FCX Q113 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2013
OR
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
 
to
Commission File Number: 001-11307-01
Freeport-McMoRan Copper & Gold Inc.
(Exact name of registrant as specified in its charter)
Delaware
74-2480931
(State or other jurisdiction of
(I.R.S. Employer Identification No.)
incorporation or organization)
 
 
 
333 North Central Avenue
 
Phoenix, AZ
85004-2189
(Address of principal executive offices)
(Zip Code)
(602) 366-8100
(Registrant's telephone number, including area code)
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
þ Yes  ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).       þ Yes  ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ         Accelerated filer ¨          Non-accelerated filer ¨         Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
¨ Yes þ No

On April 30, 2013, there were issued and outstanding 949,742,416 shares of the registrant’s common stock, par value $0.10 per share.


FREEPORT-McMoRan COPPER & GOLD INC.

TABLE OF CONTENTS

 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
.


2
Table of Contents                 


Part I.
FINANCIAL INFORMATION

Item 1.
Financial Statements.

FREEPORT-McMoRan COPPER & GOLD INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

 
March 31,
2013
 
December 31,
2012
 
(In millions)
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
9,595

 
$
3,705

Trade accounts receivable
1,082

 
927

Other accounts receivable
687

 
702

Inventories:
 
 
 
Mill and leach stockpiles
1,698

 
1,672

Materials and supplies, net
1,575

 
1,504

Product
1,536

 
1,400

Other current assets
410

 
387

Total current assets
16,583

 
10,297

Property, plant, equipment and development costs, net
21,689

 
20,999

Long-term mill and leach stockpiles
2,081

 
1,955

Other assets
2,235

 
2,189

Total assets
$
42,588

 
$
35,440

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued liabilities
$
2,892

 
$
3,007

Current portion of reclamation and environmental obligations
254

 
241

Accrued income taxes
125

 
93

Current portion of debt
4

 
2

Total current liabilities
3,275

 
3,343

Long-term debt, less current portion
10,088

 
3,525

Deferred income taxes
3,580

 
3,490

Reclamation and environmental obligations, less current portion
2,130

 
2,127

Other liabilities
1,666

 
1,644

Total liabilities
20,739

 
14,129

Equity:
 
 
 
FCX stockholders’ equity:
 
 
 
Common stock
107

 
107

Capital in excess of par value
19,163

 
19,119

Retained earnings
2,750

 
2,399

Accumulated other comprehensive loss
(500
)
 
(506
)
Common stock held in treasury
(3,580
)
 
(3,576
)
Total FCX stockholders’ equity
17,940

 
17,543

Noncontrolling interests
3,909

 
3,768

Total equity
21,849

 
21,311

Total liabilities and equity
$
42,588

 
$
35,440

 
The accompanying notes are an integral part of these consolidated financial statements.

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FREEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

 
Three Months Ended
 
March 31,
 
2013
 
2012
 
(In millions, except per share amounts)
Revenues
$
4,583

 
$
4,605

Cost of sales:
 
 
 
Production and delivery
2,719

 
2,428

Depreciation, depletion and amortization
329

 
267

Total cost of sales
3,048

 
2,695

Selling, general and administrative expenses
113

 
104

Exploration and research expenses
52

 
62

Environmental obligations and shutdown costs
15

 
10

Total costs and expenses
3,228

 
2,871

Operating income
1,355

 
1,734

Interest expense, net
(57
)
 
(63
)
Losses on early extinguishment of debt
(45
)
 
(168
)
Other expense, net
(3
)
 
(13
)
Income before income taxes and equity in affiliated companies' net earnings
1,250

 
1,490

Provision for income taxes
(428
)
 
(491
)
Equity in affiliated companies’ net earnings
2

 
2

Net income
824

 
1,001

Net income attributable to noncontrolling interests
(176
)
 
(237
)
Net income attributable to FCX common stockholders
$
648

 
$
764

 
 
 
 
Net income per share attributable to FCX common stockholders:
 
 
 
Basic
$
0.68

 
$
0.81

Diluted
$
0.68

 
$
0.80

 
 
 
 
Weighted-average common shares outstanding:
 
 
 
Basic
950

 
949

Diluted
953

 
955

 
 
 
 
Dividends declared per share of common stock
$
0.3125

 
$
0.3125

 
The accompanying notes are an integral part of these consolidated financial statements.


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FREEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

 
Three Months Ended
 
March 31,
 
2013
 
2012
 
(In millions)
 
 
 
 
Net income
$
824

 
$
1,001

 
 
 
 
Other comprehensive income, net of taxes:
 
 
 
Defined benefit plans:
 
 
 
Amortization of unrecognized amounts included in net
 
 
 
periodic benefit costs
7

 
7

Adjustment to deferred tax valuation allowance
—

 
5

Unrealized losses on securities arising during the period
(1
)
 
—

Other comprehensive income
6

 
12

 
 
 
 
Total comprehensive income
830

 
1,013

Total comprehensive income attributable to noncontrolling interests
(176
)
 
(237
)
Total comprehensive income attributable to FCX common stockholders
$
654

 
$
776


The accompanying notes are an integral part of these consolidated financial statements.




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FREEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 
Three Months Ended
 
March 31,
 
2013
 
2012
 
(In millions)
Cash flow from operating activities:
 
 
 
Net income
$
824

 
$
1,001

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, depletion and amortization
329

 
267

Stock-based compensation
41

 
32

Pension plans contributions
(22
)
 
(52
)
Net charges for reclamation and environmental obligations, including accretion
34

 
35

Payments for reclamation and environmental obligations
(36
)
 
(45
)
Losses on early extinguishment of debt
45

 
168

Deferred income taxes
136

 
168

Increase in long-term mill and leach stockpiles
(126
)
 
(61
)
Other, net
36

 
8

(Increases) decreases in working capital and other tax payments:
 
 
 
Accounts receivable
(113
)
 
(482
)
Inventories
(67
)
 
(248
)
Other current assets
(48
)
 
40

Accounts payable and accrued liabilities
(201
)
 
(64
)
Accrued income taxes and other tax payments
(1
)
 
34

Net cash provided by operating activities
831

 
801

 
 
 
 
Cash flow from investing activities:
 
 
 
