Document 6wJYKXkN8D9a5Ge5KLYOMMwno

liiiliS Phelps Dodge Corporation 2000 Annual Report )o Shareholders Phdps Dodge Corporation Overview Phelps Dodge Corporation is the world's second largest producer of copper, the world's largest producer of molybdenum and continuous-cast copper rod, and among the leading producers of magnet wire and carbon black. The company consists of two divisions, Phelps Dodge Mining Company and Phelps Dodge Industries, and employs approximately 15,500 people in 27 countries. Results in Brief (Dollars in thousands, except per shore omounh and oopper prices) 2000 (a) j 1999 (b) 1998 (c Sales and other operating revenues Operating income (loss} Net income (loss) Earnings (loss) per common share - diluted Return on average shareholders' equity Net cash provided by operating activities Capital expenditures and investments Depreciation, depletion and amortization Average number of shares outstanding - diluted /Thousands) At Year end Total assets Total debt Long-term debt Shareholders' equity Shares outstanding (Thousands) Number of employees $-! ,525,100 s 237,000 s 29,000 s 0.37 ; ; ; ; 0.9% ; s .511,200 ! s 422,300 j s 464,200 ; 78,800 1 1 $7 ,830,800 $2,687,700 Si ,963,000 S3 ,105,000 78,700 15,500 ; ! ; 1 1 ; 3,114,400 (315,600) (257,800) (4.19) (9.9)% 204,500 240,400 329,100 61,600 8,229,000 2,755,000 2,172,500 3,276,800 78,700 16,400 3,063,400 422,700 190,900 3.26 7.3% 378,400 668,300 293,300 58,500 5,036,500 1,021,000 836,400 2,587,400 57,900 13,900 Division Results Phelps Dodge Mining Company operating income (loss) (d| Phelps Dodge Industries operating income (e) Copper production /Own production - tons) Copper deliveries fOwn production - tons) $ 243,300 s 70,300 1 ,200,300 1 ,200,600 ; ; | ! (301,000) 49,700 890,100 884,200 110,300 353,600 874,000 876,300 Copper Price * COMEX annual average spot price per pound - cathodes s 0.84 ; 0.72 0.75 Ti ---------------- ---------------------------------------------------------------------------- *---------------------*t*------------------------------------i1--------------------------------- ) I : !I |aj 2000 operating income was $294.4 million before non-recurring provisions of $51.8 million for 1999 and 2000 restructuring plans and $5.6 million for working capital write-downs. 2000 after-tax income was $72.3 million, or 92 cents per sKare, before non-recurring provisions that totaled $43.3 million, or 55 cents per common share, on an after-tax basis. Return on average shareholders' equity was 2.3 percent before non-recurring provisions. (b) 1999 operating income wos $139 8 million before non-recurring provisions of $332.3 million for asset impairments primarily ct Phelps Dodge Mining Company, $28.2 million for environmental charges at Phelps Dodge Mining Company and $94.9 million for a restructuring plan announced on June 30, 1999. 1999 after-tax income was $21.7 million, or 35 cents per common share, before nan-recurring provisions that totaled $279.5 million, or $4.54 per common share, on an after-tax basis. Return on average shareholders' equity was 0.8 percent before non-recurring provisions. (c) 1998 operating income was $231.8 million before o non-recurring gain of $190.9 million, primarily due to the disposition of Accuride Corporation. 1998 after-tax income was $91.8 million, or $1.57 per common share, before the non-recurring gain which totaled $99.1 million, or $1.69 per common share, on an after-tax basis. Return on shareholders' equity was 3.5 percent before the non-recurring gain. (d) 2000 operating income for Phelps Dodge Mining Company was $249.1 million before pre-tax, non-recurring charges of $5.8 million for the 2000 restructuring plans. 1999 operating income was $84.2 million before non-recurring provisions of $320.4 million for asset impairments, $26.2 million for environmental charges and $36.6 million for the 1999 restructuring plans. 1998 operating income for Phelps Dodge Mining Company was $115.8 million before non recurring provisions of $5.5 million for costs associated with indefinite closures and curtailments at mining operations. (e| 2000 operating income for Phelps Dodge Industries was $121.9 million before pre-tax, non-recumng charges of $51.6 million for wire and cable restructuring activities. 1999 operating income for Phelps Dodge Industries was $119.7 million before non-recurring provisions of $11.9 million for asset impairments, $40.4 million for the 1999 restructuring plans in me wire and cable segment and $17.7 million at the specialty chemicals segment. 