Document

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019



☐	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 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)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.10 per share	FCX	The New York Stock Exchange

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. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). ☑ 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, or an emerging grown company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging grown company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

On July 31, 2019, there were issued and outstanding 1,450,890,574 shares of the registrant’s common stock, par value $0.10 per share.

Freeport-McMoRan Inc.

TABLE OF CONTENTS




	Page

Part I. Financial Information	3

Item 1. Financial Statements:	3

Consolidated Balance Sheets (Unaudited)	3

Consolidated Statements of Operations (Unaudited)	4

Consolidated Statements of Comprehensive (Loss) Income (Unaudited)	5

Consolidated Statements of Cash Flows (Unaudited)	6

Consolidated Statements of Equity (Unaudited)	7

Notes to Consolidated Financial Statements (Unaudited)	9

Report of Independent Registered Public Accounting Firm	31

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3. Quantitative and Qualitative Disclosures About Market Risk	69

Item 4. Controls and Procedures	69

Part II. Other Information	69

Item 1. Legal Proceedings	69

Item 1A. Risk Factors	69

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	69

Item 4. Mine Safety Disclosures	69

Item 6. Exhibits	70

Signature	S-1

Table of Contents


Part I.	FINANCIAL INFORMATION


Item 1.	Financial Statements.

Freeport-McMoRan Inc.

CONSOLIDATED BALANCE SHEETS (Unaudited)



	June 30, 2019			December 31, 2018
	(In millions)
ASSETS
Current assets:
Cash and cash equivalents	$	2,623		$	4,217
Trade accounts receivable	725			829
Income and other tax receivables	245			493
Inventories:
Materials and supplies, net	1,634			1,528
Mill and leach stockpiles	1,352			1,453
Product	1,391			1,778
Other current assets	760			422
Total current assets	8,730			10,720
Property, plant, equipment and mine development costs, net	28,841			28,010
Long-term mill and leach stockpiles	1,347			1,314
Other assets	2,168			2,172
Total assets	$	41,086		$	42,216

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	2,721		$	2,625
Current portion of environmental and asset retirement obligations	425			449
Dividends payable	73			73
Accrued income taxes	63			165
Current portion of debt	4			17
Total current liabilities	3,286			3,329
Long-term debt, less current portion	9,912			11,124
Deferred income taxes	4,055			4,032
Environmental and asset retirement obligations, less current portion	3,617			3,609
Other liabilities	2,399			2,230
Total liabilities	23,269			24,324

Equity:
Stockholders’ equity:
Common stock	158			158
Capital in excess of par value	25,949			26,013
Accumulated deficit	(12,082		)	(12,041		)
Accumulated other comprehensive loss	(582		)	(605		)
Common stock held in treasury	(3,734		)	(3,727		)
Total stockholders’ equity	9,709			9,798
Noncontrolling interests	8,108			8,094
Total equity	17,817			17,892
Total liabilities and equity	$	41,086		$	42,216

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

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Freeport-McMoRan Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
	(In millions, except per share amounts)
Revenues	$	3,546		$	5,168		$	7,338		$	10,036
Cost of sales:
Production and delivery	3,002			2,915			5,978			5,723
Depreciation, depletion and amortization	352			442			699			893
Total cost of sales	3,354			3,357			6,677			6,616
Selling, general and administrative expenses	97			109			209			240
Mining exploration and research expenses	31			24			58			45
Environmental obligations and shutdown costs	23			59			65			68
Net loss (gain) on sales of assets	8			(45		)	(25		)	(56		)
Total costs and expenses	3,513			3,504			6,984			6,913
Operating income	33			1,664			354			3,123
Interest expense, net	(132		)	(142		)	(278		)	(293		)
Net gain (loss) on early extinguishment of debt	—			9			(6		)	8
Other income, net	5			20			19			49
(Loss) income from continuing operations before income taxes and equity in affiliated companies’ net earnings	(94		)	1,551			89			2,887
Benefit from (provision for) income taxes	15			(515		)	(90		)	(1,021		)
Equity in affiliated companies’ net earnings	5			3			2			1
Net (loss) income from continuing operations	(74		)	1,039			1			1,867
Net (loss) income from discontinued operations	—			(4		)	1			(15		)
Net (loss) income	(74		)	1,035			2			1,852
Net loss (income) attributable to noncontrolling interests	2			(166		)	(43		)	(291		)
Net (loss) income attributable to common stockholders	$	(72	)	$	869		$	(41	)	$	1,561

Basic net (loss) income per share attributable to common stockholders:
Continuing operations	$	(0.05	)	$	0.60		$	(0.03	)	$	1.08
Discontinued operations	—			—			—			(0.01		)
	$	(0.05	)	$	0.60		$	(0.03	)	$	1.07

Diluted net (loss) income per share attributable to common stockholders:
Continuing operations	$	(0.05	)	$	0.59		$	(0.03	)	$	1.08
Discontinued operations	—			—			—			(0.01		)
	$	(0.05	)	$	0.59		$	(0.03	)	$	1.07

Weighted-average common shares outstanding:
Basic	1,451			1,449			1,451			1,449
Diluted	1,451			1,458			1,451			1,458

Dividends declared per share of common stock	$	0.05		$	0.05		$	0.10		$	0.10

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

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Freeport-McMoRan Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
	(In millions)
Net (loss) income	$	(74	)	$	1,035		$	2		$	1,852

Other comprehensive income, net of taxes:
Defined benefit plans:
Amortization of unrecognized amounts included in net periodic benefit costs	13			11			24			23
Foreign exchange losses	—			—			—			(1		)
Other comprehensive income	13			11			24			22