Capital expenditures:
 
 
 
North America copper mines
(258
)
 
(143
)
South America
(226
)
 
(152
)
Indonesia
(191
)
 
(182
)
Africa
(57
)
 
(127
)
Molybdenum mines
(40
)
 
(93
)
Other
(33
)
 
(10
)
Acquisition of cobalt chemical business, net of cash acquired
(321
)
 
—

Other, net
14

 
(7
)
Net cash used in investing activities
(1,112
)
 
(714
)
 
 
 
 
Cash flow from financing activities:
 
 
 
Proceeds from debt
6,615

 
3,004

Repayments of debt
(39
)
 
(3,159
)
Cash dividends paid:
 
 
 
Common stock
(297
)
 
(238
)
Noncontrolling interests
(35
)
 
(1
)
Debt financing costs
(72
)
 
(22
)
Net payments for stock-based awards
(2
)
 
(4
)
Excess tax benefit from stock-based awards
1

 
7

Net cash provided by (used in) financing activities
6,171

 
(413
)
 
 
 
 
Net increase (decrease) in cash and cash equivalents
5,890

 
(326
)
Cash and cash equivalents at beginning of year
3,705

 
4,822

Cash and cash equivalents at end of period
$
9,595

 
$
4,496

The accompanying notes are an integral part of these consolidated financial statements.

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FREEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED STATEMENT OF EQUITY (Unaudited)

 
FCX Stockholders’ Equity
 
 
 
 
 
Common Stock
 
 
 
Retained
Earnings
 
Accumu-
lated
Other Compre-
hensive
Loss
 
Common Stock
Held in Treasury
 
Total FCX
Stock-holders' Equity
 
 
 
 
 
Number
of
Shares
 
At Par
Value
 
Capital in
Excess of
Par Value
 
 
 
Number
of
Shares
 
At
Cost
 
 
Non-
controlling
Interests
 
Total
Equity
 
 
 
 
 
 
 
 
 
 
 
(In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2012
1,073

 
$
107

 
$
19,119

 
$
2,399

 
$
(506
)
 
124

 
$
(3,576
)
 
$
17,543

 
$
3,768

 
$
21,311

Exercised and issued stock-based awards
1

 
—

 
2

 
—

 
—

 
—

 
—

 
2

 
—

 
2

Stock-based compensation
—

 
—

 
41

 
—

 
—

 
—

 
—

 
41

 
—

 
41

Tax benefit for stock-based awards
—

 
—

 
1

 
—

 
—

 
—

 
—

 
1

 
—

 
1

Tender of shares for stock-based awards
—

 
—

 
—

 
—

 
—

 
—

 
(4
)
 
(4
)
 
—

 
(4
)
Dividends on common stock
—

 
—

 
—

 
(297
)
 
—

 
—

 
—

 
(297
)
 
—

 
(297
)
Dividends to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(35
)
 
(35
)
Total comprehensive income
—

 
—

 
—

 
648

 
6

 
—

 
—

 
654

 
176

 
830

Balance at March 31, 2013
1,074

 
$
107

 
$
19,163

 
$
2,750

 
$
(500
)
 
124

 
$
(3,580
)
 
$
17,940

 
$
3,909

 
$
21,849

 
The accompanying notes are an integral part of these consolidated financial statements.


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FREEPORT-McMoRan COPPER & GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. GENERAL INFORMATION
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all information and disclosures required by generally accepted accounting principles (GAAP) in the United States (U.S.). Therefore, this information should be read in conjunction with Freeport-McMoRan Copper & Gold Inc.’s (FCX) consolidated financial statements and notes contained in its annual report on Form 10-K for the year ended December 31, 2012. The information furnished herein reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods reported. All such adjustments are, in the opinion of management, of a normal recurring nature. Operating results for the three-month period ended March 31, 2013, are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.

2. ACQUISITIONS
Cobalt Chemical Refinery Business. On March 29, 2013, FCX, through a newly formed consolidated joint venture, completed the acquisition of a cobalt chemical refinery in Kokkola, Finland, and the related sales and marketing business. The acquisition provides direct end-market access for the cobalt hydroxide production at Tenke Fungurume Mining S.A.R.L. (TFM or Tenke). The joint venture operates under the name Freeport Cobalt, and FCX is the operator with an effective 56 percent ownership interest. The remaining effective ownership interest is held by its partners in TFM, including 24 percent by Lundin Mining Corporation (Lundin) and 20 percent by La Générale des Carrières et des Mines (Gécamines). Initial consideration paid was $355 million, which included $34 million for cash acquired and is subject to a working capital adjustment, and was funded 70 percent by FCX and 30 percent by Lundin. Under the terms of the acquisition agreement, there is also the potential for additional consideration of up to $110 million over a period of three years, contingent upon the achievement of revenue-based performance targets. The initial estimates of the fair value of assets acquired and liabilities assumed are included in FCX's consolidated financial statements as of March 31, 2013.

Pending Acquisitions. On December 5, 2012, FCX announced definitive agreements to acquire, in separate transactions, Plains Exploration & Production Company (PXP) and McMoRan Exploration Co. (MMR). PXP per-share consideration is equivalent to 0.6531 shares of FCX's common stock and $25.00 in cash (approximately $3.4 billion in cash and 91 million shares of FCX common stock). MMR per-share consideration consists of $14.75 in cash (approximately $3.4 billion in cash, or $2.1 billion net of MMR interests owned by FCX and PXP) and 1.15 units of a royalty trust, which will hold a five percent overriding royalty interest in future production from MMR's existing shallow water ultra-deep prospects. As further discussed in Note 6, in March 2013, FCX issued $6.5 billion of senior notes for net proceeds of $6.4 billion, which will be used, together with a five-year bank term loan that provides for borrowings up to $4.0 billion, to fund the cash portion of the merger consideration for both transactions and the repayment of certain indebtedness of PXP and MMR.

Completion of each transaction is subject to receipt of PXP and MMR stockholder approval of their respective transactions. The PXP transaction is not conditioned on the closing of the MMR transaction, and the MMR transaction is not conditioned on the closing of the PXP transaction. On April 18, 2013, PXP announced that it will hold a special meeting of its stockholders on May 20, 2013, to vote on the proposed acquisition of PXP by FCX. On May 3, 2013, MMR announced it will hold a special meeting of its stockholders on June 3, 2013, to vote on the proposed acquisition of MMR by FCX. Both transactions are expected to close in second-quarter 2013, subject to satisfaction of all conditions to closing.

