gains from price increases. After 1994 and until the financing
is repaid, the Company is required to hedge up to 130,000 metric tons of copper
per year when the forward copper price (as defined therein) does not exceed the
Company's cash costs, including capital and debt service, by at least $0.15 per
pound. As of December 31, 1994, the Company was not required to purchase options
under the terms of the agreement. Under the agreement the Company's hedging
costs need not exceed $4.0 million per year, and the Company is not required to
hedge more than 50,000 metric tons in any quarter. To date, the forward copper
price has been sufficiently above the Company's cash costs, including capital
and debt service, that no further hedging has been required. The put options for
1994 did not have a significant impact on earnings.
The financing agreements are secured by pledges of receivables of 66,000 metric
tons of copper per year and liens on assets in the categories of product
inventory, fixed assets and mining concessions. In addition, the agreements
require the Company to maintain specified ratios of debt to equity, current
assets to current liabilities and cash flow to debt service. Any reduction of
(or commitment to reduce) ASARCO Incorporated's interest in the Company to less
than 50% of the outstanding capital stock of the Company would constitute an
event of default under certain of the financing agreements. The Company is in
compliance with the various loan covenants as of December 31, 1994. Included in
Other Assets are amounts held in escrow accounts as required by two of the
Company's loan agreements. The funds will be released from escrow as scheduled
loan repayments are made.
The Company has an additional loan commitment to borrow up to $35.0 million to
support specific capital projects. This loan commitment has a fixed interest
rate of 6.43% for a term of 8 years. The commitment is subject to negotiation of
final agreements. During 1994, the Company paid commitment fees of $0.4 million.
10. PENSION BENEFIT PLAN
The Company has two noncontributory, defined benefit pension plans covering
salaried employees in the United States and certain employees in Peru. Benefits
are based on salary and years of service. The Company's funding policy is to
contribute amounts to the plans sufficient to meet the minimum funding
requirements set forth in the Employee Retirement Income Security Act of 1974,
plus such additional amounts as the Company may determine to be appropriate from
time to time. Plan assets are primarily invested in guaranteed investment
contracts, mutual funds and money market instruments.
Net pension costs for the years ended December 31, consists of:
1994 1993
---- ----
(Dollars in Millions)
Service cost $ 0.5 $ 0.3
Interest cost on projected benefit obligations 0.4 0.3
Return on plan assets 0.4 (0.3)
Other items (0.5) 0.4
------ ------
$ 0.8 $ 0.7
====== ======
C15
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
The funded status of the plans at December 31, using the projected unit credit
method is:
1994 1993
---- ----
(Dollars in Millions)
Assets and obligations:
Vested benefit obligation $ 4.1 $ 3.4
Non vested benefits 0.3 0.2
------ ------
Accumulated benefit obligation $ 4.4 $ 3.6
====== ======
Projected benefit obligation $5.5 $ 4.7
Less, Plan assets at fair value 3.5 2.5
------ ------
Excess of projected benefit obligation
over plan asset (2.0) (2.2)
Items not yet recognized in earnings:
Unrecognized initial net plan obligation 2.5 2.5
Unrecognized (gain) loss (0.3) 0.1
------ ------
Net accrued cost $ 0.2 $ 0.4
====== ======
The actuarial computations are based upon a discount rate on benefit obligations
of 8.75%, an expected long-term rate of return on plan assets of 8% and annual
salary increases of 4%. Pension information for 1992 is not presented due to
immateriality.
11. COMMON STOCK
At December 31, 1994, the stockholders of the Company were as follows:
Percent of Total
Number of Outstanding Common
Common Shares Shares
------------- -------------------
ASARCO Incorporated 34,379,145 52.31%
Cerro Trading Company, Inc. 13,600,334 20.70
Phelps Dodge Overseas Capital Corporation 10,680,799 16.25
Newmont Gold Company 7,057,215 10.74
----------- ------
65,717,493 100.00%
=========== ======
On November 4, 1994, the Company's stockholders approved a 100 for 1 stock split
consisting of the issuance of 100 shares of Common Stock for each one share of
Common Stock held of record on November 1, 1994. All of the share and per share
information included in the accompanying consolidated financial statements has
been adjusted to give retroactive effect to the stock split. In addition, the
Company's stockholders approved an increase in the Company's authorized Common
Stock from 984,370 to 100,000,000 shares and a change in its par value from $100
to $0.01 per share.
The Company declared and paid cash dividends of $21.4 million, $18.0 million and
$15.0 million in 1994, 1993 and 1992, respectively.
C16
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
12. RELATED PARTY TRANSACTIONS
ASARCO Incorporated (ASARCO), a stockholder of the Company, provides various
support services to the Company. In 1994, 1993 and 1992, these activities were
principally related to legal, tax and treasury support services. The amounts
paid to ASARCO for these services were $0.2 million, $0.4 million, and $0.2
million in 1994, 1993 and 1992, respectively. Sales to ASARCO and other
affiliates are disclosed in Note 7.
Fomenta, S.A., a wholly-owned Peruvian subsidiary, holds a 28.5% interest in the
capital of Metalurgica Peruana S.A., (MEPSA). MEPSA, a Peruvian company, is
engaged in the manufacture of metallurgical products used in the mining
industry. The Company purchases grinding media from MEPSA for use at the
Company's concentrators. Purchases were $8.0 million, $5.3 million, and $6.7
million in 1994, 1993 and 1992, respectively.
13. CUAJONE JOINT VENTURER
In September 1991, the Company purchased the Joint Venture interest in the
Cuajone mine from Billiton, B.V. for $15.2 million, to be paid in annual
installments through 1996. Provisions existed for acceleration of these payments
as stockholder dividends are made. Under the terms of this agreement, $4.2
million, $4.3 million and $4.2 million were paid in 1994, 1993 and 1992,
respectively. The final payment under the terms of the purchase agreement was
made on October 25, 1994.
14. COMMITMENTS AND CONTINGENCIES
Refining Assessment:
During 1993, assessment claims by Minero Peru for additional refining charges
for services provided in past years were settled by arbitration in the Company's
favor. This resulted in the reversal of a prior years' accrual of $11.1 million
which is included in 1993 earnings.
Cuajone Investment Recovery:
In December 1991, the Company and the Government of Peru signed an agreement
resolving all open issues concerning the conclusion of the investment recovery
contract which governed the development and operation of the Cuajone mine. The
Company agreed to undertake an investment program over the five years 1992-1996,
and the Peruvian Government agreed not to discriminate against the Company in
comparison with treatment given to other mining companies. As part of this
agreement, in 1991 the Company transferred $55.0 million from its accounts in
New York to an interest bearing account with the Central Reserve Bank of Peru,
to be withdrawn by the Company at its discretion solely for application to the
investment program. At December 31, 1994, the carrying amount of this deposit
was $60.5 million, which approximates its fair value.
The five projects specified in the investment program are in various stages of
completion. External financing, as described in Note 9, has been obtained by the
Company for use in the investment program.
Litigation:
On February 26, 1993 the Mayor of Tacna brought a lawsuit against the Company
seeking $100 million in damages from alleged harmful deposition of tailings,
slag and smelter emissions. On September 9, 1994, the First Civil Court of Tacna
dismissed the complaint. The plaintiff appealed and on December 29, 1994, the
Superior Court reversed the lower court's decision and remanded the case to that
court for further proceedings.
C17
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
On May 27, 1994, the Company received approval from the Ministry of Mines and
Energy for a modified tailings impoundment to be constructed at Quebrada Honda
at a projected cost of $27 million. This concluded another lawsuit previously
brought by the Mayor of Tacna, also relating to the disposal of mine tailings.
In another pending lawsuit, a group named the Association of Retired Employees
of Southern Peru Copper Corporation has challenged the accounting of the
Company's Peruvian Branch and its allocations of financial results to the Mining
Community during the 1970's. On July 22, 1994, the amended complaint was
dismissed by the Thirteenth Civil Court of Lima. The plaintiff appealed to the
Superior Court of Lima. The lower court's dismissal was affirmed by the Superior
Court of Lima on December 16, 1994. There is generally no further right of
appeal; however, the Peruvian Supreme Court may grant discretionary review on
limited issues in exceptional cases.
It is the opinion of management that the outcome of the legal proceedings
mentioned, as well as other miscellaneous litigation and proceedings now
pending, will not materially adversely affect the financial position or results
of operations of the Company and its consolidated subsidiaries. However, it is
possible that the outcome of the legal proceedings mentioned could have a
material effect on quarterly or annual operating results, when they are resolved
in future periods.
D1
ASARCO Incorporated
EXHIBIT INDEX
Exhibit Indexed
No. Description on Page
------ ------------- ---------
3. Certificate of Incorporation and By-Laws
(a) Certificate of Incorporation - restated, filed May 4, 1970
(Filed as an Exhibit to the Company's 1980 Annual Report on
Form 10-K and incorporated herein by reference)
(b) Certificate of Amendment to the Certificate of
Incorporation effective April 23, 1975 (Filed as an Exhibit
to the Company's 1980 Annual Report on Form 10-K and
incorporated herein by reference)
(c) Certificate of Amendment of Certificate of Incorporation
executed April 14, 1981 (Filed as an Exhibit to the
Post-Effective Amendment No. 8 to Registration Statement
No. 2-47616, filed April 30, 1981 and incorporated herein
by reference)
(d) Certificate of Amendment of Restated Certificate of
Incorporation filed on May 6, 1985 (Filed as an Exhibit to
the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1985 and incorporated herein by reference)
(e) Certificate of Amendment of Certificate of Incorporation
filed July 21, 1986 (Filed as an Exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1986 and incorporated herein by reference)
(f) Certificate of Amendment of Restated Certificate of
Incorporation, as amended filed April 22, 1987 (Filed as an
Exhibit to the Company's 1987 Annual Report on Form 10-K
and incorporated herein by reference)
(g) Statement of Cancellation filed July 31, 1987 whereby
155,000 shares of Series A Cumulative Preferred Stock and
862,500 shares of $9.00 Convertible Exchangeable Preferred
Stock were cancelled (Filed as an Exhibit to the Company's
1987 Annual Report on Form 10-K and incorporated herein by
reference)
(h) Statement of Cancellation filed November 20, 1987 whereby
1,026,900 shares of Series A Cumulative Preferred Stock
were cancelled (Filed as an Exhibit to the Company's 1987
Annual Report on Form 10-K and incorporated herein by
reference)
(i) Statement of Cancellation filed December 18, 1987 whereby
1,250,000 shares of Series B Cumulative Convertible
Preferred Stock were cancelled (Filed as an Exhibit to the
Company's 1987 Annual Report on Form 10-K and incorporated
herein by reference)
D2
ASARCO Incorporated
EXHIBIT INDEX
Exhibit Indexed
No. Description on Page
------ ------------- ---------
(j) Statement of Cancellation filed March 3, 1988 whereby
27,000 shares of Series A Cumulative Preferred Stock were
cancelled (Filed as an Exhibit to the Company's 1987 Annual
Report on Form 10-K and incorporated herein by reference)
(k) Certificate of Amendment of Restated Certificate of
Incorporation, as amended, filed August 7, 1989 (Filed as
an Exhibit to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1989 and incorporated herein
by reference)
(l) By-Laws as last amended on June 26, 1991
(Filed as an Exhibit to the Company's 1991 Annual Report on
Form 10-K and incorporated herein by reference.)
