BUSINESS SEGMENTS

3 Months Ended

Mar. 31, 2019

BUSINESS SEGMENTS

FCX has organized its mining operations into four primary divisions – North America copper mines, South America mining, Indonesia mining and Molybdenum mines, and operating segments that meet certain thresholds are reportable segments. Separately disclosed in the following tables are FCX’s reportable segments, which include the Morenci, Cerro Verde and Grasberg (Indonesia Mining) copper mines, the Rod & Refining operations and Atlantic Copper Smelting & Refining.

Intersegment sales between FCX’s business segments are based on terms similar to 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 mines to other segments, including Atlantic Copper Smelting & Refining and on 25 percent of PT-FI’s 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.

FCX allocates certain operating costs, expenses and capital expenditures to its operating divisions and individual segments. However, not all costs and expenses applicable to an operation are allocated. U.S. federal and state income taxes are recorded and managed at the corporate level (included in Corporate, Other & Eliminations), whereas foreign income taxes are recorded and managed at the applicable country level. In addition, most mining exploration and research activities are managed on a consolidated basis, and those costs, along with some selling, general and administrative costs, are not allocated to the operating divisions or individual segments. Accordingly, the following Financial Information by Business Segment 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.

Product Revenues. FCX’s revenues attributable to the products it sold for the first quarters of 2019 and 2018 follow (in millions):



	Three Months Ended
	March 31,
	2019			2018
Copper:
Concentrate	$	1,165		$	1,647
Cathode	859			1,185
Rod and other refined copper products	507			670
Purchased copper^a	337			238
Gold	391			808
Molybdenum	288			286
Other^b	277			398
Adjustments to revenues:
Treatment charges	(105		)	(132		)
Royalty expense^c	(30		)	(69		)
Export duties^d	(17		)	(46		)
Revenues from contracts with customers	3,672			4,985
Embedded derivatives^e	120			(117		)
Total consolidated revenues	$	3,792		$	4,868


a.	FCX purchases copper cathode primarily for processing by its Rod & Refining operations.


b.	Primarily includes revenues associated with cobalt and silver.


c.	Reflects royalties on sales from PT-FI and Cerro Verde that will vary with the volume of metal sold and prices.


d.	Reflects PT-FI export duties.


e.	Refer to Note 6 for discussion of embedded derivatives related to FCX’s provisionally priced concentrate and cathode sales contracts.

Financial Information by Business Segment



(In millions)

																						Atlantic		Corporate,
	North America Copper Mines						South America Mining															Copper		Other
							Cerro							Indonesia			Molybdenum		Rod &			Smelting		& Elimi-				FCX
	Morenci		Other		Total		Verde		Other			Total		Mining			Mines		Refining			& Refining		nations				Total
Three Months Ended March 31, 2019
Revenues:
Unaffiliated customers	$	12	$	95	$	107	$	727	$	98		$	825	$	705	^a	$	—	$	1,128		$	571	$	456		^b	$	3,792
Intersegment	458		469		927		126		—			126		58			91		6			5		(1,213		)		—
Production and delivery	295		448		743		439		100			539		556			71		1,133			552		(675		)		2,919
Depreciation, depletion and amortization	40		43		83		100		14			114		105			16		2			7		20				347
Metals inventory adjustments	—		—		—		—		—			—		—			—		—			—		57				57
Selling, general and administrative expenses	1		1		2		2		—			2		30			—		—			5		73				112
Mining exploration and research expenses	—		—		—		—		—			—		—			—		—			—		27				27
Environmental obligations and shutdown costs	—		—		—		—		—			—		—			—		—			—		42				42
Net gain on sales of assets	—		—		—		—		—			—		—			—		—			—		(33		)		(33		)
Operating income (loss)	134		72		206		312		(16		)	296		72			4		(1		)	12		(268		)		321

Interest expense, net	1		—		1		29		—			29		—			—		—			6		110				146
Provision for (benefit from) income taxes	—		—		—		110		(5		)	105		26			—		—			1		(27		)		105
Total assets at March 31, 2019	2,904		4,760		7,664		8,674		1,720			10,394		15,792			1,785		232			771		4,421				41,059
Capital expenditures	62		148		210		56		5			61		319			4		1			4		23				622

Three Months Ended March 31, 2018
Revenues:
Unaffiliated customers	$	3	$	15	$	18	$	625	$	150		$	775	$	1,521	^a	$	—	$	1,385		$	577	$	592		^b	$	4,868
Intersegment	601		689		1,290		102		—			102		52			95		8			2		(1,549		)		—
Production and delivery	290		501		791		427		116			543		457			67		1,388			556		(994		)		2,808
Depreciation, depletion and amortization	46		48		94		105		22			127		181			19		2			7		21				451
Selling, general and administrative expenses	1		2		3		2		—			2		39			—		—			6		81				131
Mining exploration and research expenses	—		1		1		—		—			—		—			—		—			—		20				21
Environmental obligations and shutdown costs	—		—		—		—		—			—		—			—		—			—		9				9
Net gain on sales of assets	—		—		—		—		—			—		—			—		—			—		(11		)		(11		)
Operating income (loss)	267		152		419		193		12			205		896			9		3			10		(83		)		1,459

Interest expense, net	1		—		1		17		—			17		—			—		—			5		128				151
Provision for income taxes	—		—		—		68		4			72		401			—		—			1		32				506
Total assets at March 31, 2018	2,817		4,340		7,157		8,740		1,715			10,455		10,992			1,836		290			809		5,098				36,637
Capital expenditures	47		45		92		63		4			67		203			1		1			4		34				402


a.	Includes PT-FI’s sales to PT Smelting totaling $409 million in first-quarter 2019 and $628 million in first-quarter 2018.

Includes revenues from FCX’s molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines.