EX-99.1 2 a4q2018exhibit9918k-a.htm EXHIBIT 99.1 Exhibit
fmrgbleftjustified.jpg
 
 
 
 
 

Revised supplemental schedules of FCX’s press release dated January 24, 2019, titled “Freeport-McMoRan Reports Fourth-Quarter and Year Ended 2018 Results.”

Page
 
 
IV
 
Consolidated Statements of Income (Unaudited)
 
 
 
V
 
Consolidated Balance Sheets (Unaudited)
 
 
 
VI
 
Consolidated Statements of Cash Flows (Unaudited)
 
 
 
VII
 
Adjusted Net Income
 
 
 
VIII
 
Income Taxes



As Revised February 7, 2019


FREEPORT-McMoRan INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Years Ended
 
 
December 31,
 
December 31,
 
 
2018
 
2017a
 
2018
 
2017a
 
 
(In Millions, Except Per Share Amounts)
 
Revenuesb
$
3,684

 
$
5,041

 
$
18,628

 
$
16,403

 
Cost of sales:
 
 
 
 
 
 
 
 
Production and delivery
2,899

c,d 
2,804

c,d 
11,691

c,d 
10,266

c,d 
Depreciation, depletion and amortization
403

d 
457

 
1,754

d 
1,714

 
Total cost of sales
3,302

 
3,261

 
13,445

 
11,980

 
Selling, general and administrative expenses
102

d 
115

 
443

d 
477

d 
Mining exploration and research expenses
33

 
33

 
105

 
93

 
Environmental obligations and shutdown costs
13

 
168

e 
89

 
244

e 
Net gain on sales of assets
(82
)
 
(15
)
 
(208
)
 
(81
)
 
Total costs and expenses
3,368

 
3,562

 
13,874

 
12,713

 
Operating income
316

 
1,479

 
4,754

 
3,690

 
Interest expense, netf
(509
)
c,d 
(168
)
c 
(945
)
c,d 
(801
)
c 
Net (loss) gain on early extinguishment of debt
(1
)
 
13

 
7

 
21

 
Other income (expense), net
13

c,d 
1

 
76

c,d,g 
(8
)
 
(Loss) income from continuing operations before income taxes and equity in affiliated companies' net earnings
(181
)
 
1,325

 
3,892

 
2,902

 
Benefit from (provision for) income taxesh
552

 
(136
)
 
(991
)
 
(883
)
 
Equity in affiliated companies' net earnings
3

 
4

 
8

 
10

 
Net income from continuing operations
374

 
1,193

 
2,909

 
2,029

 
Net income (loss) from discontinued operationsi
4

 
16

 
(15
)
 
66

 
Net income
378

 
1,209

 
2,894

 
2,095

 
Net loss (income) attributable to noncontrolling interests:
 
 
 
 
 
 
 
 
Continuing operations
107

 
(168
)
 
(292
)
 
(274
)
 
Discontinued operations

 

 

 
(4
)
 
Net income attributable to FCX common stockj
$
485

 
$
1,041

 
$
2,602

 
$
1,817

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted net income (loss) per share attributable to common stock:
 
 
 
 
 
 
 
 
Continuing operations
$
0.33

 
$
0.70

 
$
1.79

 
$
1.21

 
Discontinued operations

 
0.01

 
(0.01
)
 
0.04

 
 
$
0.33

 
$
0.71

 
$
1.78

 
$
1.25

 
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding:
 
 
 
 
 
 
 
 
Basic
1,450

 
1,448

 
1,449

 
1,447

 
Diluted
1,457

 
1,455

 
1,458

 
1,454

 
 
 
 
 
 
 
 
 
 
Dividends declared per share of common stock
$
0.05

 
$

 
$
0.20

 
$

 
 
 
 
 
 
 
 
