What caused the significant decrease in net income and earnings per share for the nine months ended September 30, 2004, compared to the prior year?

The significant decrease in net income and earnings per share for the nine months ended September 30, 2004, was primarily due to lower copper and gold sales volumes. These lower volumes resulted from operational challenges at the Grasberg mine, including mining lower-grade ore and accelerated waste removal following geological events (slippage and debris flow) in late 2003. While higher commodity prices partially offset the revenue decline in the third quarter, they were not sufficient to overcome the volume reduction for the nine-month period.

How has the company managed its debt and capital structure during this period?

Freeport-McMoRan has actively managed its debt. During the first nine months of 2004, it completed the full conversion of its $603.8 million in 8.25% Convertible Senior Notes into common stock. The company also issued $350 million of 6.875% Senior Notes due 2014 and sold 1.1 million shares of 5.5% Convertible Perpetual Preferred Stock, raising significant capital. A portion of these proceeds were used to repay debt and for general corporate purposes, including a substantial purchase of FCX common stock from Rio Tinto.

What is the outlook for production and profitability in the near future?

The company expects improved performance in the fourth quarter of 2004 and for the full year 2005. This is based on projections of significantly higher ore grades and increased metal sales volumes from PT Freeport Indonesia. The company forecasts consolidated operating cash flows to be approximately $250 million in Q4 2004, with an expectation of exceeding $1 billion in 2005, assuming current sales estimates and commodity prices (copper around $1.30/lb, gold around $400/oz).

How are commodity price fluctuations impacting the company?

Commodity prices, particularly for copper and gold, remain a significant factor. While higher prices in Q3 2004 compared to Q3 2003 helped offset lower sales volumes, the company notes that metal prices have historically fluctuated widely. Forecasts for 2005 remain positive, with analysts projecting prices above $1.00/lb for copper. The company has no current price protection contracts in place for mine production.

FCX 10-Q Quarterly Report Q3 FY2004 — Revenue, Net Income, EPS

Summary

Freeport-McMoRan Inc. (FCX) reported its financial results for the quarter and nine months ended September 30, 2004. The company experienced a significant decline in net income and earnings per share compared to the same periods in the prior year, largely due to lower copper and gold sales volumes, impacted by operational challenges at its Grasberg mine following geological events. Despite lower sales volumes, higher commodity prices partially offset the revenue decline in the quarter. Financially, FCX has been actively managing its debt, including significant conversions of convertible senior notes and the issuance of new senior notes and preferred stock. The company is also focused on operational improvements and cost management, particularly at its Atlantic Copper smelting and refining segment, which has been affected by a major maintenance turnaround. The outlook for the remainder of 2004 and 2005 anticipates improved production and sales volumes, with potential benefits from higher anticipated commodity prices.

Key Highlights

1Net income applicable to common stock significantly decreased to $17.1 million ($0.10/share diluted) for Q3 2004, down from $47.4 million ($0.29/share diluted) in Q3 2003. For the nine-month period, FCX reported a net loss applicable to common stock of $55.7 million ($0.30/share diluted) compared to a net income of $154.0 million ($0.98/share diluted) in the prior year.
2Revenues for the third quarter of 2004 were $600.6 million, a decrease from $632.0 million in the same period of 2003, primarily due to lower sales volumes from PT Freeport Indonesia.
3PT Freeport Indonesia's operational challenges, including mining lower-grade ore and accelerated waste removal after geological events in late 2003, led to a substantial decrease in copper and gold sales volumes for both the quarter and nine-month periods.
4Commodity prices for copper and gold were higher in Q3 2004 compared to Q3 2003, with copper averaging $1.29/lb and gold averaging $401/oz, which partially offset the impact of lower sales volumes.
5FCX has actively managed its balance sheet, completing the full conversion of its 8.25% Convertible Senior Notes and issuing new 6.875% Senior Notes due 2014 and 5.5% Convertible Perpetual Preferred Stock.
6The company's smelting and refining segment, Atlantic Copper, experienced operating losses and was impacted by a 51-day major maintenance turnaround, contributing to increased costs and lower profitability for the nine-month period.
7FCX anticipates improved operating cash flows in Q4 2004 and significant growth in 2005, driven by expected increases in production and sales volumes from PT Freeport Indonesia and favorable commodity price forecasts.

FREEPORT-MCMORAN INC Quarterly Report for Q3 Ended Sep 30, 2004

Summary

Key Highlights

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