SECURITIES AND EXCHANGE COMMISSION | |
Washington, D.C. 20549 | |
FORM 10-Q | |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE | |
SECURITIES EXCHANGE ACT OF 1934 | |
For the Quarter Ended June 30, 2003 | |
Commission File Number: 1-9916 | |
Freeport-McMoRan Copper & Gold Inc. | |
Incorporated in Delaware | 74-2480931 |
(IRS Employer Identification No.) | |
1615 Poydras Street, New Orleans, Louisiana 70112 | |
Registrant's telephone number, including area code: (504) 582-4000 | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes X No __
On June 30, 2003, there were issued and outstanding 146,640,225 shares of the registrant’s Class B Common Stock, par value $0.10 per share.
FREEPORT-McMoRan COPPER & GOLD INC.
TABLE OF CONTENTS
| Page |
Part I. Financial Information
| |
Financial Statements: | |
Condensed Balance Sheets
| 3 |
Statements of Income
| 4 |
Statements of Cash Flows
| 5 |
Notes to Financial Statements
| 6 |
Remarks
| 11 |
Report of Independent Public Accountants | 12 |
Management's Discussion and Analysis of Financial Condition | |
and Results of Operations
| 13 |
Quantitative and Qualitative Disclosures about Market Risks | 29 |
Controls and Procedures | 29 |
Part II. Other Information
| 29 |
Signature
| 30 |
Exhibit Index
| E-1 |
FREEPORT-McMoRan COPPER & GOLD INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
FREEPORT-McMoRan COPPER & GOLD INC.
BALANCE SHEETS (Unaudited)
June 30, | December 31, | |||||||
2003 | 2002 | |||||||
(In Thousands) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 740,360 | $ | 7,836 | ||||
Restricted investments and cash | 60,809 | 49,809 | ||||||
Accounts receivable | 242,961 | 190,509 | ||||||
Inventories | 380,610 | 387,247 | ||||||
Prepaid expenses and other | 9,370 |
| 2,579 | |||||
Total current assets | 1,434,110 | 637,980 | ||||||
Property, plant, equipment and development costs, net | 3,256,150 | 3,320,561 | ||||||
Deferred mining costs | 99,887 | 78,235 | ||||||
Restricted investments and cash | 23,708 | 58,137 | ||||||
Investment in PT Smelting | 43,144 | 44,619 | ||||||
Other assets | 92,556 | 52,661 | ||||||
Total assets | $ | 4,949,555 | $ | 4,192,193 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 254,331 | $ | 262,310 | ||||
Current portion of long-term debt and short-term borrowings | 144,196 | 77,112 | ||||||
Unearned customer receipts | 35,574 | 36,754 | ||||||
Rio Tinto share of joint venture cash flows | 54,039 | 51,297 | ||||||
Accrued interest payable | 62,888 | 29,081 | ||||||
Accrued income taxes |
| 78,085 |
| 81,319 | ||||
Total current liabilities | 629,113 | 537,873 | ||||||
Long-term debt, less current portion: | ||||||||
Convertible senior notes | 1,178,750 | 603,750 | ||||||
Senior notes | 715,977 | 450,000 | ||||||
Infrastructure asset financings | 279,701 | 310,674 | ||||||
Atlantic Copper debt | 172,385 | 233,642 | ||||||
Equipment and other loans | 81,478 | 84,212 | ||||||
FCX and PT Freeport Indonesia credit facilities | - | 279,000 | ||||||
Total long-term debt, less current portion | 2,428,291 | 1,961,278 | ||||||
Accrued postretirement benefits and other liabilities | 150,785 | 140,016 | ||||||
Deferred income taxes | 751,328 | 706,510 | ||||||
Minority interest | 154,905 | 129,687 | ||||||
Redeemable preferred stock | 450,003 | 450,003 | ||||||
Stockholders' equity |
| 385,130 |
| 266,826 | ||||
Total liabilities and stockholders' equity | $ | 4,949,555 | $ | 4,192,193 | ||||