 
 
a.
The adoption of accounting guidance related to the presentation of retirement benefits resulted in the reclassification of the non-service components of net periodic benefit cost to other income (expense), net.
b.
Includes adjustments to provisionally priced concentrate and cathode sales. For a summary of adjustments to provisionally priced copper sales, refer to the supplemental schedule, "Derivative Instruments," on page IX.
c.
Includes net charges associated with disputed Cerro Verde royalties for prior years, which are summarized in the supplemental schedule, "Adjusted Net Income," on page VII.
d.
Includes PT-FI and other net charges, which are summarized in the supplemental schedules, "Adjusted Net Income," on page VII.
e.
Primarily reflects adjustments to environmental obligations resulting from revised cost estimates.
f.
Consolidated interest costs (before capitalization and excluding interest expense associated with disputed Cerro Verde royalties) totaled $170 million in fourth-quarter 2018, $194 million in fourth-quarter 2017, $671 million for the year 2018 and $777 million for the year 2017. Interest expense associated with disputed Cerro Verde royalties totaled $363 million in fourth-quarter 2018, $4 million in fourth-quarter 2017, $370 million or the year 2018 and $145 million for the year 2017.
g.
Includes $30 million of interest received on tax refunds, mostly associated with the refund of PT-FI's prior years' tax receivables. Refer to the supplemental schedule, "Adjusted Net Income," on page VII.
h.
For a summary of FCX's provision for income taxes, refer to the supplemental schedule, "Income Taxes," on page VIII.
i.
Primarily reflects adjustments to the estimated fair value of contingent consideration related to the 2016 sale of FCX’s interest in TF Holdings Limited, which will continue to be adjusted through December 31, 2019.
j.
FCX defers recognizing profits on intercompany sales until final sales to third parties occur. Refer to the supplemental schedule, "Deferred Profits," on page IX for a summary of net impacts from changes in these deferrals.

IV

As Revised February 7, 2019


FREEPORT-McMoRan INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
 
 
 
 
 
 
December 31,
 
 
2018
 
2017
 
 
(In Millions)
 
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
$
4,217

 
$
4,526

 
Trade accounts receivable
829

 
1,322

 
Income and other tax receivables
493

 
343

 
Inventories:
 
 
 
 
Materials and supplies, net
1,528

 
1,323

 
Mill and leach stockpiles
1,453

 
1,422

 
Product
1,778

 
1,404

 
Other current assets
422

 
286

 
Total current assets
10,720

 
10,626

 
Property, plant, equipment and mine development costs, net
28,010

a 
22,994

 
Long-term mill and leach stockpiles
1,314

 
1,409

 
Other assets
2,172

 
2,273

 
Total assets
$
42,216

 
$
37,302

 
 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable and accrued liabilities
$
2,625

 
$
2,497

 
Accrued income taxes
199

 
583

 
Current portion of environmental and asset retirement obligations
449

 
420

 
Dividends payable
73

 

 
Current portion of debt
17

 
1,414

 
Total current liabilities
3,363

 
4,914

 
Long-term debt, less current portion
11,124

 
11,815

 
Deferred income taxes
3,998

a 
3,663

 
Environmental and asset retirement obligations, less current portion
3,609

 
3,602

 
Other liabilities
2,230

 
2,012

 
Total liabilities
24,324

 
26,006

 
 
 
 
 
 
Equity:
 
 
 
 
Stockholders' equity:
 
 
 
 
Common stock
158

 
158

 
Capital in excess of par value
26,013

 
26,751

 
Accumulated deficit
(12,041
)
 
(14,722
)
 
Accumulated other comprehensive loss
(605
)
 
(487
)
 
Common stock held in treasury
(3,727
)
 
(3,723
)
 
Total stockholders' equity
9,798

 
7,977

 
Noncontrolling interests
8,094

a 
3,319

 
Total equity
17,892

 
11,296

 
Total liabilities and equity
$
42,216

 
$
37,302

 
 
 
 
 
 
a.
Includes additions of $4.6 billion in property, plant, equipment and mine development costs, $0.8 billion in deferred income taxes and $4.8 billion in noncontrolling interests associated with the PT-FI transaction.

