01—Abstract
Summary
Summary of the 10-K/A filed April 29, 2020. Cited figures are marked; the original filing is the authoritative source.
This filing is an amendment to Southern Copper Corporation's (SCCO) 2019 10-K, specifically updating Part III concerning Directors, Executive Officers, Corporate Governance, Executive Compensation, and Security Ownership.
The amendment was necessitated because the company opted not to incorporate its proxy statement by reference. The filing provides detailed biographical information on the company's directors, highlighting their extensive experience in the mining, financial, and business sectors, often with significant ties to Grupo Mexico, the majority shareholder. It also details the compensation structure for named executive officers, emphasizing compliance with Peruvian and Mexican labor laws, discretionary bonuses, and mandated profit-sharing.
The company noted a strong shareholder approval for its executive compensation approach at the previous annual meeting. Key for investors is the confirmation of SCCO's controlled company status by Grupo Mexico, owning 88.9%a of the shares, which impacts certain corporate governance exemptions.
The compensation details, while complex due to international operations and legal requirements, show a focus on retaining executives through a mix of base salary, discretionary bonuses, and legally mandated benefits. The company also disclosed related-party transactions, primarily with Grupo Mexico and its affiliates, for various operational and support services, amounting to significant sums, but all reviewed and approved by the Audit Committee and subject to internal policies designed to manage potential conflicts of interest.
02—Key points
Key Highlights
- Amendment to 2019 10-K filing updates Part III information including directors, executive officers, and compensation.
- Southern Copper Corporation (SCCO) is a controlled company, with Grupo Mexico holding 88.9% of outstanding shares.
- The Board of Directors comprises individuals with extensive experience in mining, finance, and general business, many with affiliations to Grupo Mexico.
- Executive compensation is structured to comply with Peruvian and Mexican labor laws, incorporating base salaries, discretionary bonuses, profit-sharing, and legally mandated benefits.
- Significant related-party transactions with Grupo Mexico and its affiliates were disclosed, primarily for operational and support services, totaling $27.8 million in 2019.
- All related-party transactions were reviewed and approved by the Audit Committee, with internal policies in place to manage potential conflicts of interest.
- The company reported a strong 99.60% shareholder approval for its executive compensation approach at the 2019 annual meeting.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Southern Copper Corp kept $0.20.
- Revenue$7.29B100.0%
- Cost of revenue−$4.37B60.0%
- Gross profit$2.91B40.0%
- Operating costs−$161.8M2.2%
- Operating income$2.75B37.8%
- Interest, other & tax−$1.27B17.4%
- Net income$1.49B20.4%
Where FY2019 revenue went
$7.29B- Cost of revenue: $3.61B, 50% of revenue
- Net income: $1.49B, 20% of revenue
- Interest, other & tax: $1.27B, 17% of revenue
- SG&A: $131.8M, 1.8% of revenue
- Other operating costs: $794.4M, 11% of revenue
Kept 20% as net incomeSG&A $131.8M · 1.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-K/AFY2019filed April 29, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $7.29B$7.10B | +2.7% |
| Cost of Revenue | $3.61B$3.41B | +5.8% |
| Gross Profit | $2.91B$3.01B | −3.3% |
| SG&A Expenses | $131.80M$102.60M | +28.5% |
| Operating Expenses | $4.53B$4.22B | +7.5% |
| Operating Income | $2.75B$2.88B | −4.4% |
| Net Income | $1.49B$1.54B | −3.7% |
| EPS (Basic) | $1.92$2.00 | −4.0% |
| EPS (Diluted) | $1.92— | — |
| Shares Outstanding (Basic) | 773.10M773.00M | 0.0% |
| Shares Outstanding (Diluted) | 773.10M— | — |
05—Questions
Frequently Asked Questions
Why was this 10-K filing an amendment, and what information does it primarily add?
This filing is an Amendment No. 1 to Southern Copper Corporation's (SCCO) 2019 Form 10-K. It was filed to include information for Part III (Items 10-14) that was initially omitted in reliance on incorporating information from the company's proxy statement. Because the proxy statement was not expected to be filed within the required timeframe, SCCO is now restating this Part III information directly in the amendment. This includes details on Directors, Executive Officers, Corporate Governance, Executive Compensation, and Security Ownership.
What is the company's relationship with Grupo Mexico, and how does it affect governance?
Grupo Mexico is Southern Copper Corporation's indirect majority stockholder, owning 88.9% of SCCO's shares as of December 31, 2019. This majority ownership classifies SCCO as a 'controlled company' under NYSE rules. As a controlled company, SCCO is exempt from certain NYSE corporate governance requirements, such as having a compensation committee comprised entirely of independent directors.
How is executive compensation structured at Southern Copper, considering its international operations?
Southern Copper's executive compensation is influenced by both company objectives and the legal requirements of its primary operating locations in Peru and Mexico. Compensation includes base salaries, discretionary bonuses, and legally mandated benefits such as profit sharing (8% in Peru, 10% in Mexico) and other statutory payments. The company aims to reward performance and retain key executives, with a compensation philosophy that balances competitive market practices with compliance with local labor laws.
Are there significant related-party transactions, and how are they managed?
Yes, Southern Copper engages in significant related-party transactions, primarily with Grupo Mexico and its affiliates, for services including accounting, legal, financial, treasury, purchasing, logistics, and operational support like freight, construction, and power supply. In 2019, payments to Grupo Mexico and its subsidiary AMMINCO for support services totaled $27.8 million. These transactions are reviewed and approved by the Audit Committee, and the company has established policies to ensure they are conducted for valid business reasons, on arm's-length terms where possible, and to manage potential conflicts of interest.
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