Freeport-McMoRan 2007 Annual Report Download - page 84

FREEPORT-McMoRan COPPER & GOLD INC.
2007 Annual Report
82 Financial & Operating Information
Notes to Consolidated Financial Statements
2007 2006
Average number of basic shares of FCX common stock
outstanding prior to the acquisition of Phelps Dodge 198 191
Shares of FCX common stock issued in the acquisition 137 137
Sale of FCX shares 47 47
Mandatory Convertible Preferred Stock* 39 39
Other dilutive securities 27 31
Pro forma average number of common shares outstanding 448 445
*See Note 13 for additional information.
The above unaudited pro forma consolidated financial information has
been prepared for illustrative purposes only and is not intended to be
indicative of the results that would actually have occurred, or the results
expected in future periods, had the events reflected herein occurred on
the dates indicated.
NOTE 3. OWNERSHIP IN SUBSIDIARIES, JOINT VENTURES AND
INVESTMENT IN PT SMELTING
Ownership in Subsidiaries. On March 19, 2007, Phelps Dodge became
a wholly owned subsidiary of FCX. Phelps Dodge is a fully integrated
producer of copper and molybdenum, with mines in North America and
South America, copper and molybdenum conversion facilities, and
several development projects, including Tenke Fungurume in the DRC.
At December 31, 2007, Phelps Dodge’s major operating copper mines in
North America were Morenci, Bagdad, Sierrita and Safford located in
Arizona, and Chino and Tyrone located in New Mexico. FCX has an 85
percent interest in Morenci (see “Joint Ventures – Sumitomo”) and owns
100 percent of the other North America mines. At December 31, 2007,
operating copper mines in South America were Candelaria (80 percent
owned), Ojos del Salado (80 percent owned) and El Abra (51 percent
owned) located in Chile, and Cerro Verde (53.56 percent owned) located
in Peru. Phelps Dodge also owns the Henderson and Climax molybdenum
mines located in Colorado. The Henderson mine is currently operating,
and the Climax mine is scheduled for restart in 2010. In addition to
copper and molybdenum, certain mines produce other minerals as
by-products, such as gold, silver and rhenium. At December 31, 2007,
Phelps Dodge’s net assets totaled $28.0 billion and its retained earnings
totaled $2.2 billion. As of December 31, 2007, FCX had no loans
outstanding to Phelps Dodge.
FCX owns an effective 57.75 percent interest (through its ownership in
Phelps Dodge) in Tenke Fungurume Mining, S.A.R.L. (Tenke Fungurume), a
company incorporated under the laws of the DRC. The remaining ownership
interests are held by Tenke Mining Corp. (TMC), which is owned by Lundin
Mining Corporation (24.75 percent) and La Générale des Carrières et des
Historical
Phelps Pro Forma Pro Forma
FCX Dodgea Adjustments Consolidated
Year Ended December 31, 2007
Revenues $ 16,939 $ 2,294 $ – $ 19,233b
Operating income 6,555 793 (105) 7,243b,c
Income from continuing operations before income taxes and minority interests 6,133 837 (173) 6,797b,c,d,e,f
Income from continuing operations applicable to common stock 2,734 493 (166) 3,061b,c,d,e,f
Diluted income from continuing operations per share of common stock 7.41 N/A N/A 7.41b,c,d,e,f
Diluted weighted average shares outstanding (in millions) 397 N/A N/A 448h
Year Ended December 31, 2006
Revenues $ 5,791 $ 10,742 $ 120 $ 16,653b,g
Operating income 2,869 4,158 (2,077) 4,950b,c,g
Income from continuing operations before income taxes and minority interests 2,826 4,766 (2,847) 4,745b,c,e,g
Income from continuing operations applicable to common stock 1,396 3,000 (2,199) 2,197b,c,e,g
Diluted income from continuing operations per share of common stock 6.63 14.74 N/A 5.54b,c,e,g
Diluted weighted average shares outstanding (in millions) 221 204 N/A 445h
a. For the year ended December 31, 2007, represents the results of Phelps Dodge’s operations from January 1, 2007, through March 19, 2007. Beginning March 20, 2007, the results of Phelps Dodge’s operations
are included in FCX’s consolidated financial information.
Additionally, for comparative purposes the historical Phelps Dodge financial information for the year ended December 31, 2006, represents results from continuing operations, and therefore, excludes the results of
PDIC (
i.e. , discontinued operations).
b. Includes charges to revenues for mark-to-market accounting adjustments on copper price protection programs totaling $195 million ($119 million to net income or $0.27 per share) for 2007 and $1.2 billion
($915 million to net income or $2.06 per share) for 2006. Also includes credits for amortization of acquired intangible liabilities totaling $120 million ($76 million to net income or $0.17 per share) in each year.
c. Includes charges associated with the impacts of the increases in the carrying values of acquired metal inventories (including mill and leach stockpiles) and property, plant and equipment, and also includes the
amortization of intangible assets and liabilities resulting from the acquisition totaling $1.6 billion ($1.0 billion to net income or $2.25 per share) for 2007 and $2.2 billion ($1.4 billion to net income or $3.13 per
share) for 2006.
d. Excludes net losses on early extinguishment of debt totaling $88 million ($69 million to net income or $0.15 per share) for financing transactions related to the acquisition of Phelps Dodge.
e. Includes net interest expense associated with debt issued in connection with the acquisition of Phelps Dodge totaling $580 million ($452 million to net income or $1.01 per share) for 2007 and $775 million ($698
million to net income or $1.57 per share) for 2006.
f. Includes gains primarily on the sales of marketable securities totaling $85 million ($52 million to net income or $0.12 per share).
g. Includes charges to revenues totaling $82 million ($44 million to net income or $0.10 per share) associated with the redemption of FCX’s Gold-Denominated Preferred Stock, Series II and Silver-Denominated
Preferred Stock.
h. Estimated pro forma diluted weighted average shares outstanding for the years ended December 31, 2007 and 2006, follow (in millions):