Freeport-McMoRan 2011 Annual Report Download - page 49

MANAGEMENT’S DISCUSSION AND ANALYSIS
2011 ANNUAL REPORT | 47
Cash and Cash Equivalents
At December31,2011, we had consolidated cash and cash
equivalents of $4.8 billion. e following table reects the U.S. and
international components of consolidated cash and cash
equivalents at December31,2011 and 2010 (in billions):
2011 2010
Cash at domestic companies
a
$ 2.4 $ 1.9
Cash at international operations 2.4 1.8
Total consolidated cash and cash equivalents 4.8 3.7
Less: Noncontrolling interests’ share (0.8) (0.4)
Cash, net of noncontrolling interests’ share 4.0 3.3
Less: Withholding taxes and other (0.1) (0.2)
Net cash available $ 3.9 $ 3.1
a. Includes cash at our parent company and North America operations.
Cash held at our international operations is generally used to
support our foreign operations’ capital expenditures, operating
expenses, working capital or other cash needs. At December31,2011,
management believed that sucient liquidity was available in
the U.S. With the exception of TFM, we have not elected to
permanently reinvest earnings from our foreign subsidiaries, and
we have recorded deferred tax liabilities for foreign earnings
that are available to be repatriated to the U.S. From time to time,
our foreign subsidiaries distribute earnings to the U.S. through
dividends, which are subject to applicable withholding taxes and
noncontrolling interests’ share.
Operating Activities
Our operating cash ows vary with prices realized from copper,
gold and molybdenum sales, our sales volumes, production costs,
income taxes and other working capital changes and other
factors. During 2011, we generated operating cash ows totaling
$6.6 billion, net of $461 million for working capital uses.
Operating cash ows in 2010 totaled $6.3 billion, net of $834 million
for working capital uses. Operating cash ows in 2009 totaled
$4.4 billion, net of $770 million for working capital uses, which
included approximately $600 million related to settlement
of nal pricing with customers on 2008 provisionally priced
copper sales. Higher operating cash ows for 2011 and 2010,
compared with prior years, primarily reected higher copper and
gold price realizations.
Based on current mine plans and subject to future copper, gold
and molybdenum prices, we expect estimated operating cash ows
for the year 2012 plus available cash to be greater than our
budgeted capital expenditures, expected debt payments, dividends,
noncontrolling interest distributions and other cash requirements.
Refer to “Outlook” for further discussion of projected 2012
operating cash ows.
Investing Activities
Capital Expenditures. Capital expenditures, including capitalized
interest, totaled $2.5 billion in 2011 (including $1.4 billion for
major projects), $1.4 billion in 2010 (including $0.7 billion for major
projects) and $1.6 billion in 2009 (including $1.0 billion for major
projects and the Twin Buttes property acquisition). e increase in
capital expenditures in 2011, compared with 2010, primarily
reected higher capital spending for construction on the Climax
molybdenum mine, the underground development projects
at Grasberg and the expansion at Tenke. e decrease in capital
expenditures in 2010, compared with 2009, primarily reected
lower capital spending for the initial Tenke development project
for which construction activities were substantially complete
by mid-2009, partly oset by higher spending associated with
underground development projects at Grasberg and the sulde ore
project at El Abra.
Capital expenditures for the year 2012 are expected to
approximate $4.0 billion (including $2.4 billion for major projects),
primarily associated with underground development activities at
Grasberg, the expansion at Tenke Fungurume and the concentrator
expansion at Cerro Verde. We are also considering additional
investments at several of our sites. Capital spending plans will
continue to be reviewed and adjusted in response to changes
in market conditions and other factors. Refer to “Operations” for
further discussion.
Investment in McMoRan Exploration Co. (MMR). In December
2010, we completed the purchase of 500,000 shares of MMR’s
5¾% Convertible Perpetual Preferred Stock (the Preferred Stock)
for an aggregate purchase price of $500 million. Dividends received
in 2011 were recorded as a return of investment because of MMR’s
reported losses. Refer to Note 6 for further discussion.
Financing Activities
Debt and Equity Transactions. Total debt approximated $3.5 billion
at December31,2011, $4.8 billion at December31,2010, and
$6.3 billion at December31,2009.
During 2011, we redeemed the remaining $1.1 billion of our
outstanding 8.25% Senior Notes. In addition, we made open-
market purchases of $35 million of our 9.5% Senior Notes and
repaid the remaining $84 million of our 8.75% Senior Notes.
During 2010, we redeemed all of our $1 billion Senior Floating
Rate Notes and also made open-market purchases of $565 million
of our senior notes. During 2009, we redeemed $340 million of
our 6.875% Senior Notes and also made open-market purchases of
$387 million of our senior notes. Refer to Note 9 for further
discussion of these debt repayment transactions.