What is the impact of the declining copper prices on FCX's financial performance?

The sharp decline in copper prices, from $3.98/lb in June 2008 to $1.81/lb by October 31, 2008, has significantly impacted FCX's revenue and profitability. Lower prices directly reduce revenue and have led to lower-of-cost-or-market (LCM) inventory adjustments, as well as the potential for material impairments of long-lived assets and goodwill. This decline is forcing the company to revise its operating plans, including cost reductions and capital project deferrals.

How is FCX managing its liquidity and debt in the current economic environment?

FCX has $1.2 billion in cash and cash equivalents as of September 30, 2008, and maintains a $1.5 billion revolving credit facility, with approximately $1.4 billion available. Total debt remains around $7.2 billion. The company is focusing on protecting liquidity by reducing costs and deferring capital expenditures. While no amounts were drawn on the credit facility as of the reporting date, it provides a crucial backstop for working capital needs.

What is the outlook for FCX's development projects given the market downturn?

In response to the severe market conditions, FCX is revising its near-term strategy, which includes deferring or eliminating capital projects. Specifically, they have deferred incremental expansion projects at Sierrita and Bagdad, as well as the planned restart of the Miami mine. Construction activities for the Climax molybdenum mine restart have also been suspended. The timing of other projects, like the El Abra sulfide deposit and Grasberg block cave, is under review.

What is the significance of the Phelps Dodge acquisition and its impact on the current financial statements?

The acquisition of Phelps Dodge in March 2007 was substantial, and its accounting continues to influence the financial statements. This includes the allocation of purchase price to assets and liabilities, which affects depreciation, depletion, and amortization charges. Furthermore, the goodwill of approximately $6.0 billion recorded from this acquisition is now subject to impairment testing due to declining commodity prices, which could lead to significant charges.

FCX 10-Q Quarterly Report Q3 FY2008 — Revenue, Net Income, EPS

Summary

Freeport-McMoRan Inc. (FCX) reported its third-quarter 2008 results, a period marked by significant global economic downturn and a sharp decline in commodity prices, particularly copper. Despite a decrease in revenues to $4.6 billion from $5.1 billion in the prior year's quarter, the company managed to maintain profitability, with net income applicable to common stock at $523 million ($1.31 per diluted share) compared to $775 million ($1.87 per diluted share) in Q3 2007. The company is actively revising its business strategy to navigate these challenging market conditions, focusing on cost reductions, deferral of capital projects, and preservation of liquidity. Key operational aspects include a decrease in average realized copper prices to $3.14 per pound from $3.53 in the prior year's quarter, and an increase in unit net cash costs. Management highlighted the potential for material impairments of long-lived assets, including goodwill, due to declining commodity prices. The company is closely monitoring its financial position and exploring options to manage its liquidity, with a $1.5 billion revolving credit facility available. Despite the headwinds, FCX emphasizes its long-term positive outlook for copper, driven by supply constraints and global demand fundamentals.

Financial Highlights

24 data points

Beta

Net Income

$523.00M

EPS (Diluted)

$0.66

Cash & Equivalents

$1.20B

Free Cash Flow

$1.54B

Financial Statements

Beta

Cost of Revenue	$3.32B
SG&A Expenses	$90.00M
Operating Expenses	$3.48B
Operating Income	$1.13B
Net Income	$523.00M
EPS (Basic)	$0.69
EPS (Diluted)	$0.66
Shares Outstanding (Basic)	764.00M
Shares Outstanding (Diluted)	894.00M

Key Highlights

1Revenues for the third quarter of 2008 decreased to $4.6 billion from $5.1 billion in the same period of 2007, reflecting a decline in commodity prices.
2Net income applicable to common stock was $523 million ($1.31 per diluted share) for Q3 2008, down from $775 million ($1.87 per diluted share) in Q3 2007.
3Average realized copper price declined to $3.14 per pound in Q3 2008 from $3.53 per pound in Q3 2007.
4Unit net cash costs for copper increased to $1.51 per pound in Q3 2008 compared to $0.84 per pound in Q3 2007, driven by higher input costs.
5The company announced revisions to its near-term business strategy in response to the dramatic shift in global economic conditions and commodity price declines.
6FCX is reviewing the carrying values of long-lived assets, including goodwill associated with the Phelps Dodge acquisition, and anticipates potential material impairments.
7Cash and cash equivalents stood at $1.2 billion as of September 30, 2008, with $1.4 billion in availability under its revolving credit facility.
8Capital expenditures for the first nine months of 2008 were $1.9 billion, with plans for 2009 being revised downward due to market conditions.

FREEPORT-MCMORAN INC Quarterly Report for Q3 Ended Sep 30, 2008

Summary

Financial Highlights

Key Highlights

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