1998 operating income for Phe^ss Dodge Industries included a pre-tax gain of $198.7 million from the disposition of Accuride Corporation and a non-recurring provision of $2.3 million primarily for costs associated with an early retirement program in the wire and cable segment. f tarc-nx*)t. Except for hisbricd information, the matters discussed in this Annual Report and Form 10-K are forward-looking statements regardng future events or the future financial performance of Phelps Dodge Corporation. Actual results may differ materially from those projected. These forward-looking statements represent the colony's judgment as of March 6, 2001. Further explanation of these statements and a review of the factors which may affect them are included in Management's Discussion and Analysis within Form 10-K on poge 32. Phelps Dodge Corporation 1 Dear Fellow Shareholders The year 2000 presented significant oppor(unities and challenges for Phelps Dodge Corporation We succeeded on a number of critically important fronts. twenty four ol out worldwide operations completed the year with zero recordable safety incidents cleai evidence that exceptional safety performances can be attained and sustained in an industrial work environment 2000 was among the safest yean in the histoiy of our company. The deaths last year of two contractors' employees, however, are tragic reminders no one can waiver if everyone is to return home safely each day. We tripled our year 2000 earnings and doubled our operating cash flow as compared with our 1999 financial performance. We successfully completed the integration of our $3.4 billion acquisition of Cyprus A/nax Minerals Company, capturing the $ 13.5 million annual tun rote in syneigy savings in a 14 month period - one full year ahead of the schedule originally outlined to shareholders PD Wire & Coble's operating earnings ('before non recurring chargesj tripled over 1999 despite continued regional economic weaknesses. We decided to shift the focus of our capital and management resources to the growth ol our company in the mining and metals industry. We began the search for new, strategic ownership alter natives for our specialty chemicals and wire and cable manufacturing businesses. Financial Performance HI 'AK)0 xm 11 rujs k>oK'>i ,j I- I"; (. S/i /' t'dininys pci sIhjt ih non lecijinriy iivi"., $U Oritiiufitiy raPi t;i : SAM . Opriiotmy cash tew |.c" 4\ So i $:<:j y I J.SIIv Stock Price 2000 !JS Itiyh asmmsx tow mm $ 36 Or. i 5/3 uO y'u 63 Yecjf uftct i $ .) b b I Simultaneously, we battled low commodity prices; skyrocketing costs of market electric power, diesel fuel and natural gas; power supply interruptions; and extraordinary fourth quarter rainfall that reduced copper production at Morenci by 20 million pounds. In this letter to you a year ago, we talked about aggressive, internal stretch goals we set for ourselves in 2000 In the last 12 months, the convergence of these outside forces caused us to do more than just stretch beyond our comfort zones. The Phelps Dodge team stepped up and delivered a very solid operating performance In my 25 years at Phelps Dodge, I have never been more proud of our employees or our ability to successfully handle adversity. Nor have I been more confident in our ability to create and sustain long term value for oui shareholders f;(re:|.s 0odJt> Co:}X)':ilrOn i Mary of the year's significant positive developments were masked by a series of paradoxical events that ultimately affected our financial performance: Solid copper market fundamentals were present throughout the year. Combined physical inventories on the London Metal Exchange (LME) and New York Commodity Exchange (COMEXj decreased more than 52 percent, or 457,000 metric tonnes, but concern about a slowing U.S. economy resulted in a copper price that did not reflect the commodity exchange inventories and the global demand outlook. While the 2000 annual average COMEX copper price increased approx imately 12 cents from 1999 to 84 cents per pound, other external factors -- primarily escalating energy-related costs -- increased our total copper unit production costs, limiting gains from the copper price improvement. Although our share of 2000 copper production reached a record 2.4 billion pounds, our production was negatively impacted by power interruptions in Arizona and New Mexico, ore delineation and delivery challenges at El Abra, and extraordinary rainfall at Morenci. We reduced planned molybdenum production by 4 million pounds at Henderson and lowered associated mine development costs, and shifted the emphasis of our molybdenum production from metallurgical-grade to chemical-grade product. Unfortunately, molybdenum prices tumbled in the last half of the year reflecting reduced demand for metallurgical-grade product by the U.S. steel industry and supply increases from by-product producers and Chinese exporters. The operating earnings (before non-recurring charges) of Columbian Chemicals Company fell 20 percent as high energy-related feedstock costs negatively impacted margins. Our reduced margins were insufficient to generate the excess cash flow required to significantly reduce our acquisition-related debt. J. Steven Whisler --- Chairman, President and CEO As we entered 2001, our bottle continued with high energy-related costs and the economic ripple