10-QPeriod: Q2 FY2010

FREEPORT-MCMORAN INC Quarterly Report for Q2 Ended Jun 30, 2010

Filed August 6, 2010For Securities:FCX

Summary

Freeport-McMoRan Inc. (FCX) reported solid financial results for the second quarter and first six months of 2010, driven by higher realized prices for copper, gold, and molybdenum. Revenues increased year-over-year, with strong operating income contributing to significant net income growth. The company also saw a substantial increase in cash flow from operations, reflecting improved profitability and efficient working capital management. A key development during the quarter was the conversion of the 6¾% Mandatory Convertible Preferred Stock into common stock, which increased the number of outstanding common shares and strengthened the equity base. Additionally, FCX continued to manage its debt effectively by redeeming a significant portion of its Senior Floating Rate Notes and making open-market debt purchases, leading to lower interest expenses. The company also demonstrated a commitment to returning value to shareholders by reinstating and increasing its quarterly common stock dividend.

Financial Highlights

44 data points
Beta

Net Income

$649.00M

EPS (Diluted)

$0.70

Total Assets

$25.98B

Cash & Equivalents

$3.04B

Free Cash Flow

$1.06B

Financial Statements
Beta
Cost of Revenue$2.30B
SG&A Expenses$101.00M
Operating Expenses$2.44B
Operating Income$1.42B
Interest Expense$122.00M
Net Income$649.00M
EPS (Basic)$0.71
EPS (Diluted)$0.70
Shares Outstanding (Basic)915.00M
Shares Outstanding (Diluted)947.00M

Key Highlights

  • 1Revenues for the first six months of 2010 increased to $8.23 billion from $6.29 billion in the same period of 2009, driven by higher commodity prices.
  • 2Net income attributable to FCX common stockholders rose to $1.55 billion for the first six months of 2010, a substantial increase from $631 million in the prior year.
  • 3Diluted earnings per share (EPS) for the first six months of 2010 were $3.40, significantly up from $1.54 in the same period of 2009.
  • 4Operating cash flow for the first six months of 2010 was $2.88 billion, a significant improvement from $896 million in the prior year, bolstered by higher prices and improved working capital management.
  • 5The 6¾% Mandatory Convertible Preferred Stock automatically converted into 39.4 million shares of common stock in May 2010, strengthening the company's equity position.
  • 6FCX redeemed $1 billion in Senior Floating Rate Notes and made significant open-market debt purchases, reducing its overall debt load and interest expense.
  • 7The company increased its quarterly common stock dividend to $0.30 per share, reflecting confidence in its financial performance and cash generation.

Frequently Asked Questions

The primary driver of FCX's revenue growth in the first half of 2010 was significantly higher realized prices for its key commodities: copper, gold, and molybdenum. This was partially offset by lower sales volumes for copper and gold, mainly due to planned mine sequencing at Grasberg.

FCX actively managed its debt by redeeming $1 billion of Senior Floating Rate Notes and making open-market purchases of other senior notes. These actions reduced total debt and are expected to lower future interest expenses. Additionally, the mandatory conversion of preferred stock improved the equity structure.

FCX projected capital expenditures of approximately $1.7 billion for the full year 2010, including significant investments in major development projects like underground activities at Grasberg and the El Abra sulfide project. The company also reinstated and increased its common stock dividend to $1.20 annually, signaling confidence in its operational performance and cash flow generation.

The report mentions ongoing contract reviews and administrative disputes with the DRC government related to the Tenke Fungurume project. Additionally, FCX is facing a potential lawsuit from the U.S. Department of Justice regarding environmental liabilities at the Gilt Edge Mine Site, though the company believes its liability should be proportional rather than joint and several.