The information contained in the consolidated financial statements and the notes herein does not reflect FCX's pending acquisitions of PXP or MMR.

8
Table of Contents                 



3. EARNINGS PER SHARE
FCX’s basic net income per share of common stock was calculated by dividing net income attributable to FCX common stockholders by the weighted-average shares of common stock outstanding during the period. Following is a reconciliation of net income and weighted-average shares of common stock outstanding for purposes of calculating diluted net income per share (in millions, except per share amounts):
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
 
Net income
$
824

 
$
1,001

 
Net income attributable to noncontrolling interests
(176
)
 
(237
)
 
Net income attributable to FCX common stockholders
$
648

 
$
764

 
 
 
 
 
 
Weighted-average shares of common stock outstanding
950

 
949

 
Add shares issuable upon exercise or vesting of
 
 
 
 
dilutive stock options and restricted stock units
3

 
6

a 
Weighted-average shares of common stock outstanding
 
 
 
 
for purposes of calculating diluted net income per share
953

 
955

 
 
 
 
 
 
Diluted net income per share attributable to FCX
  common stockholders
$
0.68

 
$
0.80

 
a.
Excluded shares of common stock associated with outstanding stock options with exercise prices less than the average market price of FCX's common stock that were anti-dilutive based on the treasury stock method of approximately three million for first-quarter 2012.

Outstanding stock options with exercise prices greater than the average market price of FCX’s common stock during the period are excluded from the computation of diluted net income per share of common stock. Excluded amounts were 29 million stock options with a weighted-average exercise price of $41.35 per option for first-quarter 2013 and 9 million stock options with a weighted-average exercise price of $50.63 per option for first-quarter 2012.

4. INVENTORIES, INCLUDING LONG-TERM MILL AND LEACH STOCKPILES
The components of inventories follow (in millions):
 
March 31,
2013
 
December 31, 2012
Raw materials (primarily concentrates)
$
171

 
$
237

Work-in-processa
237

 
252

Finished goodsb
1,128

 
911

Total product inventories
$
1,536

 
$
1,400

 
 
 
 
Total materials and supplies, netc
$
1,575

 
$
1,504

a.
FCX's mining operations also have work-in-process inventories that are included in mill and leach stockpiles.
b.
Primarily included molybdenum concentrates and copper concentrates, anodes, cathodes and rod.
c.
Materials and supplies inventory was net of obsolescence reserves totaling $27 million at March 31, 2013, and December 31, 2012.


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A summary of mill and leach stockpiles follows (in millions):
 
March 31,
2013
 
December 31, 2012
Current:
 
 
 
Mill stockpiles
$
112

 
$
104

Leach stockpiles
1,586

 
1,568

Total current mill and leach stockpiles
$
1,698

 
$
1,672

Long-term:a
 
 
 
Mill stockpiles
$
627

 
$
615

Leach stockpiles
1,454

 
1,340

Total long-term mill and leach stockpiles
$
2,081

 
$
1,955

 
a.
Metals in stockpiles not expected to be recovered within the next 12 months.

5. INCOME TAXES
Geographic sources of FCX's provision for income taxes follow (in millions):
 
Three Months Ended
 
March 31,
 
2013
 
2012
United States operations
$
71

 
$
83

International operations
357

 
408

Total
$
428

 
$
491


FCX’s consolidated effective income tax rate was 34 percent for first-quarter 2013 and 33 percent for first-quarter 2012. Variations in the relative proportions of jurisdictional income can result in fluctuations to FCX’s consolidated effective income tax rate.

6. DEBT AND EQUITY TRANSACTIONS
On February 14, 2013, FCX entered into an agreement for a $4.0 billion bank term loan (the Term Loan) in connection with the pending acquisitions of PXP and MMR. Borrowings of up to $4.0 billion under the Term Loan will become available to FCX upon the closing of the PXP and/or the MMR acquisitions to fund the cash portion of the merger consideration for both transactions, to refinance certain of PXP's and MMR's outstanding debt, or for general corporate purposes. At the time the PXP transaction closes, PXP will join the Term Loan as a borrower.

The Term Loan will amortize in equal quarterly installments during the second, third and fourth years of the Term Loan in annual amounts equal to 10 percent, 15 percent and 20 percent, respectively, of the original aggregate principal amount, and the remainder will mature five years from the date of the first borrowing. At FCX's option, the Term Loan will bear interest at either an adjusted London Interbank Offered Rate (LIBOR) or an alternate-based rate (as defined under the Term Loan agreement) plus a spread to be determined by reference to FCX's credit ratings (currently LIBOR plus 1.50 percent or the alternate-based rate plus 50 basis points). FCX expects to select LIBOR for amounts borrowed at closing.

Also on February 14, 2013, FCX and PT Freeport Indonesia entered into a new senior unsecured $3.0 billion revolving credit facility, which will refinance and replace FCX's existing revolving credit facility (scheduled to mature on March 30, 2016) upon completion of the pending acquisition of PXP. Interest on the new revolving credit facility will be determined by reference to FCX's credit rating (currently LIBOR plus 1.50 percent). At the time the PXP acquisition closes, PXP will join the revolving credit facility as a borrower. No amounts are currently available to FCX under the new revolving credit facility. At the closing of the acquisition of PXP, the new revolving credit facility will be available for five years in an aggregate principal amount of $3.0 billion, with $500 million available to PT Freeport Indonesia.


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The Term Loan and new revolving credit facility both contain customary affirmative covenants and representations, and also contain a number of negative covenants that, among other things, restrict, subject to certain exceptions, the ability of FCX's subsidiaries that are not borrowers or guarantors to incur additional indebtedness (including guarantee obligations) and FCX's ability or the ability of FCX's subsidiaries to: create liens on assets; enter into sale and leaseback transactions; engage in mergers, liquidations and dissolutions; and sell assets. The Term Loan and new revolving credit facility also contain financial ratios governing maximum total leverage and minimum interest coverage.