4. Instruments defining the rights of security holders, including
indentures
(a) There are currently various separate indentures, agreements
or similar instruments under which long-term debt of Asarco
is currently outstanding. The Registrant hereby agrees to
furnish to the Commission, upon request, a copy of any of
the instruments which define the rights of holders of
long-term debt securities. None of the outstanding
instruments represent long-term debt securities in excess
of 10% of the total assets of Asarco as of December 31,
1994
(b) Form of Rights Agreement dated as of July 26, 1989, between
the Company and First Chicago Trust Company of New York, as
Rights Agent, defining the rights of shareholders under a
July 1989 Shareholders' Rights plan and dividend
declaration (Filed as an Exhibit to the Company's report on
Form 8-K filed on July 28, 1989 and incorporated herein by
reference)
(c) Rights Agreement Amendment dated as of September 24, 1992,
between the Company and The Bank of New York, as Successor
Rights Agent under the Rights Agreement listed above (Filed
as an Exhibit to the Company's 1992 Annual Report on Form
10-K and incorporated herein by reference)
(d) Second Rights Agreement Amendment dated as of February 23,
1995 between the Company and The Bank of New York (Filed as
an Exhibit to the Company's report on Form 8-K filed on
February 24, 1995 and incorporated herein by reference)
(e) Indenture Agreement dated as of February 1, 1993 between
the Company and Bankers Trust Company, as Trustee, covering
the issuance of debt securities registered by the Company
in April 1992, not to exceed $250 million (Filed as an
Exhibit to the Company's 1992 Annual Report on form 10-K
and incorporated herein by reference)
10. (a) Stock Option Plan as last amended on November 30, 1994 D9-D12
D3
ASARCO Incorporated
EXHIBIT INDEX
Exhibit Indexed
No. Description on Page
------ ------------- ---------
(b) Form of Employment Agreement entered into in 1985, as
amended in March and April 1989, among the Company and
currently 11 of its executive officers, including Messrs.
R. de J. Osborne, F.R. McAllister, K.R. Morano, R.M.
Novotny and R.J. Muth (Filed as an Exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1989 and incorporated herein by reference)
(c) Deferred Fee Plan for Directors, as amended through January
26, 1994 (Filed as an Exhibit to the Company's 1993 Annual
Report on Form 10-K and incorporated herein by reference)
(d) Supplemental Pension Plan for Designated Mid-Career
Officers, as amended through January 25, 1995 D13-D17
(e) Retirement Plan for Non-Employee Directors, as amended
through January 25, 1995 D18-D22
(f) Directors' Stock Award Plan, as amended through January 27,
1993 (Filed as an Exhibit to the Company's 1992 Annual
Report on Form 10-K and incorporated herein by reference)
(g) Stock Incentive Plan adopted by the Company's Shareholders
on April 25, 1990, as last amended on November 30, 1994 D23-D29
11. Statement re Computation of Earnings Per Share D4
21. Subsidiaries of the Registrant D5-D8
23. Report of Independent Accountants on Financial Statement Schedules
and Consent of Independent Accountants are included on page A62 of
this Annual Report on Form 10-K.
Report on Form 11-K relating to the Savings Plan for Salaried Employees of
ASARCO Incorporated and Participating Subsidiaries is to be filed by amendment
on Form 10-K/A.
Copies of exhibits may be acquired upon written request to the Treasurer and the
payment of processing and mailing costs.
D4
Exhibit 11 Statement re Computation of Earnings per Share
----------------------------------------------
This calculation is submitted in accordance with regulation S-K item 601(b)(11).
Fully Diluted Earnings per Common Share
(in thousands, except per share amounts)
For the years ended December 31,
1994 1993 1992
---- ---- ----
Net earnings (loss) applicable to common stock
before cumulative effects of changes in
accounting principles $64,034 $(70,676) $(29,127)
Cumulative effect of changes in accounting
principles - (86,295) (53,964)
------- -------- ---------
Net earnings (loss) applicable to common stock $64,034 $ 15,619 $(83,091)
======= ======== =========
Weighted average number of common shares
outstanding 41,905 41,594 41,364
Shares issuable from assumed excercise
of Common Stock Purchase Warrants - - -
Shares issuable from assumed excercise
of Stock Options 91 7 40
------ ------ -------
Weighted average number of common shares
outstanding, as adjusted 41,996 41,601 41,404
====== ====== =======
Fully diluted earnings per share:
Net earnings (loss) applicable to common
stock before cumulative effects of changes
in accounting principles $1.52 $ (1.70) $ (0.70)
Cumulative effect of changes in accounting
principles - 2.08 (1.31)
----- ------- --------
Net earnings (loss) applicable to common
stock $1.52 $ .38 $ (2.01)
===== ======= ========
Primary earnings per share:
Net earnings (loss) applicable to common
stock before cumulative effect of changes
in accounting principles $1.53 $ (1.70) $ (0.70)
Cumulative effect of changes in
accounting principles - 2.08 (1.31)
----- ------- -------
Net earnings (loss) applicable to common
stock $1.53 $ .38 $ (2.01)
===== ======= ========
D5
Item 14. (c) Exhibit 21 Subsidiaries of the Registrant
Percentage of
voting securities Key to
owned or other notes
Name of Company bases of control below
----------------- ------------------ ------
PARENTS: None
-------
Registrant: ASARCO Incorporated (A)
SUBSIDIARIES AND OTHER ASSOCIATED COMPANIES:
-------------------------------------------
1 Air Resources Corporation (Delaware) 100.0 (C)
2 Alta Mining and Development Company (Utah) 62.4 (C)
3 American Limestone Company, Inc. (Delaware) 100.0 (A)
4 American Smelting and Refining Company (New Jersey) 100.0 (C)
5 AR Mexican Explorations Inc. (Delaware) 100.0 (A)
6 Compania Minera Real de Las Lomas, S.A. de C.V. 100.0 (A)
(Mexico)
7 Minera San Bernardo, S.A. de C.V. (Mexico) 100.0 (A)
8 Minera Santa Regina, S.A. de C.V. (Mexico) 100.0 (A)
9 AR Mexican Holdings, Inc. (Delaware) 100.0 (A)
10 AR Specialty Chemicals, S. A. de C.V. (Mexico) 100.0 (A)
11 Enthone-OMI de Mexico S.A. de C.V. (Mexico) 100.0 (A)
12 Rafco Kemicals S.A. de C.V. (Mexico) (See 45) 17.0 (B) (E)
13 AR Montana Corporation (Delaware) 100.0 (A)
14 Asarco Australian Holdings, Inc. (Delaware) 100.0 (A)
15 M.I.M. Holdings Limited (Australia) 15.4 (B) (E)
16 Asarco (Delaware) Incorporated (Delaware) 100.0 (A)
17 Grupo Mexico, S.A. de C.V. (Mexico) (See 25 & 101) 2.4 (B) (E)
18 Asarco Exploration Company, Inc. (New York) 100.0 (A)
19 ASARCO Guyane Francaise S.A.R.L. 100.0 (A)
20 Asarco Exploration Company of Canada, Limited
(Canada) 100.0 (A)
21 Asarco Finance Limited (Bermuda) 100.0 (C)
22 Asarco International Corporation (Delaware) 100.0 (A)
23 Asarco International Corp. FSC (Virgin Islands) 100.0 (A)
24 Asarco de Mexico (Delaware) Inc. 100.0 (A)
25 Grupo Mexico, S.A. de C.V. (Mexico) (See 17 & 101) 0.09 (B) (E)
26 Asarco Oil and Gas Company, Inc. (New York) 100.0 (A)
27 ASARCO Santa Cruz, Inc. (Delaware) 100.0 (A)
28 Covington Land Company (Delaware) 100.0 (A)
29 CP Water Company (Arizona) 50.0 (A)
30 Asarco Trans-Ural Company (Delaware) 100.0 (A)
31 Asarco Aginskoe, Inc. (Delaware) 100.0 (A)
32 A/O KAMGOLD (Russia) 25.0 (B) (E)
33 BioTrace Laboratories, Incorporated (Utah) 100.0 (A)
34 Bridgeview Management Company, Inc. (New Jersey) 100.0
35 Compania Minera Asarco, S.A. (Chile) 100.0 (A)
36 Copper Basin Railway, Inc. (Delaware) 45.0 (B) (D)
37 Domestic Realty Company, Inc. (Montana) 100.0 (A)
38 Encycle, Inc. (Delaware) 100.0 (A)
39 Hydrometrics, Inc. (Delaware) 100.0 (A)
40 Encycle/Texas, Inc. (Delaware) 100.0 (A)
41 Enthone, Incorporated (New York) 100.0 (A)
42 Ionic International Inc. (Michigan) 100.0 (A)
43 Meltex, Inc. (Japan) 16.25 (B) (D)
44 Enthone-OMI (Singapore) Pte. Ltd. (Singapore) 8.0 (A)
(See 93)
45 Rafco Kemicals, S.A. de C.V. (Mexico) (See 12) 34.0 (B) (E)
46 Enthone-OMI, Inc. (Delaware) 100.0 (A)
47 Ebara-Udylite Co., Ltd. (Japan) 45.0 (B) (D)
48 Electroplating Engineers of Japan Ltd. (Japan) 25.0 (B) (D)
(See 82)
D6
Form 10-K
Item 14. (c) Exhibit 21 Subsidiaries of the Registrant
Percentage of
voting securities Key to
owned or other notes
Name of Company bases of control below
----------------- ------------------ -------
SUBSIDIARIES AND OTHER ASSOCIATED COMPANIES, cont'd:
----------------------------------------------------
49 Alpha Metals of Japan (Japan) 50.0 (B) (D)
50 Electroplating Engineers S.A. (Switzerland) 24.0 (B) (D)
(see 52)
51 Enthone-OMI (Benelux) B.V. (The Netherlands) 100.0 (A)
52 Electroplating Engineers S.A. (Switzerland) 20.0 (B) (D)
