01—Abstract
Summary
Summary of the 10-K filed February 26, 2009. Cited figures are marked; the original filing is the authoritative source.
Freeport-McMoRan Inc.'s (FCX) 2008 Form 10-K highlights a challenging year marked by significant commodity price declines, particularly for copper and molybdenum, in the latter half of the year.
These market shifts necessitated substantial asset impairment charges totaling $17 billiona, including goodwill and long-lived assets, leading to a net loss of $11.3 billion for the year. Despite the challenging market conditions, the company generated substantial revenues of $17.8 billion, largely driven by copper sales, which constituted approximately 76% of mining revenues. In response to the downturn, FCX implemented cost-saving measures, including production curtailments at several North American operations and its Henderson molybdenum mine, deferral of most development projects, and reduced capital spending.
The company also suspended its common stock dividend. Looking ahead to 2009, FCX projected lower copper and molybdenum sales volumes but anticipated higher gold sales, with production expected to be impacted by reduced rates at North American mines and the start-up of the Tenke Fungurume project in the DRC. The company ended 2008 with $872 millionb in consolidated cash, and in February 2009, it completed a stock offering that raised approximately $740 million to bolster its liquidity.
02—Key points
Key Highlights
- Significant commodity price declines in H2 2008 led to substantial asset impairment charges of $17 billion (including $10.9 billion for long-lived assets and $6.0 billion for goodwill), resulting in a net loss of $11.3 billion for the year.
- Revenues for 2008 totaled $17.8 billion, driven primarily by copper (76% of mining revenues), followed by molybdenum (14%) and gold (7%).
- The company implemented significant cost-reduction measures, including production curtailments at several North American copper mines and the Henderson molybdenum mine, and deferred most project development activities.
- FCX suspended its common stock dividend in December 2008 due to weak market conditions.
- Projected 2009 copper sales volumes are lower due to production curtailments, while gold sales are expected to increase due to mining higher-grade sections at Grasberg.
- The Tenke Fungurume copper and cobalt project in the DRC is expected to commence production in the second half of 2009.
- Consolidated cash and cash equivalents stood at $872 million at year-end 2008, with approximately $1.3 billion in availability under revolving credit facilities.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 26, 2009Financial Statements
FY2008 against FY2007
| Line item | FY2008FY2007 | Change |
|---|---|---|
| Cost of Revenue | $12.98B$9.77B | +32.8% |
| SG&A Expenses | $269.00M$466.00M | −42.3% |
| Operating Expenses | $30.51B$10.38B | +193.8% |
| Operating Income | -$12.71B$6.55B | −293.9% |
| Net Income | -$11.34B$2.77B | −509.6% |
| EPS (Basic) | $-14.86$4.06 | −466.0% |
| EPS (Diluted) | $-14.86$3.75 | −496.3% |
| Shares Outstanding (Basic) | 763.00M682.00M | +11.9% |
| Shares Outstanding (Diluted) | 763.00M794.00M | −3.9% |
05—Questions
Frequently Asked Questions
What was the primary driver of Freeport-McMoRan's financial performance in 2008?
The primary driver of Freeport-McMoRan's financial performance in 2008 was the significant decline in commodity prices, particularly for copper and molybdenum, experienced in the second half of the year. This market downturn led to substantial asset impairments and a net loss of $11.3 billion.
What actions did Freeport-McMoRan take in response to the challenging market conditions in late 2008?
In response to the market downturn, Freeport-McMoRan implemented several measures, including curtailing production at high-cost operations, deferring most project development activities, reducing capital expenditures, aggressively controlling costs (including workforce reductions), and suspending its common stock dividend.
What is the status of the Tenke Fungurume project in the DRC?
The Tenke Fungurume copper and cobalt project in the Democratic Republic of Congo is well advanced in its construction phase and is expected to commence mining operations during the second half of 2009. FCX has reduced capital spending on this project in response to market conditions but remains committed to its development.
How did the acquisition of Phelps Dodge impact the company's financial statements in 2008?
The acquisition of Phelps Dodge in March 2007 had a significant impact on the 2008 financial statements. It contributed to higher revenues and production volumes due to a full year of operations from the acquired assets. However, it also led to substantial goodwill and asset impairment charges in 2008, totaling $17 billion, as the fair value of these acquired assets was reassessed in light of the deteriorating market conditions.
06—Continue