On March 7, 2013, in connection with the financing of FCX's pending acquisitions of PXP and MMR, FCX issued $6.5 billion of senior notes in four tranches. FCX sold $1.5 billion of 2.375% Senior Notes due March 2018 (5-year notes), $1.0 billion of 3.100% Senior Notes due March 2020 (7-year notes), $2.0 billion of 3.875% Senior Notes due March 2023 (10-year notes) and $2.0 billion of 5.450% Senior Notes due March 2043 (30-year notes) for total net proceeds of $6.4 billion. Interest on these notes is payable semiannually on March 15 and September 15, commencing on September 15, 2013. FCX expects to use the proceeds from the senior notes, together with available funds from its Term Loan, to fund the acquisitions of PXP and MMR, including the payment of cash consideration for the acquisitions and the repayment of certain indebtedness. If the PXP acquisition does not close, FCX will be required to redeem all the outstanding 7-year, 10-year and 30-year notes at 101 percent plus accrued and unpaid interest.

FCX recorded a loss on early extinguishment of debt of $45 million ($40 million to net income attributable to FCX common stockholders) in first-quarter 2013 for financing costs incurred for the terminated $9.5 billion acquisition bridge loan facility, which was entered into in December 2012 to provide interim financing for the acquisitions of PXP and MMR.

In February 2012, FCX sold $500 million of 1.40% Senior Notes due 2015, $500 million of 2.15% Senior Notes due 2017 and $2.0 billion of 3.55% Senior Notes due 2022 for total net proceeds of $2.97 billion. These notes bear interest payable semiannually.

On March 14, 2012, FCX redeemed the remaining $3.0 billion of its outstanding 8.375% Senior Notes due 2017, for which holders received 104.553 percent of the principal amount together with the accrued and unpaid interest. As a result of this redemption, FCX recorded a loss on early extinguishment of debt of $168 million ($149 million to net income attributable to FCX common stockholders) in first-quarter 2012.

Consolidated interest expense (excluding capitalized interest) totaled $75 million in first-quarter 2013 and $99 million in first-quarter 2012. Capitalized interest totaled $18 million in first-quarter 2013 and $36 million in first-quarter 2012.

On March 27, 2013, FCX's Board of Directors declared a quarterly dividend of $0.3125 per share, which was paid on May 1, 2013, to common shareholders of record at the close of business on April 15, 2013.

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7. FINANCIAL INSTRUMENTS
FCX does not purchase, hold or sell derivative financial instruments unless there is an existing asset or obligation, or it anticipates a future activity that is likely to occur and will result in exposure to market risks, which FCX intends to offset or mitigate. FCX does not enter into any derivative financial instruments for speculative purposes, but has entered into derivative financial instruments in limited instances to achieve specific objectives. These objectives principally relate to managing risks associated with commodity price changes, foreign currency exchange rates and interest rates.

Commodity Contracts.  From time to time, FCX has entered into forward, futures and swap contracts to hedge the market risk associated with fluctuations in the prices of commodities it purchases and sells. Derivative financial instruments used by FCX to manage its risks do not contain credit risk-related contingent provisions. As of March 31, 2013, FCX had no price protection contracts relating to its mine production. A discussion of FCX’s derivative commodity contracts and programs follows.

Derivatives Designated as Hedging Instruments – Fair Value Hedges
Copper Futures and Swap Contracts. Some of FCX's U.S. copper rod customers request a fixed market price instead of the New York Mercantile Exchange (COMEX) average copper price in the month of shipment. FCX hedges this price exposure in a manner that allows it to receive the COMEX average price in the month of shipment while the customers pay the fixed price they requested. FCX accomplishes this by entering into copper futures and swap contracts and then liquidating the copper futures contracts and settling the copper swap contracts during the month of shipment, which generally results in FCX receiving the COMEX average copper price in the month of shipment. Hedging gains or losses from these copper futures and swap contracts are recorded in revenues. FCX did not have any significant gains or losses during the three-month periods ended March 31, 2013 and 2012, resulting from hedge ineffectiveness. At March 31, 2013, FCX held copper futures and swap contracts that qualified for hedge accounting for 57 million pounds at an average contract price of $3.54 per pound, with maturities through March 2014.

A summary of gains (losses) recognized in revenues for derivative financial instruments related to commodity contracts that are designated and qualify as fair value hedge transactions, along with the unrealized gains (losses) on the related hedged item (firm sales commitments) follows (in millions):
 
Three Months Ended
 
March 31,
 
2013
 
2012
Copper futures and swap contracts:
 
 
 
Unrealized (losses) gains:
 
 
 
Derivative financial instruments
$
(12
)
 
$
18

Hedged item
12

 
(18
)
 
 
 
 
Realized (losses) gains:
 
 
 
Matured derivative financial instruments
(2
)
 
10


Derivatives Not Designated as Hedging Instruments
Embedded Derivatives. As described in Note 1 to FCX’s annual report on Form 10-K for the year ended December 31, 2012, under “Revenue Recognition,” certain FCX copper concentrate, copper cathode and gold sales contracts provide for provisional pricing primarily based on the London Metal Exchange (LME) price (copper) or the COMEX price (copper) and the London Bullion Market Association (London PM) price (gold) at the time of shipment as specified in the contract. Similarly, FCX purchases copper under contracts that provide for provisional pricing. FCX applies the normal purchases and normal sales scope exception in accordance with derivatives and hedge accounting guidance to the host sales agreements since the contracts do not allow for net settlement and always result in physical delivery. Sales and purchases with a provisional sales price contain an embedded derivative (i.e., the price settlement mechanism that is settled after the time of delivery) that is required to be bifurcated from the host contract. The host contract is the sale or purchase of the metals contained in the concentrates or cathodes at the then-current LME or COMEX price (copper) or the London PM price (gold) as defined in the contract. Mark-to-market price fluctuations recorded through the settlement date are reflected in revenues for sales contracts and in cost of sales as production and delivery costs for purchase contracts.