(see 50)
53 Enthone-OMI (France) S.A. (France) (See 58) 28.5 (A)
54 OMETEC, S.A. (Switzerland) 51.0 (A)
55 Enthone-OMI (Canada) Inc. (Ontario, Canada) 100.0 (A)
56 Enthone-OMI (Deutschland)GmbH (Germany) (See 80) 75.0 (A)
57 Imasa B.V. (The Netherlands) 100.0 (A)
58 Enthone-OMI (France) S.A. (France) (See 53) 71.5 (A)
59 Enthone-OMI Holdings (U.K.) Ltd. (United 82.41 (A)
Kingdom) (see 76)
60 AMZA Ltd. (Israel) 33.3 (B) (D)
61 Enthone-OMI Marketing (Europe) Ltd. (United 100.0 (A)
Kingdom)
62 Enthone-OMI (U.K.) Limited (United Kingdom) 100.0 (A)
63 Friedr. Blasberg Svenska AB (Sweden) (See 67) 24.7 (B) (D)
64 Imasa Limited (United Kingdom) 100.0 (A)
65 L.P.W. Chemie GmbH (Germany) 49.0 (B) (D)
66 Blasberg Oberflaechentechnik GmbH (Germany) 100.0 (A)
67 Friedr. Blasberg Svenska AB (Sweden) 24.7 (B) (D)
(See 63)
68 Galvano Production Chemie GmbH (Germany) 100.0 (A)
69 Nihon LPW K.K. (Japan) 5.0 (B) (E)
70 OMI International (Portugal) Lda. (Portugal) 100.00
71 Enthone-OMI (Hong Kong) Company Limited (Hong 5.5 (A)
Kong) (See 91)
72 Enthone-OMI (Italia) S.p.A. (Italy) (See 77) 51.6 (A)
73 Enthone-OMI K.K. (Japan) 100.0 (A)
74 Enthone-OMI (Sverige) A.B. (Sweden) 100.0 (A)
75 Finima S.A. (France) 100.0 (A)
76 Enthone-OMI Holdings (U.K.) Ltd. (United 17.59 (A)
Kingdom) (See 59)
77 Enthone-OMI (Italia) S.p.A. (Italy) (See 72) 48.4 (A)
78 Imasa A.G. (Switzerland) 40.0 (B) (D)
79 Internacional de Manufacturas Asociadas, S.A. 100.0 (A)
(Spain)
80 Enthone-OMI (Deutschland) GmbH (Germany)
(See 56) 25.0
81 OMI Holding S.A. (Switzerland) 100.0 (A)
82 Electroplating Engineers of Japan Ltd. (Japan) 25.0 (B) (D)
(See 48)
83 Enthone-OMI (Suisse) S.A. (Switzerland) 100.0 (A)
84 OMI International Corporation (Delaware) 100.0 (A)
85 Enthone-OMI (Australia) Pty. Ltd. (Victoria, 100.0 (A)
Australia)
86 Enthone-OMI (Austria) GmbH (Austria) 100.0 (A)
87 Enthone-OMI (Espana) S.A. (Spain) 100.0 (A)
88 Walmanick S.A. (Spain) 4.7 (B) (E)
89 Westbridge S.A. (Spain) 4.7 (B) (E)
D7
Form 10-K
Item 14. (c) Exhibit 21 Subsidiaries of the Registrant
Percentage of
voting securities Key to
owned or other notes
Name of Company bases of control below
---------------- ------------------ ------
SUBSIDIARIES AND OTHER ASSOCIATED COMPANIES, cont'd:
-----------------------------------------------------
90 Enthone-OMI (Europe) Corporation (Delaware) 100.0 (A)
91 Enthone-OMI (Hong Kong) Company Limited (Hong 94.5 (A)
Kong) (See 71)
92 Hua-Mei Electroplating Co. Ltd. (People's 45.0 (B) (D)
Rep.of China)
93 Enthone-OMI (Singapore) Pte. Ltd. (Singapore) 60.0 (A)
(See 44)
94 Enthone-OMI (Malaysia) SDN BHD (Malaysia) 100.0 (A)
95 Federal Mining and Smelting Company (Idaho) 100.0 (A)
96 Federated Metals Canada Limited (Canada) 100.0 (A)
97 Federated Genco Limited (Canada) 60.0 (B) (D)
98 Federated Metals Corporation (New York) 100.0 (A)
99 Lone Star Lead Construction Corp. (New York). 100.0 (A)
100 Geominerals Insurance Company, Ltd. (Bermuda) 100.0 (A)
101 Grupo Mexico, S.A. de C.V. (Mexico) (See 17 & 25) 21.1 (B) (E)
102 Lac d'Amiante du Quebec, Ltee (Delaware) 100.0 (A)
103 LAQ Canada, Ltd. (Delaware) 100.0 (A)
104 Mines Trading Company Ltd. (United Kingdom) 100.0 (A)
105 Mining Development Company (Delaware) 100.0 (A)
106 Puya Raymondi Empresa Minera S.A. (Bolivia) 70.0 (A)
107 Minto Explorations Ltd. (British Columbia) 32.1
108 Mission Exploration Company (Delaware) 100.0 (A)
109 Lesarco, Inc. (Phillipines) 30.0
110 NCBR, Inc. (Delaware) 100.0 (A)
111 Neptune Mining Company (Delaware) 52.2 (B) (D)
112 Northern Peru Mining Corporation (Delaware) 100.0 (A)
113 Corporacion Minera Nor Peru, S.A. (Peru) 80.0 (A)
114 Protective Technologies International, Inc.
(Delaware) 100.0 (A)
115 Silver Valley Resources Corporation (Delaware) 50.0 (A)
116 Southern Peru Copper Corporation (Delaware) 52.3 (B) (D)
117 The International Metal Company (New York) 100.0 (A)
118 Tulipan Company, Inc. (Delaware) 52.3 (B) (E)
D8
NOTES
------
(A)Included in financial statements of Registrant and consolidated subsidiaries
at December 31, 1994, filed as part of this Form 10-K.
(B)Excluded from financial statements of Registrant and consolidated
subsidiaries filed as part of this Form 10-K, except to the extent noted in
Notes D and E. These companies are not in the aggregate considered significant.
(C)Inactive, having no assets or liabilities.
(D)Carried on the equity method. None of the 50%-or-less owned companies
constitutes a significant subsidiary. Separate Financial Statements are
submitted herewith for Southern Peru Copper Corporation and its consolidated
subsidiaries.
(E)M.I.M. and Grupo Mexico are carried on the cost method. Commencing in the
third quarter of 1988, Asarco changed from its equity method of accounting for
Southern Peru Copper Corporation and commencing in 1994 returned to the equity
method of accounting.
D9
Exhibit 10(a)
ASARCO INCORPORATED
STOCK OPTION PLAN
As last amended on November 30, 1994
1. Purpose of the Plan. The Plan is designed to increase the interest of the
executive and other key salaried employees of the Company and of its
subsidiaries in the Company's business through the added incentive created by
the opportunity afforded for stock ownership under the Plan.
2. Administration of the Plan. The Plan will be administered by a Committee of
not less than three directors selected by the Board, to serve at the pleasure of
the Board. A member of the Committee will not be eligible, while a member, to
receive an Option under the Plan. He may, however, exercise Options previously
granted to him. Any action taken by a majority of the Committee shall be the
action of the Committee. The decision of the Committee on any questions
concerning or involved in the interpretation or administration of the Plan
shall, as between the Company and the Option holders, be final and conclusive.
The Committee may consult with counsel, who may be of counsel to the Company,
and shall not incur any liability for any action taken in good faith in reliance
upon the advice of counsel. Grants of Options to individuals selected by the
Committee will be subject to approval thereof by the Board of Directors and will
become effective upon execution and delivery by the Company of the documents
setting forth the terms of the Options. Within the limitations of the Plan, the
number of shares for which Options will be granted from time to time and the
periods for which the Options will be outstanding will be determined by the
Committee.
Options granted under the Plan may be either incentive stock options, as defined
in Section 422A(b) of the Internal Revenue Code, or options which do not meet
the requirements of said Section 422A(b) of the Code, hereinafter referred to as
non-qualified stock options.
3. Participants. Participants will be selected by the Committee from among the
executive and key salaried employees of the Company or of any subsidiary of the
Company, including officers.
4. Number of Shares. Subject to Section 5, the number of shares of Common Stock
of the Company which may be subject to Options granted pursuant to the Plan
after January 26, 1983 shall not exceed 1,100,000, plus the number of shares of
Common Stock (not in excess of 443,776) subject to Options granted pursuant to
the Plan prior to such date which thereafter lapse without being exercised. More
than one Option may be granted to the same participant. For Options granted
prior to 1987, subject to adjustment as provided below, no participant may be
granted incentive stock options in any one calendar year to purchase more than
$100,000 of Common Stock of the Company, valued at the time of the grant,
provided, however, that one-half of any unused portion of such amount may be
carried over for grants to such participants in any of the three succeeding
calendar years. For incentive stock options granted after December 31, 1986, the
aggregate fair market value (determined at the time of grant) of shares of
Common Stock with respect to which incentive stock options are first exercisable
under the terms of the Option and the Plan, or under all incentive stock option
plans (as defined in Section 422A of the Internal Revenue Code) of the Company,
or of its subsidiaries, during any calendar year shall not exceed $100,000.
Shares subject to the Plan may be either authorized but unissued shares (which
will not be subject to pre-emptive rights) or shares that were once issued and
subsequently reacquired by the Company. If any Option is surrendered before
exercise or lapses without exercise or for any other reason ceases to be
exercisable, the shares reserved therefor shall continue to be available under
the Plan.
