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, 2004 | |
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, 2004, there were issued and outstanding 173,770,485 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 Consolidated Balance Sheets (Unaudited)
| 3 |
Consolidated Statements of Operations (Unaudited)
| 4 |
Consolidated Statements of Cash Flows (Unaudited
| 5 |
Notes to Consolidated Financial Statements
| 6 |
Remarks
| 11 |
Report of Independent Registered Public Accounting Firm | 12 |
Management's Discussion and Analysis of Financial Condition | |
and Results of Operations
| 13 |
Quantitative and Qualitative Disclosures about Market Risks | 33 |
Controls and Procedures | 33 |
Part II. Other Information
| 33 |
Signature
| 35 |
Exhibit Index
| E-1 |
FREEPORT-McMoRan COPPER & GOLD INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
FREEPORT-McMoRan COPPER & GOLD INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
June 30, | December 31, | |||||||
2004 | 2003 | |||||||
(In Thousands) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 299,752 | $ | 463,652 | ||||
Restricted cash and investments | 2,756 | 34,964 | ||||||
Accounts receivable | 240,887 | 196,440 | ||||||
Inventories | 417,147 | 397,027 | ||||||
Current taxes, prepaid expenses and other | 73,152 | 8,050 | ||||||
Total current assets | 1,033,694 | 1,100,133 | ||||||
Property, plant, equipment and development costs, net | 3,285,880 | 3,261,697 | ||||||
Deferred mining costs | 200,342 | 142,635 | ||||||
Other assets | 151,175 | 155,722 | ||||||
Investment in PT Smelting | 54,423 | 58,179 | ||||||
Total assets | $ | 4,725,514 | $ | 4,718,366 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 262,078 | $ | 311,948 | ||||
Current portion of long-term debt and short-term borrowings | 76,939 | 152,396 | ||||||
Accrued interest payable | 49,021 | 49,276 | ||||||
Unearned customer receipts | 35,260 | 35,335 | ||||||
Rio Tinto share of joint venture cash flows | 11,888 | 39,693 | ||||||
Accrued income taxes |
| 2,605 | 43,134 | |||||
Total current liabilities | 437,791 | 631,782 | ||||||
Long-term debt, less current portion: | ||||||||
Senior notes | 911,336 | 571,041 | ||||||
Convertible senior notes | 641,543 | 867,604 | ||||||
Redeemable preferred stock | 192,381 | 192,381 | ||||||
PT Puncakjaya Power bank debt | 161,643 | 187,008 | ||||||
Equipment and other loans | 69,119 | 104,172 | ||||||
Atlantic Copper debt | 58,004 | 153,728 | ||||||
Total long-term debt, less current portion | 2,034,026 | 2,075,934 | ||||||
Accrued postretirement benefits and other liabilities | 160,034 | 161,859 | ||||||
Deferred income taxes | 954,667 | 885,248 | ||||||
Minority interests | 190,633 | 187,559 | ||||||
Stockholders' equity |
| 948,363 | 775,984 | |||||
Total liabilities and stockholders' equity | $ | 4,725,514 | $ | 4,718,366 | ||||
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||
(In Thousands, Except Per Share Amounts) | ||||||||||||
Revenues | $ | 486,334 | $ | 609,455 | $ | 846,519 | $ | 1,134,051 | ||||
Cost of sales: | ||||||||||||
Production and delivery | 371,679 | 277,408 | 647,291 | 524,878 | ||||||||
Depreciation and amortization |
| 42,590 |
| 68,283 |
| 68,000 |
| 136,071 | ||||
Total cost of sales | 414,269 | 345,691 | 715,291 | 660,949 | ||||||||
Exploration expenses | 2,787 | 1,827 | 5,014 | 3,331 | ||||||||
General and administrative expenses |
| 22,576 |