effect of the California power crisis on the western United States. While we can and will do a number of things to mitigate the power and energy situation, long-term energy solutions on a regional and national level must be aggressively sought. Internally, we have multiple initiatives under way that will extract from our cost structure amounts necessary to help offset increased energy costs. In early 2001, for example, we began construction of a 50-megawatt, self-generation power plant in New Mexico. Energy costs and other market factors also caused us to consider other actions. In January 2001, we announced the potential production curtailment and layoff of 2,350 employees at our Chino, Tyrone and Sierrita operations. Pta/p* Dodge Corporation 3 Despite these chaBenges. we remain committed to growing aggressively, and we took important positioning steps in 2000 to narrow our strategic focus and to teady ourselves for future action. A major step was taken in December when we decided to focus our strategic capital and management resources on the mining and metals sector where we are positioned to succeed based on our leadership ond technical competencies. Growth and further success in the mining and metals industry will require us ta strengthen our balance sheet by reducing debt, and to generate additional sources ol cosh that will enable us to seize quickly the best opportunities. Phelps Dodge remains committed to growing aggressively. in 2000, we took important positioning steps to ready our company for future action. We announced at year end that we would evaluate new, strategic ownership alternatives for PD Wire & Cable and Columbian Chemicals Company. Since the mid-1980s, these businesses were expected to generate earnings and cash flow that would smooth the cycles inherent in our copper mining business. The ability of these companies to now fulfill their original strategic objectives has been diminished as a result of Phelps Dodge Mining Company's acquisition-refated growth Although our significant capital investments in PD Wire & Cable and Columbian Chemicals have created mature businesses wirh strong franchises, they each must now generate proportionately greater earnings. We believe the capital required to grow these companies will create greater value to our shareholders if applied to mining and metals opportunities. This led to our decision to pursue strategic ownership alternatives. In seeking new ownership for these businesses, we are committed to negotiating only those transactions that represent good value for our shareholders Phe'p* Dodcffc Co/j.rCrtVjCcfi 4 Our growth in the mining and metals sector already is occurring. Wo have several greenfield copper projects moving through the devel opment pipeline that will increase our worldwide production and reserves. We remain optimistic about our Safford, Arizona, copper leaching project. The land exchange and environmental permitting processes, which previously had been slowed, now have an opportunity for more expeditious regulatory review and a favorable outcome. The Sossego project, located in the Carajas region of Brazil, is a potentially significant copper-gold mineral resource, A feasibility study to evaluate a potential mine and concentrator facility is nearly complete. The results of this study will determine the economic viability of the project and will lead to a decision on development. Further success in mineral exploration will remain key to growth and adding shareholder value for our company. Grow our Reserves Broaden our Portfolio Size, coupled with quality, remains critical in the mining and metals industry. Currently, Phelps Dodge is the world's second largest producer of copper and the world's largest producer of molybdenum. Our success in executing the 1999 acquisition of Cyprus Amax, and aur ability to quickly realize the $135 million in annual run-rate synergy savings and to integrate the companies, have grown our confidence and organizational capability to succeed in future acquisitions. Our leadership and technical competencies in extraction and hydrometaHurgical technologies, project development and management, safety, aid environmental stewardship ideally position us to replicate our operating success. Some of the most exciting growth opportunities for Phelps Dodge will emerge as we broaden our mining and metals portfolio. Phaipi Dodge Corporation 5 Within cur current reserve base, we continue to combine sophisticated technologies with innovation, One example is the recent conversion of our Morenci operation to 100 percent solution extracfion/eiectrowinn ing (5X/EW) production. The $220 million project, which was completed in eorly 2001, further positions Phelps Dodge as the largest SX/EW producer in the world Our company also continues its development and adoption of best practices that served us well during the Cyprus integration. We have blended the Cyprus Quest 21 process, tire