D10
5. Stock Adjustment. To the extent permitted in the case of incentive stock
options by Sections 422A and 425 of the Internal Revenue Code, in the event that
the outstanding shares of Common Stock of the Company are increased or decreased
or changed into or exchanged for a different number or kind of shares or other
securities of the Company or of another corporation, through reorganization,
merger, consolidation, liquidation, recapitalization, reclassification, stock
split-up, combination of shares or dividend payable in stock of the class which
is subject to this Plan, appropriate adjustment in the number and kind of shares
as to which Options may be granted and as to which Options or portions thereof
then unexercised shall be exercisable, and in the Option Price thereof, shall be
made to the end that the proportionate number of shares or other securities as
to which Options may be granted and the Option holder's proportionate interest
under outstanding Options shall be maintained as before the occurrence of such
event. Any such adjustment in the shares or other securities subject to
outstanding Options (including any adjustment in the Option Price) shall be made
in such manner as not to constitute a modification as defined by subsection
(h)(3) of Section 425 of the Internal Revenue Code.
6. Option Price. The Option Price will be not less than 100% of the fair market
value of the shares at the time of the granting of the Option. Such fair market
value shall be determined by the Committee and shall be taken at not less than
the mean of the high and low prices of the Common Stock on the New York Stock
Exchange on the day on which the Option is granted, or, if no sale of the Common
Stock shall have been made on the Exchange on that day, then on the next
preceding day on which there was such a sale.
7. Terms of Options. Each Option will provide by its terms that it is not
exercisable after the expiration of ten years from the date such Option is
granted. Within this limitation the Committee will determine the expiration
dates of the Options. Options may be exercised at any time or from time to time,
within their terms, in whole or in part.
Unless the terms of an Option provide to the contrary, upon exercise, the Option
Price is payable in cash or by delivering Common Stock of the Company owned by
the grantee having a fair market value (determined as provided in Section 6) at
least equal to the Option Price, or a combination of Common Stock and cash; and
payment of the Option Price by any means shall be made prior to the delivery of
the shares as to which the Option was exercised. The payment of taxes, if any,
upon the exercise of an Option pursuant to this Section 7 or a stock
appreciation right relating thereto pursuant to Section 10, shall be in cash at
the time of exercise or on the applicable tax date under Section 83 of the Code,
if later; provided, however, that such tax withholding obligations with respect
to Options (including stock appreciation rights relating thereto) other than
incentive stock options (including stock appreciation rights relating thereto)
may be met by the withholding of Common Stock of the Company otherwise
deliverable to the grantee pursuant to procedures approved by the Committee.
Options other than incentive stock options may also be exercised in accordance
with a cashless exercise program under which either (A) if so instructed by the
grantee, shares may be issued directly to the grantee's broker or dealer upon
receipt of the purchase price in cash from the broker or dealer or (B) shares
may be issued by the Company to the grantee's broker or dealer in consideration
of such broker's or dealer's irrevocable commitment to pay to the Company that
portion of the proceeds from the sale of such shares that is equal to the
exercise price of the Option(s) relating to such shares.
8. Listing and Registration. The Company, in its discretion, may postpone the
issuance and delivery of shares upon any exercise of an Option until completion
of such stock exchange listing, or registration or other qualification of such
shares under any state or federal law, rule or regulation as the Company may
consider appropriate; and may require any person exercising an Option to make
such representations and furnish such information as it may consider appropriate
in connection with the issuance of the shares in compliance with applicable law.
D11
9. Consideration for Grant of Options. The grantee of an Option will, at the
time of the grant, be required to enter into an employment contract with the
Company for a period of not less than two years, subject to retirement pursuant
to the Company's Retirement Benefit Plan for Salaried Employees, and on other
terms approved by the Board of Directors, including the right of the Company to
terminate the employment at any time on two months notice.
10. Form of Options and Conditions to Their Exercise. It is intended, except as
otherwise provided herein, that the Options shall conform to the requirements of
Sections 422A and 425 of the Internal Revenue Code and to the provisions of this
Plan and shall otherwise be as determined by the Committee and approved by the
Board of Directors. The terms "parent corporation" and "subsidiary corporation"
shall have the meanings given to them by Section 425 of the Internal Revenue
Code. All section references to the Internal Revenue Code in this Plan are
intended to include any amendments or substitutions therefor in the Code
subsequent to the adoption of the Plan.
The Options by their terms will provide that they will not be transferable by
the grantee otherwise than by will or the laws of descent and distribution and
that each is exercisable, during the lifetime of the grantee, only by him. Each
incentive stock option granted prior to November 24, 1987, will provide that the
Option is not exercisable while there is outstanding (within the meaning of
Section 422A(c)(7) of the Internal Revenue Code as in effect prior to amendments
introduced by the Tax Reform Act of 1986) any incentive stock option which was
granted, before the granting of the Option, to the grantee to purchase Common
Stock of the Company or any corporation which at the time of the granting of the
Option is a parent or a subsidiary of the Company or a predecessor corporation
of any such corporation.
An Option may be exercised only if at all times during the period beginning with
the date of the granting of the Option and ending on the date of such exercise,
the grantee was an employee of either the Company or of a parent or subsidiary
of the Company or of another corporation referred to in Section 422(a)(2) of the
Internal Revenue Code, unless such continuous employment is terminated by such
employer, or by retirement under the Company's Retirement Benefit Plan for
Salaried Employees, or otherwise terminated with the written consent of the
employer. If such continuous employment is so terminated, the Option may also be
exercised within a period to be provided in the Option or by agreement with the
grantee of an Option not to exceed three years after such termination of
continuous employment, but in no event later than the termination date of the
Option. If the grantee should die at any time when the Option, or any portion
thereof, shall be exercisable by him, the Option will be exercisable within a
period provided for in the Option or by agreement with the grantee of the
Option, not to exceed the three years next succeeding his death, by the person
or persons to whom his rights under the Option shall have passed by will or by
the laws of descent and distribution, but in no event at a date later than the
termination of the Option.
Notwithstanding the foregoing, the Committee may, in its sole discretion, grant
to a grantee of an Option (whether outstanding on April 23, 1980 or granted
thereafter) the right (hereinafter referred to as a "stock appreciation right")
to elect, in the manner described below, in lieu of exercising his Option for
all or a portion of the shares covered by such Option, to relinquish his Option
with respect to any or all of such shares and to receive from the Company a
payment having a value equal to the amount by which (a) the fair market value of
a share of Common Stock on the date of such election, multiplied by the number
of shares as to which the grantee shall have made such election, exceeds (b) the
total purchase price for that number of shares of Common Stock under the terms
of such Option. A grantee who makes such an election shall receive payment in
the sole discretion of the Committee (i) in cash equal to such excess; or (ii)
in the nearest whole number of shares of Common Stock of the Company having an
aggregate value which is not greater than the cash amount calculated in (i)
above; or (iii) a combination of (i) and (ii) above. A stock appreciation right
may be exercised only when the amount described in (a) above exceeds the amount
described in (b) above. An election to exercise stock appreciation rights shall
be deemed to have been made on the day written notice of such election,
addressed to the Committee, is received at the Company's offices at 180 Maiden
Lane, New York, New York 10038. In the case of exercises of stock appreciation
rights the fair market value of a share of Common Stock on any date shall be the
closing sale price for such date as reported in New York Stock Exchange
Composite Transactions. An Option or any portion thereof with respect to which a
grantee has elected to exercise the stock appreciation rights described above
shall be surrendered to the Company and such Option shall thereafter remain
exercisable according to its terms only with respect to the number of shares as
to which it would otherwise be exercisable, less the number of shares with
respect to which stock appreciation rights have been exercised. The grant of a
stock appreciation right shall be evidenced by such form of agreement as the
Committee may prescribe. The agreement evidencing stock appreciation rights will
provide that they will not be transferable by the grantee otherwise than by will
or the laws of descent and distribution and that they will be exercisable,
during the lifetime of the grantee, only by him. Tax withholding obligations, if
any, arising upon the exercise of a stock appreciation right with respect to an
Option shall be satisfied in accordance with the last sentence of Section 7.
D12
11. Term of Plan. Options may be granted under the Plan at any time after it has
been adopted by the Stockholders and on or before January 25, 1993 at the end of
which period the Plan will expire, except as to Options then outstanding which
shall remain in effect until their exercise, expiration or termination.
12. Amendment of Plan. The Plan may be amended at any time by the Board of
Directors provided that (except pursuant to Section 5) no amendment made without
approval of stockholders shall increase the total number of shares which may be
issued under Options granted pursuant to the Plan, or reduce the minimum Option
Price, or extend the latest date upon which Options may be granted or shall be
exercisable, or change the class of employees eligible to receive Options. No
amendment of the Plan shall, without the optionee's consent, adversely affect
any Option then outstanding.
D13
Exhibit 10(d)
ASARCO INCORPORATED
SUPPLEMENTAL PENSION PLAN
FOR DESIGNATED MID-CAREER OFFICERS
As Amended through January 25, 1995
WHEREAS, the Organization and Compensation Committee (the "Committee") of the
Board of Directors of ASARCO Incorporated (the "Company") has been advised by
its independent compensation consultants that executive officers who join or
have joined the Company in mid-career, and subsequently serve as vice president
or higher rank for ten or more years, usually do not have sufficient time before
retirement to accrue benefits under existing pension plans of the Company
adequate to their needs or appropriate to reflect their experience or employment
responsibilities, and that a supplemental retirement benefits plan for such
persons should be adopted to remove these inequities, to encourage the continued
association of these executives with the Company, and to assure that the Company
is able to attract and retain executives with valuable prior experience; and
WHEREAS, the Committee has recommended the adoption of, and the Board of
Directors has approved and decided to adopt, the Asarco Supplemental Pension
Plan for Designated Mid-Career Officers (the "Plan") to permit the Company to
provide supplemental retirement benefits to key officers identified by the
Committee who otherwise would receive retirement benefits which would not
reflect their experience prior to employment with the Company or would not be
appropriate for the position of responsibility which they hold with the Company.
NOW, THEREFORE, the Company hereby adopts the Plan effective November 24, 1987.