| 20,711 |
| 38,136 |
| 37,219 | ||||
Total costs and expenses |
| 439,632 |
| 368,229 |
| 758,441 |
| 701,499 | ||||
Operating income | 46,702 | 241,226 | 88,078 | 432,552 | ||||||||
Equity in PT Smelting earnings (losses) | (2,548 | ) | 2,270 | (2,906 | ) | 2,947 | ||||||
Interest expense, net | (39,339 | ) | (55,478 | ) | (72,729 | ) | (107,987 | ) | ||||
Gains (losses) on early extinguishment and conversion of debt | 643 | (6,579 | ) | (14,000 | ) | (6,579 | ) | |||||
Other income (expense), net |
| (368 | ) |
| (2,328 | ) |
| 3,174 |
| (3,947 | ) | |
Income before income taxes and minority interests | 5,090 | 179,111 | 1,617 | 316,986 | ||||||||
Provision for income taxes | (38,210 | ) | (97,908 | ) | (56,551 | ) | (175,122 | ) | ||||
Minority interests in net income of consolidated subsidiaries |
| (5,118 | ) |
| (14,259 | ) |
| (2,687 | ) |
| (25,170 | ) |
Net income (loss) before cumulative effect of change in accounting principle | (38,238 | ) | 66,944 | (57,621 | ) | 116,694 | ||||||
Cumulative effect of change in accounting principle, net | - | - | - | 9,082 | ||||||||
Net income (loss) | (38,238 | ) | 66,944 | (57,621 | ) | 125,776 | ||||||
Preferred dividends |
| (15,073 | ) |
| (9,572 | ) |
| (15,241 | ) | (19,159 | ) | |
Net income (loss) applicable to common stock | $ | (53,311 | ) | $ | 57,372 | $ | (72,862 | ) | $ | 106,617 | ||
Net income (loss) per share of common stock: | ||||||||||||
Basic: | ||||||||||||
Before cumulative effect | $(0.30 | ) | $0.39 | $(0.39 | ) | $0.67 | ||||||
Cumulative effect | - | - | - | 0.06 | ||||||||
Net income (loss) per share of common stock | $(0.30 | ) | $0.39 | $(0.39 | ) | $0.73 | ||||||
Diluted: | ||||||||||||
Before cumulative effect | $(0.30 | ) | $0.37 | $(0.39 | ) | $0.64 | ||||||
Cumulative effect | - | - | - | 0.05 | ||||||||
Net income (loss) per share of common stock | $(0.30 | ) | $0.37 | $(0.39 | ) | $0.69 | ||||||
Average common shares outstanding: | ||||||||||||
Basic | 175,202 | 145,907 | 186,570 | 145,574 | ||||||||
Diluted | 175,202 | 190,990 | 186,570 | 190,122 | ||||||||
Dividends paid per common share | $0.20 | $0.09 | $0.40 | $0.09 | ||||||||
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, | ||||||||||||
2004 | 2003 | |||||||||||
(In Thousands) | ||||||||||||
Cash flow from operating activities: | ||||||||||||
Net income (loss) | $ | (57,621 | ) | $ | 125,776 | |||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||
Depreciation and amortization | 68,000 | 136,071 | ||||||||||
Cumulative effect of change in accounting principle | - | (9,082 | ) | |||||||||
Losses on early extinguishment and conversion of debt | 14,000 | 6,579 | ||||||||||
Deferred income taxes | 69,564 | 37,451 | ||||||||||
Equity in PT Smelting losses (earnings) | 2,906 | (2,947 | ) | |||||||||
Minority interests’ share of net income | 2,687 | 25,170 | ||||||||||
Increase in deferred mining costs | (57,707 | ) | (21,652 | ) | ||||||||
Amortization of deferred financing costs | 4,460 | 9,571 | ||||||||||
Currency translation loss (gain) | (1,847 | ) | 6,277 | |||||||||
Elimination of profit on PT Freeport Indonesia sales to PT Smelting | 1,956 | 4,422 | ||||||||||
Provision for inventory obsolescence | 4,025 | 3,000 | ||||||||||
Other | 5,986 | 8,176 | ||||||||||
(Increases) decreases in working capital: | ||||||||||||
Accounts receivable | (47,949 | ) | (47,524 | ) | ||||||||
Inventories | (33,007 | ) | (11,309 | ) | ||||||||