V

As Revised February 7, 2019


FREEPORT-McMoRan INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 
 
 
 
 
 
 
 
 
 
Years Ended
 
 
 
December 31,
 
 
 
2018
 
2017
 
 
 
(In Millions)
 
Cash flow from operating activities:
 
 
 
 
 
Net income
 
$
2,894

 
$
2,095

 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
Depreciation, depletion and amortization
 
1,754

 
1,714

 
U.S. tax reform benefit
 
(123
)
 
(393
)
 
Net gain on sales of assets
 
(208
)
 
(81
)
 
Stock-based compensation
 
76

 
71

 
Net charges for Cerro Verde royalty dispute
 
371

 
355

 
Payments for Cerro Verde royalty dispute
 
(56
)
 
(53
)
 
Net charges for environmental and asset retirement obligations, including accretion
 
262

 
383

 
Payments for environmental and asset retirement obligations
 
(239
)
 
(131
)
 
Net charges for defined pension and postretirement plans
 
81

 
120

 
Pension plan contributions
 
(75
)
 
(174
)
 
Net gain on early extinguishment of debt
 
(7
)
 
(21
)
 
Deferred income taxes
 
(438
)
 
76

 
Loss (gain) on disposal of discontinued operations
 
15

 
(57
)
 
Decrease in long-term mill and leach stockpiles
 
94

 
224

 
Other, net
 
16

 
(35
)
 
Changes in working capital and other tax payments:
 
 
 
 

 
Accounts receivable
 
649

 
427

 
Inventories
 
(631
)
 
(393
)
 
Other current assets
 
(28
)
 
(28
)
 
Accounts payable and accrued liabilities
 
(106
)
 
110

 
Accrued income taxes and timing of other tax payments
 
(438
)
 
457

 
Net cash provided by operating activities
 
3,863

 
4,666

 
 
 
 
 
 
 
Cash flow from investing activities:
 
 
 
 
 
Capital expenditures:
 
 
 
 
 
North America copper mines
 
(601
)
 
(167
)
 
South America
 
(237
)
 
(115
)
 
Indonesia
 
(1,001
)
 
(875
)
 
Molybdenum mines
 
(9
)
 
(5
)
 
Other
 
(123
)
 
(248
)
 
Acquisition of PT Rio Tinto Indonesia
 
(3,500
)
 

 
Proceeds from sales of:
 
 
 
 
 
PT Indonesia Papua Metal dan Mineral

 
457

 

 
Other assets
 
93

 
72

 
Intangible water rights and other, net
 
(97
)
 
17

 
Net cash used in investing activities
 
(5,018
)
 
(1,321
)
 
 
 
 
 
 
 
Cash flow from financing activities:
 
 
 
 
 
Proceeds from debt
 
632

 
955

 
Repayments of debt
 
(2,717
)
 
(3,812
)
 
Proceeds from sale of PT-FI shares
 
3,500

 

 
Cash dividends paid:
 
 
 
 
 
Common stock
 
(218
)
 
(2
)
 
Noncontrolling interests
 
(278
)
 
(174
)
 
Other, net
 
(19
)
 
(22
)
 
Net cash provided by (used in) financing activities
 
900

 
(3,055
)
 
 
 
 
 
 
 
Net (decrease) increase in cash, cash equivalents, restricted cash and restricted cash equivalents
 
(255
)
 
290

 
Cash, cash equivalents, restricted cash and restricted cash equivalents at
beginning of year
 
4,710

 
4,420

 
Cash, cash equivalents, restricted cash and restricted cash equivalents at
end of perioda
 
$
4,455

 
$
4,710

 
 
 
 
 
 
 
a.
Includes restricted cash and restricted cash equivalents of $238 million at December 31, 2018, and $184 million at December 31, 2017.