1. DEFINITIONS.
1.1 Committee. Committee is the Organization and Compensation
Committee of the Board of Directors of ASARCO Incorporated
(the "Company").
1.2 Executive. Executive is an officer of the Company holding a
rank of Vice President or higher who is determined by the
Committee in its sole discretion to be a person who when first
employed by the Company already had prior business or
professional experience which was valuable to the Company and
relevant to the position for which he was employed. This term
shall also include the Executive's spouse in the event Benefit
payments, as described hereinafter, to such spouse have
commenced under the Plan.
1.3 Final Compensation Rate. The Final Compensation Rate of the
Executive shall mean the average of the sixty highest
consecutive monthly amounts of his basic compensation,
bonuses, and payments he received for his trust account each
month under the Salary Adjustment Program and Contingent Stock
Allotment Plan in the one hundred twenty months preceding his
retirement or termination of employment prior to age 65. Basic
compensation shall include any amount of salary or bonus which
is deferred under any deferred compensation plan of the
Company, at the time the services giving rise to the deferred
income are performed.
1.4 Primary Insurance Amount. The Primary Insurance Amount shall
be the Executive's Primary Insurance Amount for social
security purposes, determined on the basis of the Executive's
actual compensation with respect to years of employment with
the Company. With respect to years of employment, if any,
prior to employment with the Company, the Committee shall
estimate the employee's income that is treated as wages for
purposes of the Social Security Act. If the Executive's
employment with the Company is terminated prior to age 65, for
years following termination of employment, it shall be assumed
for purposes of calculating the Primary Insurance Amount that
the Executive earns compensation so as to accrue maximum
Social Security benefits.
D14
2. SUPPLEMENTAL BENEFIT. All supplemental benefits under the Plan shall be
determined according to this Section 2.
2.1 Benefit. The base annual Benefit payable to the Executive on
or after age 65 shall be determined by multiplying his
annualized Final Compensation Rate by 0.55 (fifty-five
percent). This amount shall be reduced by the sum of (i) the
annual amount of any benefits accrued to the date of
termination of employment with the Company (other than
benefits attributable to pre- or post-tax contributions made
by the Executive) which are payable, which have been paid or
which will become payable to the Executive from any defined
benefit or money purchase pension plan (whether qualified or
nonqualified) maintained by the Company or any other employer
at any time, and (ii) his annual Primary Insurance Amount. In
the event the Executive has received, is receiving, or is
scheduled to receive benefits from another such pension plan
in any form other than a single life annuity (including a
single sum distribution or a variable annuity) or at a time
other than when benefits commence under this Plan, the
benefits to be taken into account under (i) above shall be
determined in good faith by the Company based on actuarial
assumptions and factors reasonably utilized under the ASARCO
Salaried Retirement Plan (the "Salaried Plan") as of the date
of determination, or to the extent such factors or assumptions
do not contemplate a particular situation which arises under
this Plan, based upon the factors applied by the Pension
Benefit Guaranty Corporation for purposes of determining the
present value of benefits upon termination of a plan with
insufficient assets. In the event of a controversy concerning
the calculation of benefits described in (i) above, the
Committee shall in good faith determine the amount of benefits
pursuant to Section 5 of the Plan. The benefit remaining after
this reduction shall constitute the Executive's net annual
Benefit.
2.2 Form and Timing of Payment. The net annual Benefit shall be
payable to the Executive annually, in equal monthly
installments, for life, commencing upon the day upon which the
Executive is first eligible to receive benefits from the
Salaried Plan (whether or not benefits have actually commenced
from such plan) (the "Commencement Date") except as provided
under Section 3.1 below; provided, however, if the Executive
is married at his date of death, his surviving spouse shall
receive a lifetime benefit of 50% of the amount of the
Executive's Benefit for her lifetime; and further provided,
however, that an Executive may, (i) at least twelve (12)
months prior to the date on which the Executive terminates
employment with the Company (the "Date of Termination") or
(ii) in the event of termination by reason of "disability" (as
defined for purposes of the Salaried Plan), prior to the Date
of Termination, elect in writing to receive his Benefit in a
lump sum, payable as soon as practicable following the later
of the Commencement Date and the Date of Termination, except
as provided under Section 3.1 below. Any such election may be
revoked, provided that no such revocation shall be given
effect unless it is made in writing at least twelve (12)
months prior to the Date of Termination. The amount of such
lump sum shall be the lump sum equivalent value of the
Benefit, determined (after taking into account, if applicable,
the reductions for early commencement of Benefits set forth in
Section 3.2) by using the following actuarial assumptions for
the Executive (and spouse, if married at the date of
determination):
Interest Rate: The rate will be the yield on U.S.
Treasury debt obligations with a 10-year
maturity. The rate will be determined as of
the Date of Termination or, if elected by
the Participant at least 12 calendar months
prior to the Date of Termination, the rate
in effect as of the date 12 calendar months
prior to the Date of Termination.
D15
Mortality Table: The Mortality Table contained in U.S.
Internal Revenue Service Revenue Ruling
95-6 or any succeeding Revenue Ruling
issued by the Internal Revenue Service for
use in applying the provisions of sections
415 and 417(e) of the Internal Revenue
Code.
2.3 Eligibility for Benefit. Except for payments under Section 3.3
no Benefit shall be payable unless the Executive shall have
been in the employ of the Company as a Vice President or
officer of higher rank for a period of at least 10 years on
his date of termination of employment.
3. TERMINATION OF EMPLOYMENT PRIOR TO AGE 65. If the Executive terminates
employment prior to age 65, for any reason, his rights and Benefits
under the Plan will be determined in accordance with this Section 3.
3.1 Benefit Commencement. The commencement date of Benefit
payments shall be the day upon which the Executive is first
eligible to receive benefits from the Salaried Plan (and the
Executive shall have no right to elect any other commencement
date); provided, however, that at the option of the Company,
the Company may require that the Executive's benefit
commencement date shall be age 65, if later than the date
Benefits would otherwise commence hereunder. The option
provided to the Company herein shall not be exercised
unreasonably or in bad faith.
3.2 Benefit Adjustment. If the Executive terminates prior to age
65 for reasons other than death or total and permanent
disability, as determined by the Company's physician, his
Benefit shall be reduced by 33/100 of one percent (0.0033) for
each month such termination precedes the month in which he
attains age 65.
3.3 Death and Disability. If the employment of the Executive with
the Company terminates prior to age 65 but after completion of
at least 10 years service with the Company, whether or not as
an officer, due to reason of total and permanent disability,
as determined by the Company's physician, the Executive will
be eligible for immediate commencement of Benefit payments
pursuant to Section 2. Further, no reduction in Benefits will
be made under Section 3.2 above. If the employment of the
Executive with the Company terminates prior to the age 65 but
after completion of at least 10 years service with the
Company, whether or not as an officer, for the reason of
death, the Executive's surviving spouse, if any, shall be
eligible for immediate commencement of the survivor portion of
the Executive's Benefit set forth in Section 2.2 above, except
that if the spouse is more than 60 months younger than the
Executive, such spouse's benefit shall be reduced by 1/12 of
1% for each full month by which the spouse is more than 60
months younger than the Executive; provided, however, that in
determining the amount of such survivor benefit, no reduction
shall be made pursuant to Section 3.2 for the early
commencement of benefits; and further provided, however, that
if at the time of the Executive's death, a valid lump sum
election is in effect with respect to the Executive's Benefit,
the survivor portion of such Benefit (after applying the
factors set forth above) shall be paid in a lump sum as soon
as practicable after the Executive's death, and the amount of
such lump sum shall be determined in a manner consistent with
the actuarial assumption set forth in Section 2.2 above.
3.4 Company Consent. Except for termination of employment under
Section 3.3 above, if the Executive voluntarily terminates
employment with the Company prior to age 65 without the
express, written consent of the Company, all rights of the
Executive to Benefits hereunder shall thereupon terminate; it
being understood that if the Executive's employment is
terminated at the Company's request, no Benefits hereunder
shall be forfeited pursuant to this Section 3.4.
D16
4. INDEMNIFICATION. The Company shall pay any and all legal fees and
expenses incurred by the Executive in seeking to obtain or enforce any
rights under the Plan, provided that Executive is successful in
obtaining or enforcing such rights.
5. ADMINISTRATION. Issues relating to the administration of the Plan and
payment of Benefits thereunder shall be determined in good faith by the
Committee pursuant to the terms of the Plan.
6. AMENDMENT. The Plan may not be terminated or amended except by action
of the Board of Directors of the Company, and may not be amended to
terminate or reduce or adversely affect Benefits to any Executive then
participating in the Plan without the approval of such Executive.
7. GOVERNING LAW; BINDING EFFECT. The Plan shall be governed and construed
and enforceable in accordance with the laws of the State of New Jersey.
If the Company is consolidated or merged with or into another
corporation, or if another entity purchases all, or substantially all
of the Company's assets the surviving or acquiring corporation shall
succeed to the Company's rights and obligations under the Plan. The
Plan shall inure to the benefit of, and is enforceable by, the
Executive's personal or legal representatives, executors,
administrators, successors, heirs, devisees, and legatees. If the
Executive dies while married and any amounts are payable under the
Plan, all such amounts, unless otherwise provided, shall be paid in
accordance with the terms of the Plan to the Executive's surviving
spouse.
8. NATURE OF OBLIGATIONS. The Company's obligations to pay Benefits under
the Plan shall be contractual in nature only, however, the amounts of
such payments may be held in a trust, the assets of which shall be
subject to the claims of the Company's general creditors in the event
of bankruptcy or insolvency only. Any benefit paid from such trust
shall reduce the amount of benefits owed by the Company.
9. NOTICE. Any notice or filing required or permitted to be given to the
Company shall be sufficient if in writing and hand delivered or when
sent by Registered or Certified mail to the principal office of the
Company, directed to the attention of the Secretary of the Company. Any
notice to the Executive must be in writing and is effective when
delivered or when mailed by Registered or Certified mail, return
receipt requested, postage prepaid to the Executive or his personal
representatives at his last known address.
10. EMPLOYMENT. Nothing contained in the Plan nor any action taken
hereunder shall be construed as a contract guaranteeing the Executive
continued status as an employee. Further, if the Executive has
committed willful misconduct in office materially injurious to the
Company or has been convicted of a felony relating to conduct in office
affecting the Company constituting willful violation of criminal law,
any rights of the Executive under the Plan shall terminate.