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF INCOME (Unaudited)
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
2003 | 2002 | 2003 | 2002 | |||||||||
(In Thousands, Except Per Share Amounts) | ||||||||||||
Revenues | $ | 609,455 | $ | 407,999 | $ | 1,134,051 | $ | 800,679 | ||||
Cost of sales: | ||||||||||||
Production and delivery | 277,408 | 206,124 | 524,878 | 441,041 | ||||||||
Depreciation and amortization |
68,283 | 62,305 | 136,071 | 115,359 | ||||||||
Total cost of sales | 345,691 | 268,429 | 660,949 | 556,400 | ||||||||
Exploration expenses | 1,827 | 800 | 3,331 | 1,554 | ||||||||
General and administrative expenses |
20,711 | 16,360 | 37,219 | 32,772 | ||||||||
Total costs and expenses |
368,229 | 285,589 | 701,499 | 590,726 | ||||||||
Operating income | 241,226 | 122,410 | 432,552 | 209,953 | ||||||||
Equity in PT Smelting earnings (losses) | 2,270 | (2,537 | ) | 2,947 | (3,359 | ) | ||||||
Interest expense, net | (55,478 | ) | (43,492 | ) | (107,987 | ) | (87,774 | ) | ||||
Other expenses, net |
(8,907 | ) |
(9,331 | ) |
(10,526 | ) |
(9,295 | ) | ||||
Income before income taxes and minority interest | 179,111 | 67,050 | 316,986 | 109,525 | ||||||||
Provision for income taxes | (97,908 | ) | (46,040 | ) | (175,122 | ) | (74,854 | ) | ||||
Minority interest in net income of consolidated subsidiaries |
|
(14,259 | ) |
|
(5,975 | ) |
|
(25,170 | ) |
|
(11,529 | ) |
Net income before cumulative effect of changes in accounting principle | 66,944 | 15,035 | 116,694 | 23,142 | ||||||||
Cumulative effect of changes in accounting principle, net |
- | - | 9,082 | (3,049 | ) | |||||||
Net income |
66,944 | 15,035 | 125,776 | 20,093 | ||||||||
Preferred dividends |
(9,572 | ) |
(9,459 | ) |
(19,159 | ) |
(18,671 | ) | ||||
Net income applicable to common stock |
$ |
57,372 | $ |
5,576 | $ |
106,617 | $ |
1,422 | ||||
Net income per share of common stock: | ||||||||||||
Basic: |
| |||||||||||
Before cumulative effect | $0.39 | $0.04 | $0.67 | $0.03 | ||||||||
Cumulative effect | - | - | 0.06 | (0.02 | ) | |||||||
Net income per share of common stock | $0.39 | $0.04 | $0.73 | $0.01 | ||||||||
Diluted: | ||||||||||||
Before cumulative effect | $0.37 | $0.04 | $0.64 | $0.03 | ||||||||
Cumulative effect | - | - | 0.05 | (0.02 | ) | |||||||
Net income per share of common stock | $0.37 | $0.04 | $0.69 | $0.01 | ||||||||
| ||||||||||||
Average common shares outstanding: | ||||||||||||
| Basic | ||||||||||||
| Basic |
145,907 |
144,698 |
145,574 |
144,403 | ||||||||
| Diluted |
190,990 |
147,370 |
190,122 |
146,410 | ||||||||
| Dividends paid per common share |
$0.09 |
$ - |
$0.09 |
$ - | ||||||||
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, | ||||||||
2003 | 2002 | |||||||
(In Thousands) | ||||||||
Cash flow from operating activities: | ||||||||
Net income | $ | 125,776 | $ | 20,093 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 136,071 | 115,359 | ||||||
Cumulative effect of changes in accounting principle | (9,082 | ) | 3,049 | |||||
Deferred income taxes | 37,451 | 25,368 | ||||||
Equity in PT Smelting losses (earnings) | (2,947 | ) | 3,359 | |||||
Minority interest's share of net income | 25,170 | 11,529 | ||||||
Change in deferred mining costs | (21,652 | ) | (12,420 | ) | ||||
Currency translation loss | 6,277 | 8,726 | ||||||
Amortization of deferred financing costs | 9,571 | 6,005 | ||||||
Loss on early extinguishment of debt | 5,010 | - | ||||||
Elimination (recognition) of profit on PT Freeport Indonesia sales to PT Smelting | 4,422 | (1,091 | ) | |||||