VI

As Revised February 7, 2019


FREEPORT-McMoRan INC.
ADJUSTED NET INCOME
Adjusted net income is intended to provide investors and others with information about FCX's recurring operating performance. This information differs from net income attributable to common stock determined in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. FCX's adjusted net income follows, which may not be comparable to similarly titled measures reported by other companies (in millions, except per share amounts).
 
Three Months Ended December 31,
 
 
2018
 
2017
 
 
Pre-tax
 
After-taxa
 
Per Share
 
Pre-tax
 
After-taxa
 
Per Share
 
Net income attributable to common stock
N/A

 
$
485

 
$
0.33

 
N/A

 
$
1,041

 
$
0.71

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cerro Verde royalty disputeb
$
(399
)
 
$
(195
)
 
$
(0.13
)
 
$
9

 
$
2

 
$

 
PT-FI net charges
(192
)
c 
(94
)
 
(0.07
)
 

 

 

 
Other net charges
(65
)
d 
(36
)
 
(0.02
)
 
(25
)
e 
(15
)
 
(0.01
)
 
Net adjustments to environmental obligations and related litigation reserves
(5
)
 
(5
)
 

 
(157
)
 
(157
)
 
(0.11
)
 
Net gain on sales of assets
82

f 
82

 
0.05

 
15

 
15

 
0.01

 
Net gain on early extinguishment of debt
(1
)
 
(1
)
 

 
13

 
13

 
0.01

 
Net tax creditsg
N/A

 
569

 
0.39

 
N/A

 
417

 
0.29

 
Gain on discontinued operations
4

 
4

 

 
16

 
16

 
0.01

 
 
$
(576
)

$
324

 
$
0.22

 
$
(129
)
 
$
291

 
$
0.20

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted net income attributable to common stock
N/A
 
$
161

 
$
0.11

 
N/A
 
$
750

 
$
0.51

 
 
Years Ended December 31,
 
 
2018
 
2017
 
 
Pre-tax
 
After-taxa
 
Per Share
 
Pre-tax
 
After-taxa
 
Per Share
 
Net income attributable to common stock
N/A

 
$
2,602

 
$
1.78

 
N/A

 
$
1,817

 
$
1.25

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cerro Verde royalty disputeb
$
(406
)
 
$
(195
)
 
$
(0.13
)
 
$
(348
)
 
$
(186
)
 
$
(0.13
)
 
Cerro Verde labor agreement
(69
)
 
(22
)
 
(0.02
)
 

 

 

 
PT-FI net charges
(180
)
c 
(88
)
 
(0.06
)
 

 

 

 
Other net charges
(50
)
d 
(30
)
 
(0.02
)
 
(33
)
e 
(27
)
 
(0.02
)
 
PT-FI charges for workforce reductions

 

 

 
(125
)
h 
(66
)
 
(0.04
)
 
Net adjustments to environmental obligations and related litigation reserves
(57
)
 
(57
)
 
(0.04
)
 
(210
)
 
(210
)
 
(0.14
)
 
Net gain on sales of assets
208

f 
208

 
0.14

 
81

 
81

 
0.06

 
Net gain on early extinguishment of debt
7

 
7

 

 
21

 
21

 
0.01

 
Interest on tax refunds
30

 
19

 
0.01

 

 

 

 
Net tax creditsg
N/A

 
574

 
0.39

 
N/A

 
438

 
0.30

 
(Loss) gain on discontinued operations
(15
)
 
(15
)
 
(0.01
)
 
70

 
62

 
0.04

 
 
$
(532
)
 
$
401

 
$
0.26

 
$
(544
)
 
$
113

 
$
0.08

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted net income attributable to common stock
N/A
 