11. VALIDITY. In the event any provision of this Plan is held invalid,
void, or unenforceable, the same shall not affect in any respect
whatsoever the validity of any other provision of this Plan.
12. ASSIGNMENT. Executive may not assign, alienate, anticipate, or
otherwise encumber any rights, duties or amounts which he may be
entitled to receive under the Plan.
13. PROTECTIVE PROVISIONS. The Executive shall cooperate in good faith with
the Company in furnishing any and all information reasonably requested
by the Company in order to determine and facilitate Benefit payments
under the Plan.
14. GENDER, SINGULAR AND PLURAL. All pronouns in any variations thereof
shall be deemed to refer to the masculine or feminine as the identity
of the person or persons may require. As the context may require, the
singular may be read as the plural and the plural as the singular.
D17
15. CAPTIONS. The captions to the sections and paragraphs of the Plan are
for convenience only and shall not control or affect the meaning or
construction of any of its provisions.
IN WITNESS WHEREOF the Plan, as amended through January 25, 1995, has been
adopted by the Company upon the recommendation of the Committee and the approval
of its Board of Directors.
ASARCO Incorporated
By /s/ David B. Woodbury
---------------------
Vice President
Attest:
/s/ C. D. Gonzalez
------------------
Assistant Secretary
D18
Exhibit 10(e)
ASARCO INCORPORATED RETIREMENT PLAN FOR
NON-EMPLOYEE DIRECTORS
As Amended through January 25, 1995
Effective as of January 27, 1988, ASARCO Incorporated ("ASARCO") hereby
establishes the ASARCO Incorporated Retirement Plan for Non-Employee Directors,
a non-qualified deferred compensation plan for the exclusive benefit of its
non-employee directors, pursuant to authorization of the Board of Directors of
ASARCO.
ARTICLE I
INTRODUCTION
Section 1.1 Name of Plan. The name of the plan is the "ASARCO Incorporated
Retirement Plan for Non-Employee Directors." It is also referred to
as the "Plan."
Section 1.2 Effective Date. The effective date of the Plan is January 27,
1988.
ARTICLE II
DEFINITIONS
Section 2.1 "Board" shall mean the Board of Directors of ASARCO.
Section 2.2 "Compensation Committee" shall mean the Organization and
Compensation Committee of the Board or its delegate.
Section 2.3 "Non-Employee Director" shall mean a director serving on the
Board of ASARCO who is not an employee of ASARCO or any of its
subsidiaries or affiliated business entities.
Section 2.4 "Participant" shall mean a Non-Employee Director.
Section 2.5 "Plan Year" shall mean a calendar year.
Section 2.6 "Year of Service" shall mean 365 days of membership on the
Board both before and after the Effective Date; provided, however,
that in no event shall membership on the Board from the date of one
annual meeting of stockholders of ASARCO to the date of the next
consecutive annual meeting of such stockholders be treated as less
than one Year of Service. Membership on the Board shall be
cumulative for periods of service on the Board which are not
consecutive.
ARTICLE III
BENEFITS UNDER THE PLAN
Section 3.1 Eligibility to Receive Benefits Under The Plan. A Participant
under this Plan shall be eligible to receive benefits under this
Plan only if, at the time of termination from service on the Board
or at any later date, such Participant has not earned an accrued
benefit under any qualified retirement plan sponsored by ASARCO or
any of its subsidiaries or affiliated businesses. If a Participant
earns an accrued benefit under any such qualified retirement plan
after payments under this Plan to the Participant have commenced,
all future payments made from this Plan on behalf of such
Participant shall immediately be forfeited.
D19
Section 3.2 Vesting of Benefits Under the Plan. A Participant
shall be vested in benefits provided under the Plan in
accordance with the following schedule:
Years of Service Vested
as an ASARCO Director Percentage
--------------------- ----------
less than 5 0%
5 but less than 6 50%
6 but less than 7 60%
7 but less than 8 70%
8 but less than 9 80%
9 but less than 10 90%
10 or more 100%
Section 3.3 Amount of Annual Benefit Payable Under The Plan. A
vested Participant who is eligible to receive benefits
under this Plan shall be entitled to receive an annual
benefit equal to the amount of the annual retainer fee
in effect for service on the Board at the time the
Participant's most recent service on the Board is
terminated. Notwithstanding the above, the aggregate
annual amount, if any, payable during the remainder of
the calendar year in which the Participant terminates
service with the Board, shall be equal to:
a) The amount of the annual retainer fee in effect at
the time of termination from the Board, minus
b) The pro rata portion, if any, of the annual
retainer fee for the year the Participant's
service is terminated, and during which the
Participant served in the capacity of a director.
Section 3.4 Form of Benefit. Except as provided in Section 3.5,
benefits payable to a Participant shall be paid in the
form of a quarterly single life annuity in an amount
equal to one-fourth of the annual benefit determined in
accordance with Section 3.3.
In no event shall any benefits be payable under the
Plan after the death of a Participant.
Section 3.5 Time and Duration of Payments Under the Plan.
Benefits under the Plan shall commence as of the last
day of the calendar quarter coincident with or next
following the later of the date the Participant attains
age 65 or the date the Participant terminates service
on the Board (the "Date of Termination"). Such payments
shall be made on the last day of each calendar quarter
thereafter and shall continue until the last day of the
calendar quarter preceding the Participant's death;
provided, however, that a Participant may, (i) at least
twelve (12) months prior to the Date of Termination or
(ii) in the event of termination by reason of
disability (as determined by the Compensation
Committee), prior to the Date of Termination, elect in
writing to receive such payments in a lump sum, payable
as soon as practicable following the later of the date
the Participant attains age 65 or the Date of
Termination. Any such election may be revoked, provided
that no such revocation shall be given effect unless it
is made in writing at least twelve (12) months prior to
the Date of Termination. The amount of such lump sum
shall be the lump sum equivalent value of a
Participant's benefits under the Plan, determined by
using the following actuarial assumptions:
D20
Interest Rate: The rate will be the yield on U.S.
Treasury debt obligations with a 10-year
maturity. The rate will be determined as of
the Date of Termination or, if elected by
the Participant at least 12 calendar months
prior to the Date of Termination, the rate
in effect as of the date 12 calendar months
prior to the Date of Termination; provided,
however, if at the Date of Termination the
Participant has not attained age 64, such
Participant shall have the right to elect,
up to the time of attaining age 64, to
apply the rate in effect as of the date 12
calendar months prior to the date that
benefits commence under the Plan.
Mortality Table: The Mortality Table contained in
U.S. Internal Revenue Service Revenue
Ruling 95-6 or any succeeding Revenue
Ruling issued by the Internal Revenue
Service for use in applying the provisions
of sections 415 and 417(e) of the Internal
Revenue Code.
Notwithstanding any other provision of this Plan to the
contrary, the Chairperson of the Compensation Committee
may, in his or her sole discretion, direct that
payments be made before such payments are otherwise due
if, for any reason (including, but not limited to, a
change in the tax or revenue laws of the United States
of America, a published ruling or similar announcement
issued by the Internal Revenue Service, a regulation
issued by the Secretary of the Treasury or his
delegate, or a decision by a court of competent
jurisdiction involving a Participant), it believes that
a Participant has recognized or will recognize income
for federal income tax purposes with respect to amounts
that are or will be payable under the Plan before they
are paid. In making this determination, the Chairperson
shall take into account the hardship that would be
imposed on the Participant by the payment of federal
income taxes under such circumstances.
Section 3.6 Non-Assignability of Interests. The interests
herein and the right to receive benefits hereunder may
not be anticipated, alienated, sold, transferred,
assigned, pledged, encumbered, or subjected to any
charge or legal process, and if any attempt is made to
do so, or a Participant becomes bankrupt, the interests
under the Plan of the person affected may be terminated
by the Compensation Committee.
Section 3.7 No Offsets. Under no circumstances shall ASARCO be
entitled to offset benefits payable pursuant to the
Plan to a Participant in any manner with respect to any
claim it may have against such Participant.
D21
ARTICLE IV
PLAN ADMINISTRATION
Section 4.1 Administration. The Plan shall be administered by
the Compensation Committee. The Compensation Committee
shall have the authority to interpret the Plan and any
such interpretation shall be final and binding on all
parties. The Compensation Committee shall have the
authority to delegate the duties and responsibilities
of maintaining records, issuing such regulations as it
deems appropriate, and making distributions hereunder.
ARTICLE V
AMENDMENT AND TERMINATION
Section 5.1 Amendment and Termination. The Board may amend or
terminate the Plan at any time, provided that no such
amendment or termination shall adversely affect the
amounts payable under the Plan before the time of such
amendment or termination unless the Participant becomes
entitled to a benefit equal in value to such amount
under another plan or practice adopted by ASARCO.
ASARCO will pay for all distributions made pursuant to
the Plan and for all costs, charges and expenses
relating to the administration of the Plan.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Limitation of Rights. Neither the establishment of
this Plan, nor any modification hereof, nor the payment
of any benefits hereunder, shall be construed as giving
to any Participant or other person any legal or
equitable right against ASARCO, or any officer or
employee thereof, except as herein provided. Under no
circumstances shall participation in the Plan be
construed to confer upon any individual the right to
remain a member of the Board.
ASARCO's obligation to pay any benefits under this Plan
shall be contractual in nature only, however, the
amounts of such benefits may be held in a trust, the
assets of which shall be subject to the claims of
ASARCO's general creditors in the event of bankruptcy
or insolvency only. Any benefit paid from such trust
shall reduce the amount of benefits owed by ASARCO.
Section 6.2 Application of Payments. If, for any reason, the
Compensation Committee shall determine that it is not
desirable because of the incapacity of the person who
shall be entitled to receive any payments hereunder, to
make such payments directly to such person, the
Compensation Committee may apply such payment for the
benefit of such person in any way that it shall deem
advisable or may make any such payment to any third
person who, in the judgment of the Compensation
Committee, will apply such payment for the benefit of
the person entitled thereto. In the event of such
payment ASARCO and the Board shall be discharged from
all further liability for such payment.
Section 6.3 Applicable Law. All questions pertaining to the
construction, validity and effect of the Plan shall be
determined in accordance with the laws of the United
States and the laws of the State of New Jersey.