Phelps Dodge Zero und Beyond safety value, and other strategic initiatives into one system Called Quest far Zero, it is designed to produce specific, measurable and replicable results: zero safety ond environmental incidents, zero ., variability m production process and costs, zero waste, and zero product defects. This is an ambitious undertaking, but already in safety we have evidence that Zero is possible. * ,. . . Succeed through Strategic Sameness Finally, we expect to create new, outof-the-box ventures with the potential to flourish over time. Our involvement in the creation of Qundrem is one example. This new Internet-based procurement marketplace is open, neutral and independent and will enable all mining, metals and minerals fcompanies worldwide to purchase goods and services from suppliers in more than 100 countries. The benefits to both buyers and suppliers include access to common electronic cataloguing, administrative and cost efficiencies, ond the streamlining of the transaction process. Currently, we have myriad other ventures in progress. Some are related to the development of proprietary process technologies, while others Venture Out for Future Value capitalize on our unique knowledge base that can be applied to products that support consumer safety and energy efficiency While growth in mining and metals wifi remain our core focus, we will not overlook the potential to break into strategically significant adjacencies that may generate future streams of value for Plielps Dodge shareholders. Phelps Dodjfc Cot|*W>tfcn 4 The uthltrvements of oui people in 2000 were significant We fought the concurrent challenges of low commodity piices and high energy costs We expedited the integration of Cyprus Amax one year earlier titan projected, and as a result have created a larger and leanei Phelps Dodge piepared for the next phase of growth We cunenlly ate engaged in completing the steps that will enable us to reduce our debt and focus our growth on the mining and metals sector. The signs of Oui giowlh will become apparent as we: Gain cnticnl sua in the mining and melatr industry, [nharice and further institutionalise best practices through Quest for Zeio, Broaden am portfolio by applying oui operating shengths. and Venture out into business adjacencies that will grow over lime. Phelps Dodge is a great company with enormous opportunities ahead. Time and again, the Phelps Dodge team has combined its talent, resilience and innovation to achieve impiesslve results. In the upcoming years, you can expect to see us step out to be bigger, better, bolder and broader. Sincerely, J. Steven Whisler -- C.ha;inirrn, President and CtO April I. 2001 f'Kdps Duduc Coif/orution 7 Phelps Dodge Mining Company Phelps Dodge Mining Company [PDMC) is cm industry loader in the safe, clliciom and environmentally responsible production oi high quality metals and minerals PDMC is a fully integrated produce! of copper and molybdenum, with mines and piocessmg facilities m Moith and South Amedeo and urO|>e PDMC tanks as [lie woild's second largest [Moiiocri of coppet and the leudmy producer ol continuous-east copper rod and molybdenum. As byproducts PDMC also produces other minerals, me Is cis gold, silver and rhenium. Phelps Dodge Explanation Coi poration artel the Process Technology Center ensure the continued discovery and development o) economically viable nnnerol icseives. and the ic-lincmenl and cieotion ol production and piocess technologies. II Ph*!pi, Doiicier Ccr|>7fV3'<cn 6 Phelps Dodge Industries Phelps Dodge industries JPDI) comprises two global companies -- PD Wire & Cable and Columbian Chemicals Company -- that manufacture engineered products for the energy, telecommunications, transportation and specialty chemicals sectors both in established and emerging markets worldwide PD Wire & Cable products deliver energy and transmit voice and data communications in the electricity-based economy Columbian Chemicals Company is among the world's largest producers of carbon black. Its piimcrry products, rubber and industrial blocks, add strength, duinbility and improved performance to tiros, mechanical rubber goods, inks, paint, plastics. electrical coble ond other products Wire & Cobb j Primary products Operations .. c s .. f f <e , ,ks Vr ' s$$<z',y\ Empfeyoof Specialty t cs ; Primary products, Operations . ' '' s-'vo/cC v, . <s , ' > ^ 'ey,- ( 'n,vr y' -j, , ' y * V- ;^ 'V '* Kp'fr'V 'd'-wV^Sy ' WdO production Smploy&os to - , 1 W ~ m. t to to' to toto to 'to to to' to'to to to to'to to'to m 'to toto to to* toto to'*' toto to'to' to'to to to' to'to* to Hcollh ond Safety: A Core Value The Phelps Dodge Chairman's Health & Safety Award recognizes outstanding twxtlih ond safety petformance across the global, business units ofour company. Eligibility is based on completion of the calendar year with ze'Q recordable occupational injuries or illnesses. A total of 24 Phelps Dodge