$
2,201

 
$
1.52

 
N/A
 
$
1,704

 
$
1.17

 
a.
Reflects impact to FCX net income attributable to common stock (i.e., net of any taxes and noncontrolling interests).
b.
Reflects net (charges) adjustments associated with disputed royalties at Cerro Verde for prior years. Net charges for the 2018 periods primarily reflect penalties and interest for the years 2009 through 2013 and consist of charges to production and delivery costs ($14 million), interest expense ($363 million in fourth-quarter 2018 and $370 million for the year 2018) and other expense ($22 million), net of income tax benefits ($28 million in fourth-quarter 2018 and $35 million for the year 2018) and noncontrolling interests ($176 million). Net charges for the year 2017 primarily reflect disputed royalties and related matters for prior years and consists of charges to production and delivery ($203 million), interest expense ($145 million) and income taxes ($7 million), net of noncontrolling interests ($169 million).
c.
Reflects charges in production and delivery of $69 million for surface water tax disputes with the local regional tax authority in Papua, Indonesia, $32 million for assessments of prior period permit fees with Indonesia's Ministry of Environment and Forestry, $72 million for disputed payroll withholding taxes for prior years and other tax settlements, and $62 million to write-off certain previously capitalized project costs for the new Indonesian smelter. These charges were partly offset by inventory adjustments ($43 million in fourth-quarter 2018 and $55 million for the year 2018).
d.
Includes prior period depreciation expense at Freeport Cobalt that was suspended while it was classified as held for sale ($48 million in fourth-quarter 2018 and $31 million for the year 2018), and other net charges to production and delivery ($6 million in fourth-quarter 2018 and $8 million for the year 2018), selling, general and administrative expense ($4 million), interest expense ($4 million) and other expense ($3 million).
e.
Primarily includes net charges in production and delivery costs ($16 million in fourth-quarter 2017 and $7 million for the year 2017) and interest expense ($8 million). The year 2017 also includes net charges of $17 million in selling, general and administrative expense.
f.
Reflects gains on sales of assets and adjustments to assets no longer classified as held for sale. Also includes fair value adjustments of $(45) million in fourth-quarter 2018 and $31 million for the year 2018 associated with potential contingent consideration related to the 2016 sale of onshore California oil and gas properties. FCX has realized $50 million in contingent consideration for 2018, which is expected to be received in 2019, and would receive additional contingent consideration related to this transaction consisting of $50 million per year for 2019 and 2020 if the price of Brent crude oil averages over $70 per barrel in each of these calendar years.
g.
Refer to "Income Taxes" on page VIII, for further discussion of net tax credits.
h.
Includes charges of $5 million in selling, general and administrative expenses.

VII

As Revised February 7, 2019


FREEPORT-McMoRan INC.
INCOME TAXES

Following is a summary of the approximate amounts used in the calculation of FCX's consolidated income tax provision for the fourth quarters and years 2018 and 2017 (in millions, except percentages):
 
Three Months Ended December 31,
 
 
2018
 
2017
 
 
 
 
 
 
Income Tax
 
 
 
 
 
Income Tax
 
 
Income
 
Effective
 
(Provision)
 
Income
 
Effective
 
(Provision)
 
 
(Loss)a
 
Tax Rate
 
Benefit
 
(Loss)a
 
Tax Rate
 
Benefit
 
U.S.
$
13

 
208%
 
$
(27
)
b,c 
$
(25
)
 
148%
 
$
37

b 
South America
133

 
56%
 
(74
)
 
350

 
41%
 
(143
)
 
Indonesia
45

 
67%
 
(30
)
d 
998

 
43%
 
(434
)
 
U.S. tax reforme

 
N/A
 
123

 

 
N/A
 
393

 
Cerro Verde royalty disputef
(399
)
 
N/A
 
28

 
9

 
N/A
 
(5
)
 
Change in PT-FI tax ratesg

 
N/A
 
504

 

 
N/A
 

 
Eliminations and other
27

 
N/A
 
(5
)
 
(7
)
 
N/A
 
13

 
Rate adjustmenth

 
N/A
 
33

 

 
N/A
 
3

 
Continuing operations
$
(181
)
 
305%
 
$
552

 
$
1,325

 
10%
 
$
(136
)
 
 
Years Ended December 31,
 
 
2018
 
2017
 
 
 