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A summary of FCX’s embedded derivatives at March 31, 2013, follows:
 
Open Positions
 
Average Price
Per Unit
 
Maturities Through
 
 
Contract
 
Market
 
Embedded derivatives in provisional sales contracts:
 
 
 
 
 
 
 
Copper (millions of pounds)
491

 
$
3.57

 
$
3.41

 
August 2013
Gold (thousands of ounces)
105

 
1,606

 
1,601

 
July 2013
Embedded derivatives in provisional purchase contracts:
 
 
 
 
 
 
 
Copper (millions of pounds)
124

 
3.57

 
3.42

 
July 2013

Copper Forward Contracts. Atlantic Copper, FCX’s wholly owned smelting and refining unit in Spain, enters into forward copper contracts designed to hedge its copper price risk whenever its physical purchases and sales pricing periods do not match. These economic hedge transactions are intended to hedge against changes in copper prices, with the mark-to-market hedging gains or losses recorded in cost of sales. At March 31, 2013, Atlantic Copper held net forward copper sales contracts for 16 million pounds at an average contract price of $3.48 per pound, with maturities through June 2013.

A summary of the realized and unrealized gains (losses) recognized in income before income taxes and equity in affiliated companies’ net earnings for commodity contracts that do not qualify as hedge transactions, including embedded derivatives, follows (in millions):
 
Three Months Ended
 
March 31,
 
2013
 
2012
Embedded derivatives in provisional sales contractsa
$
(83
)
 
$
184

Copper forward contractsb
3

 
11

a.
Amounts recorded in revenues. 
b.
Amounts recorded in cost of sales as production and delivery costs.

Unsettled Derivative Financial Instruments
A summary of the fair values of unsettled derivative financial instruments recorded on the consolidated balance sheets follows (in millions):
 
March 31,
2013
 
December 31, 2012
Derivatives designated as hedging instruments
 
 
 
Commodity contracts:
 
 
 
Copper futures and swap contracts:a
 
 
 
Asset positionb
$
—

 
$
5

Liability positionc
8

 
1

 
 
 
 
Derivatives not designated as hedging instruments
 
 
 
Commodity contracts:
 
 
 
Embedded derivatives in provisional sales/purchase contracts:d
 
 
 
Gross amounts in an asset position
$
19

 
$
36

Less gross amounts offset in the balance sheet
—

 
8

Net amounts in an asset position
$
19

 
$
28

 
 
 
 
Gross amounts in a liability position
$
79

 
$
27

Less gross amounts offset in the balance sheet
—

 
8

Net amounts in a liability position
$
79

 
$
19

 
 
 
 
Copper forward contracts:
 
 
 
Asset positionb
$
1

 
$
—

a.
FCX paid $10 million to brokers at March 31, 2013, and $7 million at December 31, 2012, for margin requirements (recorded in other current assets).
b.
Amounts recorded in other current assets. 
c.
Amounts recorded in accounts payable and accrued liabilities. 

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d.
These derivatives are the only derivatives that are offset in the balance sheet in accordance with accounting guidance. Based on the respective contract, embedded derivatives on provisional sales/purchases are netted with the corresponding outstanding receivable/payable balances. At March 31, 2013, the net amounts were in a net liability position of $60 million, of which a credit of $43 million was netted against trade accounts receivable, and a credit of $17 million was included in accounts payable and accrued liabilities. At December 31, 2012, the net amounts were in a net asset position of $9 million, of which a debit of $15 million was included in trade accounts receivable, and a credit of $6 million was included in accounts payable and accrued liabilities.

Credit Risk.  FCX is exposed to credit loss when financial institutions with which FCX has entered into derivative transactions (commodity, foreign exchange and interest rate swaps) are unable to pay. To minimize the risk of such losses, FCX uses counterparties that meet certain credit requirements and periodically reviews the creditworthiness of these counterparties. FCX does not anticipate that any of the counterparties it deals with will default on their obligations. As of March 31, 2013, FCX did not have significant credit exposure associated with derivative transactions.

Other Financial Instruments.  Other financial instruments include cash and cash equivalents, accounts receivable, investment securities, trust assets, accounts payable and accrued liabilities, and long-term debt. The carrying value for cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities approximates fair value because of their short-term nature and generally negligible credit losses (refer to Note 8 for the fair values of investment securities, trust assets and long-term debt).

A summary of cash and cash equivalents follows (in millions):
 
March 31,
2013
 
December 31, 2012
 
Money market funds
$
8,367

 
$
2,991

 
Time deposits
697

 
514

 
Overnight repurchase agreementa
300

 
—

 
Cash in banks
231

 
200

 
Total cash and cash equivalents
$
9,595

 
$
3,705

 
a.
In the first quarter of 2013, FCX entered into an overnight repurchase agreement with a financial institution. In connection with the agreement, FCX purchases an undivided interest in U.S. government treasury and/or agency securities at market value, and the financial institution agrees to repurchase the securities on demand (the following business day) at the original purchase price plus a designated interest rate. FCX does not participate in the actual return on the underlying securities. Because of its short-term, highly liquid nature, and the insignificant risk of changes in value, FCX considers this financial instrument a cash equivalent.


14
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8. FAIR VALUE MEASUREMENT
Fair value accounting guidance includes a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs). FCX did not have any significant transfers in or out of Levels 1, 2 or 3 for first-quarter 2013.

A summary of the carrying amount and fair value of FCX’s financial instruments other than cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities follows (in millions):
 
At March 31, 2013
 
Carrying
 
Fair Value
 
Amount
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
 
 
Investment securities (current and long-term):
 
 
 
 
 
 
 
 
 
MMR investmentb
$
439

 
$
592

 
$
—

 
$
592

 
$
—

U.S. core fixed income funda,c
22

 
22

 
—

 
22

 
—

Money market fundsa, c
16

 
16

 
16

 
—

 
—

Equity securitiesa, c
7

 
7

 
7

 
—

 
—

Total investment securities
484

 
637

 
23

 
614

 
—

 
 
 
 
 
 
 
 
 
 
Trust assets (long-term):a, c
 
 
 
 
 
 
 
 
 
U.S. core fixed income fund
49

 
49

 
—

 
49

 
—

Government mortgage-backed securities
40

 
40

 
—

 
40

 
—

Corporate bonds
28

 
28

 
—

 
28

 
—

Government bonds and notes
19

 
19

 
—

 
19

 
—

Asset-backed securities
18

 
18

 
—

 
18

 
—

Money market funds
7

 
7

 
7

 
—

 
—

Municipal bonds
1

 
1

 
—

 
1

 
—

Total trust assets
162

 
162

 
7

 
155

 
—

 
 
 
 
 
 
 
 
 
 
Derivatives:a
 
 
 
 
 
 
 
 
 
Embedded derivatives in provisional sales/purchase
 
 
 
 
 
 
 
 
 
contracts in a gross asset positiond
19

 
19

 
—

 
19

 
—

Copper forward contractse
1

 
1

 
1

 
—

 
—

Total derivative assets
20

 
20

 
1

 
19

 
—

 
 
 
 
 
 
 
 
 
 
Total assets
 
 
$
819

 
$
31

 
$
788

 
$
—

 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Derivatives:a
 
 
 
 
 
 
 
 
 
Embedded derivatives in provisional sales/purchase
 
 
 
 
 
 
 
 
 
contracts in a gross liability positiond
$
79

 
$
79

 
$
—

 
$
79

 
$
—

Copper futures and swap contractsf
8

 
8

 
6

 
2

 
—

Total derivative liabilities
87

 
87

 
6

 
81

 
—

 
 
 
 
 
 
 
 
 
 
Long-term debt, including current portiong
10,092

 
10,129

 
—

 
10,129

 
—

 
 
 
 
 
 
 
 
 
 
Total liabilities
 
 
$
10,216

 
$
6

 
$
10,210

 
$
—



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Table of Contents                 


 
At December 31, 2012
 
Carrying
 
Fair Value
 
Amount
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
 
 
Investment securities (current and long-term):
 
 
 
 
 
 
 
 
 
MMR investmentb
$
446

 
$
539

 
$
—

 
$
539

 
$
—

U.S. core fixed income funda,c
22

 
22

 
—

 
22

 
—

Money market fundsa, c
16

 
16

 
16

 
—

 
—

Equity securitiesa, c
8

 
8

 
8

 
—

 
—

Total investment securities
492

 
585

 
24

 
561

 
—

 
 
 
 
 
 
 
 
 
 
Trust assets (long-term):a, c
 
 
 
 
 
 
 
 
 
U.S. core fixed income fund
50

 
50

 
—

 
50

 
—

Government mortgage-backed securities
36

 
36

 
—

 
36

 
—

Corporate bonds
30

 
30

 
—

 
30

 
—

Government bonds and notes
24

 
24

 
—

 
24

 
—

Asset-backed securities
15

 
15

 
—

 
15

 
—

Money market funds
7

 
7

 
7

 
—

 
—

Municipal bonds
1

 
1

 
—

 
1

 
—

Total trust assets
163

 
163

 
7

 
156

 
—

 
 
 
 
 
 
 
 
 
 
Derivatives:a
 
 
 
 
 
 
 
 
 
Embedded derivatives in provisional sales/purchase
 
 
 
 
 
 
 
 
 
contracts in a gross asset positiond
36

 
36

 
—

 
36

 
—

Copper futures and swaps contractse
5

 
5

 
5

 
—

 
—

Total derivative assets
41

 
41

 
5

 
36

 
—

 
 
 
 
 
 
 
 
 
 
Total assets
 
 
$
789

 
$
36

 
$
753

 
$
—

 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Derivatives:a
 
 
 
 
 
 
 
 
 
Embedded derivatives in provisional sales/purchase
 
 
 
 
 
 
 
 
 
contracts in a gross liability positiond
$
27

 
$
27

 
$
—

 
$
27

 
$
—

Copper futures and swap contractsf
1

 
1

 
1

 
—

 
—

Total derivative liabilities
28

 
28

 
1

 
27

 
—

 
 
 
 
 
 
 
 
 
 
Long-term debt, including current portiong
3,527

 
3,589

 
—

 
3,589

 
—

 
 
 
 
 
 
 
 
 
 
Total liabilities
 
 
$
3,617

 
$
1

 
$
3,616

 
$
—

a.
Recorded at fair value. 
b.
Recorded at cost and included in other assets.
c.
Current portion included in other current assets and long-term portion included in other assets. 
d.
Embedded derivatives are recorded in trade accounts receivable and/or accounts payable and accrued liabilities (refer to Note 7 for further discussion).
e.
Included in other current assets.
f.
Included in accounts payable and accrued liabilities.
g.
Recorded at cost except for long-term debt acquired in the FMC acquisition, which was recorded at fair value at the acquisition date.

Valuation Techniques

Money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.

FCX's investment in MMR's 5.75% Convertible Perpetual Preferred Stock (MMR investment) is not actively traded. Historically, FCX used a pricing simulation model in determining fair value of the MMR investment; however, because of the definitive agreement to acquire MMR (refer to Note 2), FCX incorporated a discounted cash flow model in determining fair value of the MMR investment at March 31, 2013. Accordingly, FCX primarily valued its MMR investment based on a discounted cash flow model that uses risk-adjusted discount rates as the most

16
Table of Contents                 


significant observable input and an expected settlement date. FCX continues to classify this valuation within Level 2 of the fair value hierarchy.

Fixed income securities (U.S. core fixed income funds, government securities, corporate bonds, asset-backed securities and municipal bonds) are valued using a bid evaluation or a mid evaluation. A bid evaluation is an estimated price at which a dealer would pay for a security. A mid evaluation is the average of the estimated price at which a dealer would sell a security and the estimated price at which a dealer would pay for a security. These evaluations are based on quoted prices, if available, or models that use observable inputs and, as such, are classified within Level 2 of the fair value hierarchy.

Equity securities are valued at the closing price reported on the active market on which the individual securities are traded and, as such, are classified within Level 1 of the fair value hierarchy.

FCX’s embedded derivatives on provisional copper concentrate, copper cathode and gold purchases and sales have critical inputs of quoted monthly LME or COMEX copper forward prices and the London PM gold forward price at each reporting date based on the month of maturity; however, FCX's contracts themselves are not traded on an exchange. As a result, these derivatives are classified within Level 2 of the fair value hierarchy.