operations were eligible for ibo award in 2000. The three winners are. U.S. Operation: Columbian Chemicals Company, Ulysses, Kansas International Operation; PD Alcoa, Pocos de C.aldos, Brazil Support and Transition Operation: Ml Emmons Mining Company, Colorado The James Douglas Health & Safety Award recognizes am individual or team from each Phelps Dodge division that makes a significant ana/or sustained contribution to the health, safety and welfare of employees and their families, on or off (he job. Dougfos wos a pioneer in mining and metallurgy and was among the early industry champions of employee health ond safety. He established the first Phelps Dodge safely department try 1913, The winners from each division are: Phelps Dodge Mining Company: Russel P Rios, General Supervisor, Surface Depot tmenl, Pltdps Dodge Morenci (Arizona) Phelps Dodge Industries: leadership Team, PD Alcoa (Brazil) ; / Phsta Oocbt C:yo<a:ion 9 Copper Copper niai-e' fundamentals Improved substantially in 2000 from the previous yew Globally, growth in consumption oI refined copper exceeded 5 jv-irer' ns demand in the United Stales, Europe, Canada and Asia proved 10 lie stronger than expected Refined production grew a modest 2 percent. As a result, copper inventories for western metals exchanges dropped steadily throughout 2000 White the Nov. York Commodity Exchange [COMEXf copper price averaged 84 cents per pound of catlrode in 2000, compaiocl to the 1929 overage of 72 cents per pound, the price did not fully reflect the strong market fundamentals. In the short term, the outlook for copper likely will temoir. doincmd driven, espe cially ai signs of on economic slowdown in the United Stoles, which could cany over to olhor regional economies become apparent in late 2000. Anoiysls expect copper inventories to furlltor dwindle in the coming yean and hove forecast deficits tied to lower levels of growth in copper production. The copper market is expected to be roughfy in balance in 200), followed by o modest deficit in 2002, Molybdenum During the post decode, western world consumption of molybdenum grew at on overage annual role of 3 petcenl while production increases outpaced market demand. The market remains strong for new high-growth applications of molyb denum, including supcr-olloys, desulfurization catalysts, lubricants, chemicals and electronics. However, the U.S. steel and cast iron sectors which comprise the larger market segment have slowed, and cr high volume of molyMnmmi experts from China continue- to move into the marketplace These dynamics have created a substantial inventor y surplus, reducing the molybdenum oxide puce in 2000 by 5 percent from 1999, and by a total of 41 percent over the past four years. Wire and Coble Market conditions fat wire and cable producls improved gradually in 2000 driven by increased activity in the aerospace and geophysical markets, positive economic activity in Africa, and reactivation of energy infrastructure projects in Brazil, Centra) Amer ica and Southeast Asia, Improved metols prices also favotably impacted revenues in the wire and coble industry. However, lower sales to the automotive and appliance segments in the fourth quarter pen (tally offset these market improvements. Demand growth is projected in the emerging wire and cable markets of Southeast Asia, South America and the Middle East, while U.S consumption of wire and cable products is expected to remain relatively flat. Carbon Block . The demand for carbon black is driven primarily by tire production, and is divided . : into approximately equol shares among Europe, Asia ond North America. Worldwide tire sates have shown consistent growth from 199B to 2000 and ate projected to continue to grow from 2C0I to 2004, The manufacture of low-technology, standard passenger tires is: shifting to fow-cost-ptoduction countries More sophisticated tires, such as high-performance passenger tires and large truck fires, will continue to be produced in the major industrialized markets;,: Recent macroeconomic conditions, including growth in global gross domestic product, led to higher vehicle sales and strong original equipment tir e sales in 2000. Records for these sectors were set in North America and wester n Europe in 1999 and then again in 2000, However, slower growth In carbon black demand in the United.States is anticipated over the next four years as automobile manu facturing and tire production slow. Truck tire demand in the emerging mar kets is expected to increase as truck transport is essential to the continuing growth of commerce in these regions. Phelps Doo^e CorjXH'Olrcn ! U Phelps Dodge Corporation Directory Board of Director* Soutbwood J. Mortott Corporate Officers ) Phelps Dodge Robert N. Burt Chairman and Chief Evocative Officer. FMC Corporation, o producer of chemicals ond machinery for industry, agriculture and government Retired CftoimKin, Dana Corporation a worfehvide manufacture)' caret distiihntor of parts for the vehicular, industrial and mobile off- 1 highway markets Gofdon R. Parker i. Steven Whisler \ Choii man. President and; 1 . Chief Executive Officer . : * : Manuel J. troola ' * ! Senior Vice President. , , t; and President, j leadership Changes :We wcfcoiiK'd two executives to Or11 Sea nor Moiicrgemon! Tpam. Arthur R Midi?, senior . vice president, marketing, and Archie W. Dunham Chairman, Preside)!