Current taxes, prepaid expenses and other | (63,766 | ) | (4,844 | ) | ||||||||
Accounts payable and accrued liabilities | (28,286 | ) | 19,448 | |||||||||
Rio Tinto share of joint venture cash flows | (30,484 | ) | 2,718 | |||||||||
Accrued income taxes |
| (41,868 | ) |
| (3,234 | ) | ||||||
Increase in working capital |
| (245,360 | ) |
| (44,745 | ) | ||||||
Net cash provided by (used in) operating activities |
| (188,951 | ) |
| 284,067 | |||||||
Cash flow from investing activities: | ||||||||||||
PT Freeport Indonesia capital expenditures | (59,583 | ) | (58,565 | ) | ||||||||
Atlantic Copper capital expenditures | (15,257 | ) | (3,623 | ) | ||||||||
Sale of restricted investments | 19,346 | 23,645 | ||||||||||
Decrease in Atlantic Copper restricted cash | 11,000 | - | ||||||||||
Investment in PT Smelting | (1,106 | ) | - | |||||||||
Other |
| (113 | ) |
| 1,890 | |||||||
Net cash used in investing activities |
| (45,713 | ) |
| (36,653 | ) | ||||||
Cash flow from financing activities: | ||||||||||||
Net proceeds from sales of senior notes | 344,354 | 1,046,437 | ||||||||||
Proceeds from other debt | 57,708 | 47,400 | ||||||||||
Repayments of debt | (337,184 | ) | (593,742 | ) | ||||||||
Net proceeds from sale of convertible perpetual preferred stock | 1,067,000 | - | ||||||||||
Purchase of shares of common stock from Rio Tinto | (881,868 | ) | - | |||||||||
Purchases of FCX common shares | (99,477 | ) | - | |||||||||
Redemption of preferred stock | (1,110 | ) | - | |||||||||
Cash dividends paid: | ||||||||||||
Common stock | (74,655 | ) | (13,090 | ) | ||||||||
Preferred stock | (5,219 | ) | (19,066 | ) | ||||||||
Minority interests | (929 | ) | - | |||||||||
Net proceeds from exercised stock options | 4,030 | 20,475 | ||||||||||
Bank credit facilities fees and other |
| (1,886 | ) |
| (3,304 | ) | ||||||
Net cash provided by financing activities |
| 70,764 |
| 485,110 | ||||||||
Net increase (decrease) in cash and cash equivalents | (163,900 | ) | 732,524 | |||||||||
Cash and cash equivalents at beginning of year | 463,652 |
| 7,836 | |||||||||
Cash and cash equivalents at end of period | $ | 299,752 | $ | 740,360 | ||||||||
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan COPPER & GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
EARNINGS PER SHARE
Freeport-McMoRan Copper & Gold Inc.’s (FCX) basic net income (loss) per share of common stock was calculated by dividing net income (loss) applicable to common stock by the weighted average number of common shares outstanding during the period. The following is a reconciliation of net income (loss) and weighted average common shares outstanding for purposes of calculating diluted net income (loss) per share (in thousands, except per share amounts):
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
2004 | 2003 | 2004 | 2003 | ||||||||||
Net income (loss) before preferred dividends and cumulative effect of change in accounting principle |
$ |
(38,238 | ) |
$ |
66,944 |
$ |
(57,621 | ) |
$ |
116,694 | |||
Preferred dividends | (15,073 | ) | (9,572 | ) | (15,241 | ) | (19,159 | ) | |||||
Net income (loss) before cumulative effect | (53,311 | ) | 57,372 | (72,862 | ) | 97,535 | |||||||
Cumulative effect of change in accounting principle | - | - | - | 9,082 | |||||||||
Net income (loss) applicable to common stock | (53,311 | ) | 57,372 | (72,862 | ) | 106,617 | |||||||