Provision for inventory obsolescence | 3,000 | 3,000 | ||||||
Other | 9,745 | 4,214 | ||||||
(Increases) decreases in working capital: | ||||||||
Accounts receivable | (47,524 | ) | (21,076 | ) | ||||
Inventories | (11,309 | ) | (18,278 | ) | ||||
Prepaid expenses and other | (4,844 | ) | (2,894 | ) | ||||
Accounts payable and accrued liabilities | 19,448 | (13,145 | ) | |||||
Rio Tinto share of joint venture cash flows | 2,718 | 31,087 | ||||||
Accrued income taxes |
| (3,234 | ) |
| (10,050 | ) | ||
Increase in working capital |
| (44,745 | ) |
| (34,356 | ) | ||
Net cash provided by operating activities |
| 2 84,067 |
| 152,835 | ||||
Cash flow from investing activities: | ||||||||
PT Freeport Indonesia capital expenditures | (58,565 | ) | (80,215 | ) | ||||
Atlantic Copper capital expenditures | (3,623 | ) | (1,254 | ) | ||||
Sale of restricted investments to fund interest costs | 23,645 | 23,678 | ||||||
Sale of assets and other |
| 1,890 |
| (156 | ) | |||
Net cash used in investing activities |
| (36,653 | ) |
| (57,947 | ) | ||
Cash flow from financing activities: | ||||||||
Net proceeds from sales of senior notes | 1,046,437 | - | ||||||
Proceeds from other debt | 47,400 | 314,631 | ||||||
Repayments of debt | (5 93,742 | ) | (396,981 | ) | ||||
Cash dividends paid: | ||||||||
Common stock | (13,090 | ) | - | |||||
Preferred stock | (19,066 | ) | (18,350 | ) | ||||
Proceeds from exercised stock options | 20,475 | 7,549 | ||||||
Financing costs |
| (3,304 | ) |
| (661 | ) | ||
Net cash provided by (used in) financing activities |
| 4 85,110 |
| (93,812 | ) | |||
Net increase in cash and cash equivalents | 732,524 | 1,076 | ||||||
Cash and cash equivalents at beginning of year | 7,836 |
| 7,587 | |||||
Cash and cash equivalents at end of period | $ | 740,360 | $ | 8,663 | ||||
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan COPPER & GOLD INC.
NOTES TO FINANCIAL STATEMENTS
1.
EARNINGS PER SHARE
Freeport-McMoRan Copper & Gold Inc.’s (FCX) basic net income per share of common stock was calculated by dividing net income applicable to common stock by the weighted-average number of common shares outstanding during the period. The following is a reconciliation of net income and weighted average common shares outstanding for purposes of calculating diluted net income per share (in thousands, except per share amounts):
Three months ended June 30, | Six months ended June 30, | ||||||||||||
2003 | 2002 | 2003 | 2002 | ||||||||||
Net income before preferred dividends and cumulative effect of changes in accounting principle |
$ |
66,944 |
$ | 15,035 |
$ |
116,694 |
$ |
23,142 | |||||
Preferred dividends | (9,572 | ) | (9,459 | ) | (19,159 | ) | (18,671 | ) | |||||
Net income before cumulative effect | 57,372 | 5,576 | 97,535 | 4,471 | |||||||||
Cumulative effect of changes in accounting principle | - | - | 9,082 | (3,049 | ) | ||||||||
Net income applicable to common stock | 57,372 | 5,576 | 106,617 | 1,422 | |||||||||
Plus income impact of assumed conversion of 8 ¼% Convertible Senior Notes, after taxes |
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Diluted net income applicable to common stock | $ | 70,060 | $ | 5,576 | $ | 131,958 | $ | 1,422 | |||||
Weighted average common shares outstanding | 145,907 | 144,698 | 145,574 | 144,403 | |||||||||
Add: Shares issuable upon conversion of 8 ¼% Convertible Senior Notes |
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