Total comprehensive (loss) income	(61		)	1,046			26			1,874
Total comprehensive loss (income) attributable to noncontrolling interests	1			(166		)	(44		)	(290		)
Total comprehensive (loss) income attributable to common stockholders	$	(60	)	$	880		$	(18	)	$	1,584

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

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Freeport-McMoRan Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)



	Six Months Ended
	June 30,
	2019			2018
	(In millions)
Cash flow from operating activities:
Net income	$	2		$	1,852
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	699			893
Metals inventory adjustments	59			2
Net gain on sales of assets	(25		)	(56		)
Stock-based compensation	40			60
Net charges for environmental and asset retirement obligations, including accretion	109			152
Payments for environmental and asset retirement obligations	(100		)	(110		)
Net charges for defined pension and postretirement plans	53			38
Pension plan contributions	(33		)	(44		)
Net loss (gain) on early extinguishment of debt	6			(8		)
Deferred income taxes	20			61
(Income) loss on disposal of discontinued operations	(1		)	15
(Increase) decrease in long-term mill and leach stockpiles	(33		)	38
PT Freeport Indonesia surface water tax settlement	28			—
Cerro Verde royalty dispute	28			4
Payments for Cerro Verde royalty dispute	(86		)	(21		)
Other, net	41			15
Changes in working capital and other tax payments:
Accounts receivable	256			309
Inventories	287			(468		)
Other current assets	(26		)	(20		)
Accounts payable and accrued liabilities	9			114
Accrued income taxes and timing of other tax payments	(245		)	(148		)
Net cash provided by operating activities	1,088			2,678

Cash flow from investing activities:
Capital expenditures:
North America copper mines	(417		)	(232		)
South America	(108		)	(138		)
Indonesia	(658		)	(449		)
Molybdenum mines	(6		)	(2		)
Other	(62		)	(63		)
Proceeds from sales of oil and gas properties	91			—
Intangible water rights and other, net	(7		)	(86		)
Net cash used in investing activities	(1,167		)	(970		)

Cash flow from financing activities:
Proceeds from debt	328			352
Repayments of debt	(1,563		)	(2,297		)
Cash dividends and distributions paid:
Common stock	(146		)	(73		)
Noncontrolling interests	(79		)	(241		)
Contributions from noncontrolling interests	100			—
Stock-based awards net (payments) proceeds	(6		)	5
Debt financing costs and other, net	(4		)	(23		)
Net cash used in financing activities	(1,370		)	(2,277		)

Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents	(1,449		)	(569		)
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year	4,455			4,710
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	3,006		$	4,141

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

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Freeport-McMoRan Inc.

CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)

THREE MONTHS ENDED JUNE 30



	Stockholders’ Equity
	Common Stock						Accum-ulated Deficit			Accumu- lated Other Compre- hensive Loss			Common Stock Held in Treasury				Total 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
	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 March 31, 2019	1,582	$	158	$	25,963		$	(12,010	)	$	(594	)	131	$	(3,734	)	$	9,783		$	8,058		$	17,841
Stock-based compensation, including the tender of shares	—	—		10			—			—			—	—			10			—			10
Dividends	—	—		(73		)	—			—			—	—			(73		)	—			(73		)
Contributions from noncontrolling interests	—	—		49			—			—			—	—			49			51			100
Net loss attributable to common stockholders	—	—		—			(72		)	—			—	—			(72		)	—			(72		)
Net loss attributable to noncontrolling interests	—	—		—			—			—			—	—			—			(2		)	(2		)
Other comprehensive income	—	—		—			—			12			—	—			12			1			13
Balance at June 30, 2019	1,582	$	158	$	25,949		$	(12,082	)	$	(582	)	131	$	(3,734	)	$	9,709		$	8,108		$	17,817



	Stockholders’ Equity
	Common Stock						Accum-ulated Deficit			Accumu- lated Other Compre- hensive Loss			Common Stock Held in Treasury				Total 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
	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 March 31, 2018	1,579	$	158	$	26,729		$	(14,030	)	$	(475	)	130	$	(3,726	)	$	8,656		$	3,270		$	11,926
Exercised and issued stock-based awards	—	—		2			—			—			—	—			2			—			2
Stock-based compensation, including the tender of shares	—	—		9			—			—			—	—			9			—			9
Dividends	—	—		(73		)	—			—			—	—			(73		)	(68		)	(141		)
Net income attributable to common stockholders	—	—		—			869			—			—	—			869			—			869
Net income attributable to noncontrolling interests	—	—		—			—			—			—	—			—			166			166
Other comprehensive income	—	—		—			—			11			—	—			11			—			11
Balance at June 30, 2018	1,579	$	158	$	26,667		$	(13,161	)	$	(464	)	130	$	(3,726	)	$	9,474		$	3,368		$	12,842

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Freeport-McMoRan Inc.

CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)

SIX MONTHS ENDED JUNE 30



	Stockholders’ Equity
	Common Stock						Accum-ulated Deficit			Accumu- lated Other Compre- hensive Loss			Common Stock Held in Treasury				Total 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
	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, 2018	1,579	$	158	$	26,013		$	(12,041	)	$	(605	)	130	$	(3,727	)	$	9,798		$	8,094		$	17,892
Exercised and issued stock-based awards	3	—		1			—			—			—	—			1			—			1
Stock-based compensation, including the tender of shares	—	—		33			—			—			1	(7		)	26			—			26
Dividends	—	—		(146		)	—			—			—	—			(146		)	(70		)	(216		)
Changes in noncontrolling interests	—	—		(1		)	—			—			—	—			(1		)	(11		)	(12		)
Contributions from noncontrolling interests	—	—		49			—			—			—	—			49			51			100
Net loss attributable to common stockholders	—	—		—			(41		)	—			—	—			(41		)	—			(41		)
Net income attributable to noncontrolling interests