FCX’s derivative financial instruments for copper futures and swap contracts and copper forward contracts that are traded on the respective exchanges are classified within Level 1 of the fair value hierarchy because they are valued using quoted monthly COMEX or LME forward prices at each reporting date based on the month of maturity (refer to Note 7 for further discussion). Certain of these contracts are traded on the over-the-counter market and are classified within Level 2 of the fair value hierarchy.

Long-term debt, including the current portion, is valued using prices obtained from a readily available pricing source and, as such, is classified within Level 2 of the fair value hierarchy.

The techniques described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while FCX believes its valuation techniques are appropriate and consistent with other market participants, the use of different techniques or assumptions to determine fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the techniques used at March 31, 2013, except as otherwise described above.
 
9. CONTINGENCIES AND COMMITMENTS
Litigation. The following information includes a discussion of updates to previously reported legal proceedings included in Note 13 of FCX's annual report on Form 10-K for the year ended December 31, 2012.

Shareholder Litigation. In re Freeport-McMoRan Copper & Gold Inc. Derivative Litigation, No. 8145-VCN, consolidated in the Delaware Court of Chancery on January 25, 2013. On March 18, 2013, the Delaware Court of Chancery granted the stipulation made by the parties to allow the plaintiffs in In re Freeport-McMoRan Derivative Litigation, No. CV2012-018351, consolidated in the Arizona Superior Court on February 6, 2013, to intervene in the consolidated Delaware action. On March 18, 2013, the Arizona plaintiffs agreed to seek a permanent stay of the Arizona actions, and on March 20, 2013, the Arizona Superior Court extended the stay until June 7, 2013. On March 21, 2013, the plaintiffs in the consolidated Delaware action informed the Delaware Court of Chancery that they will not seek a preliminary injunction barring either the PXP merger or the MMR merger.
Stephen Blau MD Money Purchase Pension Plan Trust v. Moffett et al., No. 8384-VCN, Delaware Court of Chancery, filed March 5, 2013. On March 5, 2013, an additional derivative action challenging the MMR merger and the PXP merger was filed on behalf of FCX by a purported FCX stockholder in the Delaware Court of Chancery. The action names some or all of the following as defendants: the directors and certain officers of FCX, two FCX subsidiaries, PXP and certain of its directors, and MMR and certain of its directors and officers. The action alleges, among other things, that the FCX directors breached their fiduciary duties to FCX stockholders because they, among other things, pursued their own interests at the expense of stockholders in approving the PXP and MMR mergers. The complaint also alleges that some or all of the following parties aided and abetted the wrongful acts allegedly committed by the directors and certain officers of FCX, two FCX subsidiaries, PXP and certain of its directors, and MMR and certain of its directors and officers. The action seeks as relief, among other things, enjoining defendants temporarily and permanently from taking any steps to accomplish or implement the proposed PXP and MMR mergers under the terms proposed and requiring submission of the proposed PXP and MMR

17
Table of Contents                 


mergers to a vote of FCX stockholders, damages, and attorneys' fees and costs. This action has not yet been consolidated into the Delaware action.
In re Plains Exploration & Production Company Stockholder Litigation, No. 8090-VCN, consolidated in the Delaware Court of Chancery on January 15, 2013. On March 22, 2013, the plaintiffs filed a brief in support of their motion for preliminary injunction which was filed on February 15, 2013. The Delaware Court of Chancery held a hearing on May 1, 2013, regarding the plaintiffs' motion for preliminary injunction. A ruling is expected in the near future.
In re McMoRan Exploration Co. Stockholder Litigation, No. 8132-VCN, consolidated in the Delaware Court of Chancery on January 25, 2013. On March 21, 2013, the plaintiffs filed a brief in support of their motion for preliminary injunction which was filed on December 20, 2012.
Langley v. Moffett et al., No. 2012-11904, Civil District Court for the Parish of Orleans of the State of Louisiana, filed December 19, 2012. On April 19, 2013, the Louisiana Civil District Court granted defendants' motion to stay the action pending the resolution of the consolidated action brought by MMR stockholders in the Delaware Court of Chancery.
FCX intends to defend itself vigorously in these matters.
Tax Matters. As reported in Note 13 of FCX's annual report on Form 10-K for the year ended December 31, 2012, PT Freeport Indonesia has received assessments from the Indonesian tax authorities for additional taxes and interest related to various audit exceptions for the years 2005, 2006 and 2007. During first-quarter 2013, PT Freeport Indonesia also received assessments from the Indonesian tax authorities for additional taxes of $59 million and interest of $55 million related to various audit exceptions for 2008. As of March 31, 2013, PT Freeport Indonesia has paid $190 million (of which $148 million is included in other assets) for the tax assessments. PT Freeport Indonesia has filed objections to the 2005, 2006 and 2007 assessments because it believes it has properly determined and paid its taxes.

10. NEW ACCOUNTING STANDARDS
In December 2011, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) that requires companies to disclose information regarding offsetting and other arrangements for derivatives and other financial instruments. Additionally, in January 2013, FASB issued an ASU that limited the scope of the balance sheet offsetting disclosures to derivatives, repurchase agreements and securities lending transactions to the extent that they are (i) offset in the financial statements or (ii) subject to an enforceable master netting arrangement or similar arrangement. FCX adopted this guidance effective January 1, 2013.

In February 2013, FASB issued an ASU that clarified the reclassification requirements from accumulated other comprehensive income to net income. This ASU requires disclosure of amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present either on the face of the financial statements or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the amount is reclassified in its entirety to net income in the same reporting period. For amounts not reclassified in their entirety to net income, an entity is required to cross-reference to the related note on the face of the financial statements for additional information. FCX adopted this guidance effective January 1, 2013.

11. SUBSEQUENT EVENTS
FCX evaluated events after March 31, 2013, and through the date the consolidated financial statements were issued, and determined any events or transactions occurring during this period that would require recognition or disclosure are appropriately addressed in these consolidated financial statements.

12. BUSINESS SEGMENTS
FCX has organized its operations into five primary divisions – North America copper mines, South America mining, Indonesia mining, Africa mining and Molybdenum mines. Notwithstanding this structure, FCX internally reports information on a mine-by-mine basis. Therefore, FCX concluded that its operating segments include individual mines or operations. Operating segments that meet certain thresholds are reportable segments. Beginning in first-quarter 2013, the Molybdenum operations division was revised to only report FCX's two molybdenum mines in North America - the Henderson underground mine and the Climax open-pit mine, both in Colorado - as a division (i.e. Molybdenum mines). The molybdenum sales company and related conversion facilities are included with Corporate, Other & Eliminations in the following segment tables. In addition, FCX revised its segment disclosures for the three months ended March 31, 2012, to conform with the current period presentation.

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Table of Contents                 



Intersegment Sales. Intersegment sales between FCX’s operations are based on similar arms-length transactions with third parties at the time of the sale. Intersegment sales may not be reflective of the actual prices ultimately realized because of a variety of factors, including additional processing, timing of sales to unaffiliated customers and transportation premiums.

FCX defers recognizing profits on sales from its mining operations to Atlantic Copper and on 25 percent of Indonesia mining sales to PT Smelting until final sales to third parties occur. Quarterly variations in ore grades, the timing of intercompany shipments and changes in product prices result in variability in FCX's net deferred profits and quarterly earnings.
Allocations. FCX allocates certain operating costs, expenses and capital expenditures to its operating divisions and individual segments. However, not all costs and expenses applicable to a mine or operation are allocated. U.S. federal and state income taxes are recorded and managed at the corporate level, whereas foreign income taxes are recorded and managed at the applicable country. In addition, most exploration and research activities are managed at the corporate level, and those costs along with some selling, general and administrative costs are not allocated to the operating divisions or segments. Accordingly, the following segment information reflects management determinations that may not be indicative of what the actual financial performance of each operating division or segment would be if it was an independent entity.





19
Table of Contents                 


Business Segments
(In millions)
North America Copper Mines
 
South America
 
Indonesia
 
Africa
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Atlantic
 
Corporate,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Molyb-
 
 
 
Copper
 
Other &
 
 
 
 
 
Other
 
 
 
Cerro
 
Other
 
 
 
 
 
 
 
denum
 
Rod &
 
Smelting
 
Elimi-
 
FCX
 
Morenci
 
Mines
 
Total
 
Verde
 
Mines
 
Total
 
Grasberg
 
Tenke
 
MInes
 
Refining
 
& Refining
 
nations
 
Total
Three Months Ended March 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unaffiliated customers
$
80

 
$
49

 
$
129

 
$
290

 
$
560

 
$
850

 
$
864

a 
$
438

 
$
—

 
$
1,330

 
$
633

 
$
339

b 
$
4,583

Intersegment
436

 
824

 
1,260

 
109

 
55

 
164

 
67

 
—

 
143

 
7

 
6

 
(1,647
)
 
—

Production and delivery
297

 
514

 
811

 
171

 
304

 
475

 
563

 
185

 
80

 
1,328

 
628

 
(1,351
)
 
2,719

Depreciation, depletion and amortization
33

 
69

 
102

 
33

 
38

 
71

 
55

 
58

 
20

 
3

 
10

 
10

 
329

Selling, general and administrative expenses
—

 
1

 
1

 
—

 
1

 
1

 
26

 
3

 
—

 
—

 
5

 
77

 
113

Exploration and research expenses
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
52

 
52

Environmental obligations and shutdown costs
—

 
(4
)
 
(4
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
19

 
15

Operating income (loss)
186

 
293

 
479

 
195

 
272

 
467

 
287

 
192

 
43

 
6

 
(4
)
 
(115
)
 
1,355

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
1

 
1

 
2

 
—

 
—

 
—

 
2

 
—

 
—

 
—

 
4

 
49

 
57

Provision for (benefit from) income taxes
—

 
—

 
—

 
64

 
87

 
151

 
120

 
44

 
—

 
—

 
—

 
113

 
428

Total assets at March 31, 2013
2,589

 
5,917

 
8,506

 
5,968

 
4,359

 
10,327

 
6,862

 
4,894

 
2,033

 
316

 
918

 
8,732

c 
42,588

Capital expenditures
153

 
105

 
258

 
164

 
62

 
226

 
191

 
57

 
40

 
1

 
8

 
24

 
805

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unaffiliated customers
$
13

 
$
17

 
$
30

 
$
449

 
$
526

 
$
975

 
$
953

a 
$
303

 
$
—

 
$
1,298

 
$
704

 
$
342

b 
$
4,605

Intersegment
513

 
913

 
1,426

 
127

 
152

 
279

 
(3
)
 
2

 
126

 
6

 
8

 
(1,844
)
 
—

Production and delivery
256

 
451

 
707

 
193

 
270

 
463

 
515

 
132

 
70

 
1,297

 
695

 
(1,451
)
 
2,428

Depreciation, depletion and amortization
31

 
62

 
93

 
30

 
32

 
62

 
46

 
32

 
11

 
2

 
10

 
11

 
267

Selling, general and administrative expenses
—

 
1

 
1

 
1

 
1

 
2

 
33

 
2

 
—

 
—

 
5

 
61

 
104

Exploration and research expenses
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
62

 
62

Environmental obligations and shutdown costs
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
10

 
10

Operating income (loss)
239

 
416

 
655

 
352

 
375

 
727

 
356

 
139

 
45

 
5

 
2

 
(195
)
 
1,734

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
—

 
1

 
1

 
5

 
—

 
5

 
—

 
—

 
—

 
—

 
3

 
54

 
63

Provision for income taxes
—

 
—

 
—

 
123

 
117

 
240

 
150

 
29

 
—

 
—

 
—

 
72

 
491

Total assets at March 31, 2012
2,146

 
5,255

 
7,401

 
5,300

 
4,127

 
9,427

 
5,613

 
4,138

 
1,906

 
328

 
1,033

 
3,059

 
32,905

Capital expenditures
44

 
99

 
143

 
69

 
83

 
152

 
182

 
127

 
93

 
3

 
3

 
4

 
707

a.
Included PT Freeport Indonesia’s sales to PT Smelting totaling $430 million in first-quarter 2013 and $589 million in first-quarter 2012.
b.
Included revenues from FCX's molybdenum sales company, which included sales of molybdenum produced by the molybdenum mines and by certain of the North and South America copper mines.
c.
Included $7.0 billion of cash and cash equivalents at the parent company and $477 million of total assets related to Freeport Cobalt.