D22
IN WITNESS WHEREOF the Plan, as amended through January 25, 1995, has been
adopted by the Company upon the recommendation of its Organization and
Compensation Committee and the approval of its Board of Directors.
ASARCO Incorporated
By /s/ David B. Woodbury
----------------------
Vice President
Attest:
/s/ C. D. Gonzalez
-------------------
Assistant Secretary
D23
Exhibit 10(g)
ASARCO INCORPORATED
STOCK INCENTIVE PLAN
As last amended on November 30, 1994
1. Purpose
The purpose of this Stock Incentive Plan (the "Plan") is to increase the
interest of the executive and other key salaried employees of ASARCO
Incorporated (the "Company") and of its subsidiaries in the Company's business
through the added incentive created by the opportunity afforded for stock
ownership under the Plan. Such ownership will provide such employees with a
further stake in the future welfare of the Company, and encourage them to remain
with the Company and its subsidiaries. It is also expected that the Plan will
encourage qualified persons to seek and accept employment with the Company and
its subsidiaries. Pursuant to the Plan, such employees will be offered the
opportunity to acquire common stock through the grant of options, the award of
restricted stock under the Plan, bonuses payable in stock or a combination
thereof.
As used herein, the term "subsidiary" shall mean any present or future
corporation which is or would be a "subsidiary corporation" of the Company as
the term is defined in Section 425 of the Internal Revenue Code of 1986, as
amended from time to time (the "Code"). In the Plan, whenever the context so
indicates, the singular or plural and the masculine or feminine shall each be
deemed to include the others.
2. Administration of the Plan
The Plan shall be administered by the Organization and Compensation Committee
(the "Committee") as appointed from time to time by the Board of Directors of
the Company, which Committee shall consist of not less than three (3) members of
such Board of Directors: none of such members of the Committee shall be eligible
to be granted options or awarded restricted stock or receive bonuses payable in
stock under the Plan or shall have been so eligible within one year prior to
appointment.
In administering the Plan, the Committee may adopt rules and regulations for
carrying out the Plan. The interpretation and decision with regard to any
question arising under the Plan made by the Committee shall be final and
conclusive on all employees of the Company and its subsidiaries participating or
eligible to participate in the Plan. The Committee may consult with counsel, who
may be of counsel to the Company, and shall not incur any liability for any
action taken in good faith in reliance upon the advice of counsel. The Committee
shall determine the employees to whom, and the time or times at which, grants or
awards shall be made and the number of shares to be included in the grants or
awards. Grants of options or stock or other awards to individuals selected by
the Committee will become effective upon execution and delivery by the Company
of the documents setting forth the terms of the options or awards. Within the
limitations of the Plan, the number of shares for which options will be granted
from time to time and the periods for which the options will be outstanding will
be determined by the Committee. The Board of Directors of the Company may, by
resolution, establish procedures to be followed by the Committee.
3. Shares of Stock Subject to the Plan
The total number of shares that may be optioned or awarded under the Plan is
2,000,000 shares of the no par value common stock of the Company (the "Common
Stock") of which 300,000 shares may be awarded as restricted stock, except that
said numbers of shares shall be adjusted as provided in Paragraph 13 of the
Plan. Any shares subject to an option which for any reason expires, is
relinquished or is terminated unexercised and any restricted stock which is
forfeited may again be optioned or awarded under the Plan. Shares subject to the
Plan may be either authorized but unissued shares (which will not be subject to
pre-emptive rights) or shares that were once issued and subsequently reacquired
by the Company.
D24
4. Eligibility
Key salaried employees, including officers, of the Company and its subsidiaries
(but excluding non-employee Directors as well as members of the Committee) are
eligible to be granted options and awarded restricted stock under the Plan and
to have their bonuses payable in stock. The employees who shall receive awards
or options under the Plan shall be selected from time to time by the Committee,
in its sole discretion, from among those eligible, which may be based upon
information furnished to the Committee by the Company's management, and the
Committee shall determine, in its sole discretion, the number of shares to be
covered by the award or awards and by the option or options granted to each such
employee selected.
5. Duration of the Plan
No award or option may be granted under the Plan after April 24, 2000, but
awards or options theretofore granted may extend beyond that date.
6. Terms and Conditions of Stock Options
All options granted under this Plan shall be either Incentive Stock Options as
defined in section 422A of the Code or options other than Incentive Stock
Options. Each such option shall be subject to all the applicable provisions of
the Plan, including the following terms and conditions, and to such other terms
and conditions not inconsistent therewith as the Committee shall determine.
(a) The option price per share shall be determined by the Committee.
However, (i) in the case of Incentive Stock Options, the option price
shall not be less than 100% of the fair market value at the time the
Incentive Stock Option is granted and (ii) in the case of other
options, the option price shall not be less than 50% of the fair market
value at the time such other option is granted. The fair market value
shall be the mean of the high and low sales prices for the Common Stock
as reported on the Composite Tape for New York Stock Exchange issues
for the day on which the option is granted or, if there is no sale of
the shares reported on the Composite Tape on the date the option is
granted, then on the next preceding day on which there was such a sale,
or alternatively the mean of the bid and asked prices reported on the
Composite Tape at the close of the market on the date the option was
granted shall be deemed to be the fair market value of the shares. In
the event that the method for determining the fair market value of the
shares provided for in this Paragraph 6(a) shall not be practicable,
then the fair market value per share shall be determined by such other
reasonable method as the Committee shall, in its discretion, select and
apply at the time of grant of the option concerned.
(b) Each Incentive Stock Option shall be exercisable during and over such
period ending not later than ten years, or such later date as may be
allowable under the Code, from the date it was granted, as may be
determined by the Committee and stated in the option. Each other option
shall be exercisable during and over such period as may be determined
by the Committee and stated in the option.
(c) Unless otherwise provided in the option, no option shall be exercisable
within six months from the date of the granting of the option, except
as provided in Paragraph 13 of the Plan.
(d) Each option shall state whether it will or will not be treated as an
Incentive Stock Option.
D25
(e) Each option may be exercised by giving written notice to the Company
specifying the number of shares to be purchased, which shall be
accompanied by payment in full including applicable taxes, if any.
Payment, except as provided in the option, shall be (i) in cash, or
(ii) in shares of Common Stock of the Company already owned by the
optionee (the value of such stock shall be its fair market value on the
date of exercise as determined under Paragraph 6(a)), (iii) by a
combination of cash and shares of Common Stock of the Company, (iv) in
accordance with a cashless exercise program under which either (A) if
so instructed by the optionee, shares may be issued directly to the
optionee's broker or dealer upon receipt of the purchase price in cash
from the broker or dealer, or (B) shares may be issued by the Company
to an optionee's broker or dealer in consideration of such broker's or
dealer's irrevocable commitment to pay to the Company that portion of
the proceeds from the sale of such shares that is equal to the exercise
price of the option(s) relating to such shares, or (v) in such other
manner as permitted by the Committee at the time of grant or
thereafter. No optionee shall have any rights to dividends or other
rights of a shareholder with respect to shares subject to his option
until he has given written notice of exercise of his option and paid in
full for such shares.
(f) Notwithstanding the foregoing, the Committee may, in its sole
discretion, grant to a grantee of an option (whether outstanding on
April 25, 1990 or granted thereafter) the right (hereinafter referred
to as a "stock appreciation right") to elect, in the manner described
below, in lieu of exercising his option for all or a portion of the
shares covered by such option, to relinquish his option with respect to
any or all of such shares and to receive from the Company a payment
having a value equal to the amount by which (a) the fair market value
of a share of Common Stock on the date of such election, multiplied by
the number of shares as to which the grantee shall have made such
election, exceeds (b) the total purchase price for that number of
shares of Common Stock under the terms of such option. A grantee who
makes such an election shall receive payment at the sole discretion of
the Committee (i) in cash equal to such excess; or (ii) in the nearest
whole number of shares of Common Stock of the Company having an
aggregate value which is not greater than the cash amount calculated in
(i) above; or (iii) a combination of (i) and (ii) above. A stock
appreciation right may be exercised only when the amount described in
(a) above exceeds the amount described in (b) above. An election to
exercise stock appreciation rights shall be deemed to have been made on
the day written notice of such election, addressed to the Committee, is
received at the Company's offices at 180 Maiden Lane, New York, New
York 10038. In the case of exercises of stock appreciation rights the
fair market value of a share of Common Stock on any date shall be the
closing sale price for such date as reported on the Composite Tape for
New York Stock Exchange issues. An option or any portion thereof with
respect to which a grantee has elected to exercise the stock
appreciation rights described above shall be surrendered to the Company
and such option shall thereafter remain exercisable according to its
terms only with respect to the number of shares as to which it would
otherwise be exercisable, less the number of shares with respect to
which stock appreciation rights have been exercised. The grant of a
stock appreciation right shall be evidenced by such form of agreement
as the Committee may prescribe. The agreement evidencing stock
appreciation rights shall be personal and will provide that they will
not be transferable by the grantee otherwise than by will or the laws
of descent and distribution and that they will be exercisable, during
the lifetime of the grantee, only by him.
(g) An option may be exercised only if at all times during the period
beginning with the date of the granting of the option and ending on the
date of such exercise, the grantee was an employee of either the
Company or of a parent or subsidiary of the Company or of another
corporation referred to in Section 422A(a)(2) of the Code, unless such
continuous employment is terminated by such employer, or by retirement
under a retirement plan of the Company or a subsidiary, or otherwise
terminated with the written consent of the employer. If such continuous
employment is so terminated, the option may also be exercised within a
period to be provided in the option or by agreement with the grantee of
an option not to exceed three years after such termination of
continuous employment, but in no event later than the termination date
of the option. If the grantee should die at any time when the option,
or any portion thereof, shall be exercisable by him, the option will be
exercisable within a period provided for in the option or by agreement
with the grantee of the option, not to exceed the three years next
succeeding his death, by the person or persons to whom his rights under
the option shall have passed by will or by the laws of descent and
distribution, but in no event at a date later than the termination of
the option.
(h) The option by its terms shall be personal and shall not be transferable
by the optionee otherwise than by will or by the laws of descent and
distribution. During the lifetime of an optionee, the option shall be
D26
exercisable only by him.