 
 
 
Income Tax
 
 
 
 
 
Income Tax
 
 
Income
 
Effective
 
(Provision)
 
Income
 
Effective
 
(Provision)
 
 
(Loss)a
 
Tax Rate
 
Benefit
 
(Loss)a
 
Tax Rate
 
Benefit
 
U.S.
$
352

 
7%
 
$
(24
)
b,c 
$
41

 
(156)%
 
$
64

b 
South America
706

 
43%
 
(303
)
 
1,059

 
41%
 
(439
)
 
Indonesia
3,027

 
42%
 
(1,284
)
d 
2,033

 
43%
 
(869
)
 
U.S. tax reforme

 
N/A
 
123

 

 
N/A
 
393

 
Cerro Verde royalty disputef
(406
)
 
N/A
 
35

 
(348
)
 
N/A
 
(7
)
 
Change in PT-FI tax ratesg

 
N/A
 
504

 

 
N/A
 

 
Eliminations and other
213

 
N/A
 
(42
)
 
117

 
N/A
 
(25
)
 
Continuing operations
$
3,892

 
25%
i 
$
(991
)
 
$
2,902

 
30%
 
$
(883
)
 
a.
Represents income from continuing operations by geographic location before income taxes and equity in affiliated companies' net earnings.
b.
Includes net tax credits for changes in valuation allowances totaling $9 million for the fourth quarter and year 2018 and $24 million for the fourth quarter and year 2017. The year 2018 also includes a tax credit of $5 million associated with the settlement of a state income tax examination. The year 2017 also includes net tax credits of $21 million associated with alternative minimum tax (AMT) credit carryforwards, which are not related to the AMT credits resulting from U.S. tax reform that are presented separately in the above tables and described in footnote e.
c.
Includes a tax charge of $29 million associated with adjustments to the calculation of transition tax resulting from recently released guidance by the U.S. Internal Revenue Service.
d.
Includes a tax credit of $20 million ($17 million net of noncontrolling interest) for adjustment to PT-FI's historical tax positions.
e.
The Tax Cuts and Jobs Act (the Act), which was enacted on December 22, 2017, included significant modifications to U.S. tax laws and created many new complex tax provisions. In December 2018, FCX completed its analysis of the Act and recognized benefits totaling $123 million ($119 million net of noncontrolling interest) for the fourth quarter and year 2018 associated with AMT credit refunds. For the fourth quarter and year 2017, FCX recognized net tax credits associated with the Act totaling $393 million, reflecting the reversal of valuation allowances associated with anticipated refunds of AMT credits over the next four years ($272 million) and a decrease in corporate income tax rates ($121 million).
f.
Reflects net tax credits (charges) for disputed royalties and other related mining taxes. Refer to the supplemental schedule, "Adjusted Net Income," on page VII, for a summary of charges related to disputed royalties at Cerro Verde.
g.
Reflects a tax credit of $504 million ($453 million net of noncontrolling interest) resulting from the reduction in PT-FI's statutory tax rates in accordance with the IUPK.
h.
In accordance with applicable accounting rules, FCX adjusts its interim provision for income taxes equal to its consolidated tax rate.
i.
The consolidated effective income tax rate is a function of the combined effective tax rates for the jurisdictions in which FCX operates. Accordingly, variations in the relative proportions of jurisdictional income result in fluctuations to FCX's consolidated effective income tax rate. Assuming achievement of current sales volume and cost estimates and average prices of $2.75 per pound for copper, $1,300 per ounce for gold and $12.00 per pound for molybdenum, FCX estimates its consolidated effective tax rate for the year 2019 would approximate 46 percent (comprised of an estimated effective rate of 0% on U.S. income, 38% on Indonesia income and 40% on South America income). Because of FCX’s U.S. tax position, it does not record a financial statement impact for income or losses generated in the U.S.; therefore, the consolidated effective rate is generally higher than the international rates at lower copper prices and lower than international rates at higher prices.

VIII