(i) Notwithstanding any intent to grant Incentive Stock Options, an option
granted will not be considered an Incentive Stock Option to the extent
that it together with any earlier Incentive Stock Options permits the
exercise for the first time in any calendar year of more than $100,000
in value of Common Stock (determined at the time of grant).
(j) The Committee may, but need not, require such consideration from an
optionee at the time of granting an option as it shall determine,
either in lieu of, or in addition to, the limitations on exercisability
provided in Paragraph 6(c).
(k) The Committee may impose such restrictions on the resale of Common
Stock received by officers upon exercise of options or stock
appreciation rights as may be necessary to comply with Rule 16b-3 under
the Securities Exchange Act of 1934 or comparable successor rules.
7. Terms and Conditions of Restricted Stock Awards
The 14,200 outstanding shares of restricted stock issued under agreements dated
as of June 28, 1989 under authorizations by the Committee and Board of Directors
on that date, shall be deemed to have been issued under this Plan and shall be
subject to the terms and provisions of the Plan. All awards of restricted stock
under the Plan shall be subject to all the applicable provisions of the Plan,
including the following terms and conditions, and to such other terms and
conditions not inconsistent therewith, as the Committee shall determine.
(a) Awards of restricted stock may be in addition to or in lieu of option
grants.
(b) During a period set by the Committee at the time of each award of
restricted stock (the "restriction period"), the recipient shall not be
permitted to sell, transfer, pledge, or assign the shares of restricted
stock; except that such shares may be used, if the award permits, to
pay the option price of any option granted under the Plan provided an
equal number of shares delivered to the optionee shall carry the same
restrictions as the shares so used.
(c) Shares of restricted stock shall become free of all restrictions if the
recipient dies or his employment terminates by reason of permanent
disability, as determined by the Committee, during the restriction
period and, to the extent set by the Committee at the time of the award
or later, if the recipient retires under a retirement plan of the
Company or a subsidiary during such period. The Committee may require
medical evidence of permanent disability, including medical
examinations by physicians selected by it. If the Committee determines
that any such recipient is not permanently disabled or that a retiree's
restricted stock is not to become free of restrictions, the restricted
stock held by either such recipient, as the case may be, shall be
forfeited and revert to the Company.
(d) Shares of restricted stock shall be forfeited and revert to the Company
upon the recipient's termination of employment during the restriction
period for any reason other than death, permanent disability or, to the
extent determined by the Committee, retirement under a retirement plan
of the Company or a subsidiary except to the extent the Committee, at
its sole discretion, finds that such forfeiture might not be in the
best interest of the Company and, therefore, waives all or part of the
application of this provision to the restricted stock held by such
recipient.
D27
(e) Stock certificates for restricted stock shall be registered in the name
of the recipient but shall be appropriately legended and returned to
the Company by the recipient, together with a stock power, endorsed in
blank by the recipient. The recipient shall be entitled to vote shares
of restricted stock and shall be entitled to all dividends paid
thereon, except that dividends paid in Common Stock or other property
shall also be subject to the same restrictions.
(f) Restricted stock shall become free of the foregoing restrictions upon
expiration of the applicable restriction period and the Company shall
deliver Common Stock certificates evidencing such stock.
8. Bonuses Payable in Stock
In lieu of cash bonuses otherwise payable under the Company's compensation
practices to employees eligible to participate in the Plan, the Committee, in
its sole discretion, may determine that such bonuses shall be payable in stock
or partly in stock and partly in cash. Such bonuses shall be in consideration of
services previously performed and as an incentive toward future services and
shall consist of shares of Common Stock free of any restrictions imposed by the
Plan. The number of shares of Common Stock payable in lieu of an amount of each
bonus otherwise payable shall be determined by dividing such amount by the fair
market value of one share of Common Stock on the date the bonus is payable, with
fair market value determined in accordance with Paragraph 6(a).
9. Limited Rights
Any option granted under the Plan may, at the discretion of the Committee, at
the time of grant or thereafter contain provision for limited rights, as
described herein. A limited right shall be exercisable upon the occurrence of an
event specified in the option as an exercise event, and shall expire thirty (30)
days after the occurrence of such event. Exercise events may include, at the
discretion of the Committee and as specified in the option, consummation of a
tender or exchange offer for shares of the Company's Common Stock outstanding at
the commencement of such offer or a proxy contest the result of which is the
replacement of a majority of the members of the Company's Board of Directors, or
consummation of a merger or reorganization of the Company in which the Company
does not survive or in which the shareholders of the Company receive stock or
securities of another corporation or cash, or a liquidation or dissolution of
the Company or other similar events. Limited rights shall permit optionees to
receive in cash for each share covered by an option, without regard to the date
on which the option otherwise would be exercisable, either (i) the highest
market price per share that the Company's Common Stock traded as reported on the
Composite Tape for New York Stock Exchange issues for the sixty days immediately
preceding the exercise event or (ii) if provided by the Committee in its
discretion at the time of grant, the highest market price per share that the
Company's Common Stock traded as reported on the Composite Tape for New York
Stock Exchange issues on the date of exercise, less the option price per share
specified in the option. In the event the exercise event is consummation of a
tender or exchange offer, the value per share set by the offeror shall be
substituted for the highest market price per share provided in clause (i) in the
preceding sentence. Limited rights shall not extend the exercise period of any
option and, to the extent exercised, shall reduce the shares of Company Common
Stock available under the Plan and the shares of such Stock covered by the
options to which the limited rights relate.
10. Transfer, Leave of Absence
For the purpose of the Plan: (a) a transfer of an employee from the Company to a
subsidiary, or vice versa, or from one subsidiary to another, and (b) a leave of
absence, duly authorized in writing by the Company or a subsidiary, shall not be
deemed a termination of employment.
D28
11. Rights of Employees
(a) No person shall have any rights or claims under the Plan except in
accordance with the provisions of the Plan.
(b) Nothing contained in the Plan shall be deemed to give any employee the
right to be retained in the service of the Company or its subsidiaries.
12. Tax Withholding Obligations
(a) The payment of taxes, if any, upon the exercise of an option pursuant
to Paragraph 6(e) or a stock appreciation right pursuant to Paragraph
6(f), shall be in cash at the time of exercise or on the applicable tax
date under Section 83 of the Code, if later; provided, however, tax
withholding obligations may be met by the withholding of Common Stock
otherwise deliverable to the optionee pursuant to procedures approved
by the Committee.
(b) Recipients of restricted stock, pursuant to Paragraph 7, shall be
required to pay taxes to the Company upon the expiration of restriction
periods or such earlier dates as elected pursuant to Section 83 of the
Code; provided, however, tax withholding obligations may be met by the
withholding of Common Stock otherwise deliverable to the recipient
pursuant to procedures approved by the Committee. In no event shall
Common Stock be delivered to any awardee until he has paid to the
Company in cash the amount of tax required to be withheld by the
Company or has elected to have his withholding obligations met by the
withholding of Common Stock in accordance with the procedures approved
by the Committee or otherwise entered into an agreement satisfactory to
the Company providing for payment of withholding tax.
(c) The Company shall withhold from any cash bonus described in Paragraph
8, an amount of cash sufficient to meet its tax withholding
obligations.
13. Changes in Capital
Upon changes in the Common Stock by a stock dividend, stock split, reverse
split, subdivision, recapitalization, merger, consolidation (whether or not the
Company is a surviving corporation), combination or exchange of shares,
separation, reorganization or liquidation, the number and class of shares
available under the Plan as to which stock options and restricted stock may be
awarded, the number and class or shares under each option and the option price
per share shall be correspondingly adjusted by the Committee, such adjustments
to be made in the case of outstanding options without change in the total price
applicable to such options. If a transaction shall occur or be proposed which
the Committee in its sole discretion determines may materially adversely affect
the market value of the Common Stock after such transaction, the Committee may,
(i) cancel all restrictions on restricted stock previously awarded to recipients
under the Plan, (ii) accelerate the time of exercise so that all stock options
which are outstanding shall become immediately exercisable in full without
regard to any limitations of time or amount otherwise contained in the Plan or
the options and/or (iii) determine that the options shall be adjusted and make
such adjustments by substituting for Common Stock subject to options, stock or
other securities as may be issuable by another corporation in the transaction if
such stock or other securities are publicly traded or, if such stock or other
securities are not publicly traded, by substituting stock or other securities of
an affiliate of such corporation if the stock or other securities of such
affiliate are publicly traded, in which event the aggregate option price shall
remain the same and the amount of shares or other securities subject to option
shall be the amount of shares or other securities which could have been
purchased on the closing date or expiration date of such transaction with the
proceeds which would have been received by the optionee if the option had been
exercised in full prior to such transaction or expiration date and the optionee
had exchanged all of such shares in the transaction. No optionee shall have any
right to prevent the consummation of any of the foregoing acts affecting the
number of shares available to the optionee. Notwithstanding the foregoing
adjustments any changes to Incentive Stock Options shall, unless the Committee
determines otherwise, only be effective to the extent such adjustments or
changes do not adversely affect the tax status of such option.
D29
14. Use of Proceeds
Proceeds from the sale of shares pursuant to options granted under this Plan
shall constitute general funds of the Company.
15. Amendments
The Board of Directors may amend, alter or discontinue the Plan, including
without limitation any amendment considered to be advisable by reason of changes
to the Code, but no amendment, alteration or discontinuation shall be made which
would impair the rights of any holder of an award of restricted stock or option
or stock bonus theretofore granted, without his consent, or which, without the
approval of the shareholders, would:
(a) except as is provided in Paragraph 13 of the Plan, increase the total
number of shares reserved for the purpose of the Plan;
(b) except as is provided in Paragraphs 6(f) and 13 of the Plan, decrease
the option price of an Incentive Stock Option to less than 100% of the
fair market value on the date of the granting of the option; or
(c) extend the duration of the Plan.
The Committee may amend the terms of any award of restricted stock or option
theretofore granted, retroactively or prospectively, but no such amendment shall
impair the rights of any holder without his consent.
EX-27
2
5
1,000
YEAR
DEC-31-1994
DEC-31-1994
18321
0
389973
6249
299148
747317
2509072
1203573
3291025
465533
0
572591
0
0
944796
3291025
2031846
2031846
1781141
1781141
154077
(1490)
62529
25756
(9375)
16381
0
0
0
64034
1.53
1.53