} and Chief Executive .Officer, Conoco he., an integrated . energy company Retired Chairman and Chief Executive Officer, Nervmont Mining. Corporation, one of ! the svodd's largest gold producers .'. ;. Phelps Dodge indusirtes . j .ipmsirfunt of PfrTps DccJyn Timothy R. Snider Soles Compcaly; and KcJirlns V, SeniorVicePresidentand: * : Madhavpeddi, sc-riior vice . President, Pfiefps Dodge Mining Company J president, business develop- ; } William A. fronko J, Steven Whisfer : Chairman, President and .. ; Chaifnrgn, President and . : Ramiro G. Peru .- 4 mem Both Ad and Kolidos. * haver been with our company Chief Executive Offew, : America West Holdings Chief Executive OFficei, Phelps Dodge Corporotion , ; : Senior Vice President and { Chief Fnancia! Officer ;j;;;;;-d;: for many years and bring wjih., Corporation, an emotion ift-r'in o deep vndorstondiog of and travel Services company;: Committees of the and Chairman and Chief Board of Directors Arthur R. Wide Senior Vice. President, * * am husiiwss and our customers.! Executive Officei of tfs subsidiary, Amw ica West ; Audit Committee Morkoting, and President,):;;J: ; Phelps Dodge Sales .' / C v In Mcmanoi Airlines, Inc , and fkesideni, Franke & Company, tnc., ; an investment firm : ; Knowles, (Chair), Dunham, Frank, Krebs. Potker . Committee on Directors ; Company ., ;; ! i KoUdos V. Madhavpeddi{ Sad'y, our dear friend and .); ros[x<lcd colleogve, A. I Paul Hozen Burt (Choir). Dunham, : : Senior Vice Pi cadent. s; ?f J "jolm" Ltr.a CarCO. who Served \ ; Chairman, : : Hazen. Krebs. Mcrcott business Development : < os Prosidont of Pheljrs Dotlgei, > Wells Fargo A Company, a bank holding company Manuel J. Iroolo : : : V .. Senior Vico President,. . ., Phefps Dock) Corporation; President,;.:. Phelps Dodge industries . Marie L. Knowles Compensation and Management Development Committee . Hazen (Choir), Burl. .: Dunham, Krtovdos, Morcot! finance Committee ;: Krebs (Ctioir), Fionke. r .:' Mazert. Morcatt. Paiker S. David Colton : : ; ) : xf>lorotion Coipcaalton, bsl : . Senior Vice President V : his bailie against coikct in and General Counsel ::: *. David L. Putotie Senior Vice Pr^irfent, . if Doc enliven John nifidn memy , } ; iignificant contributicns during :) Human Resources 4 Shis. 28-year carew with cx< Linda 0. Findlay I company. His pOssion fot : J Retired Exocvt tv Vice :. President and. Chief Financial Officer, Atlantic,Richfidd Company IARCQI, a diret srfied energy. ; . Environmental, Heofth and Safety Committee Parkei (Chair). Burl, .; Franke, Kppyvf&s- Vice ftesidonl, Government Relation* : A. Daniel Luechtefeid Vice P) esidertl. Taxes . gookjgy tho discovery process, it and the people in out compcmy , * I wilt be fdg fuinr-nifciSfed 4 company . Executive Committee" Robert D. Krebs Choiitnan, Burlington . Northern Sctnto fo Pacific ;; Coipoiation. a hairing s frcjrlmiiKrebK;: 'ifi Stoart L Marcus Vico President, Human Resources -k; Stanton X. Rideout company engaged in 'Vice President <md CoithNIer;; transportation Gregory W, Stevens : VicePies'ident and Treasurer.:; Susan M. Sever Vice President, Organization Effectiveness : < ond Communications Robert C. Swan Vice President and Secretory rt'W, Chira, C^-;<.s>Vtr:f;, U : Eleven-Year Financial Summary 2000-1990 (Dollars in millions, except per share amounts) Sales and other operating revenues to unaffiliated customers Phelps Dodge Mining Company..................................................... Phelps Dodge Industries.................................................................. Operating expenses Cost of products sold (g) ............................................................................... Depreciation, depletion and amortization ................................................... Selling and general administrative expense................................................ Exploration and research expense.................................................................. Provision for reclamation costs, environmental costs, asset dispositions and other.......................................................................................................... Operating income (loss).................................................................................... Interest expense................................................................................................... Capitalized interest................................................................................................. Miscellaneous income and expense, net........................................................... Income (loss) before taxes, minority interests, equity in net earnings (losses) of affiliated companies, and cumulative effect of accounting changes................................................................................................................ Provision for taxes ................................................................................................. Minority interests in consolidated subsidiaries (g)....................................... Equity in net earnings (losses) of affiliated companies............................. Income (loss) before cumulative effect of accounting changes............... Cumulative effect of accounting changes......................................................... Net income (loss) ................................................................................................. Earnings (loss) per common share -- diluted (h, i) Income (loss) before cumulative effect of accounting changes ............. Cumulative effect of accounting changes......................................................... Net income (loss) ............................................................................................... Average number of common shares outstanding In millions (h)................................................................................................. 2000(a) 1999(b) 1998(c) 1997(d) $3,073.7 1,451.4 4,525.1 1,786.6 1,327.8 3,114.4 1,677.7 1,385.7 3,063.4 2,173.3 1,741.0 3,914.3 3,580.2 464.2 135.1 56.8 2,477.8 329.1 115.5 52.2 2,381.3 293.3 102.0 55.0 2,744.1 283.7 141.8 87.8 51.8 4,288.1 237.0 (217.8) 4.5 30.0 455.4 3,430.0 (315.6) (120.4) 0.2 9.1 (190.9) 2,640.7 422.7 (96.4) 1.9 8.8 45.9 3,303.3 611.0 (74.2) 11.7 33.4 53.7 (19.2) (7.0) 1.5 29.0 -- 5 29.0 (426.7) 165.2 2.1 5.1 (254.3) (3.5) (257.8) 337.0 (134.0) (7.9) (4.2) 190.9 -- 190.9 581.9 (180.4) (4.7) 11.7 408.5 -- 408.5 $ 0.37 -- $ 0.37 (4.13) (0.06) (4.19) 3.26 -- 3.26 6.63 -- 6.63 78.8 61.6 58.5 61.6 (a) Reported amounts include after-tax, non-recurring provisions of $56.4 million or 72 cents per common share for the 1999 and 2000 restructuring plans, offset by an income tax refund and related interest of $10.1 million or 13 cents per common share and an insurance settlement refund of $3.0 million or 4 cents per common share relating to a former Cyprus Amax coal property. (b) Reported amounts include after-tax, non-recurring provisions of $222.5 million or $3.61 per common share for asset impairments, $17.8 million or 29 cents per common share reflecting provisions for environmental costs, $65.7 million or $1.07 per common share for costs associated with a restructuring plan announced on June 30, 1999, and $3.5 million or 6 cents per common share for the cumulative effect of an accounting change, partially offset by a non-recurring gain of $30.0 million or 49 cents per common share for an adjustment of prior year's taxes. Phelps Dodge acquired Cyprus Amax Minerals Company on October 16, 1999. (c) Reported amounts include an after-tax gain of $131.1 million, or $2.24 per common share from the disposition of Accuride Corporation, an after-tax loss of $26.4 million or 45 cents per common share from the sale of our 44.6 percent interest in a South African mining company and a non-recurring, after-tax provision of $5.6 million, or 10 cents per common share for curtailments and indefinite closures primarily at Phelps Dodge Mining Company. (d) Reported amounts include non-recurring 1997 charges reflecting provisions for environmental costs, an early retirement program and asset dispositions of $31.6 million after taxes, or 51 cents per common share. Eleven-Year Financial Summary 2000-1990 (Continued) (Dollars in millions, except per share amounts) Business segments (g) Operating income (loss): Phelps Dodge Mining Company Phelps Dodge Industries.......... Corporate and other.................. Net assets: Phelps Dodge Mining Company Phelps Dodge Industries.......... Corporate and other.................. Common dividends declared.............................................. Dividends per common share (h) .................................... Purchase of own shares (h) Common shares (Thousands) ............................. ................. Cost of shares purchased.................................................... Net cash provided by operating activities........................ Capital expenditures and investments.............................. At December 31 Net current assets .............................................................. Total assets......................................................................... Long-term debt.................................................................... Shareholders' equity............................................................ Book value per common sharc(h,i).................................. Common shares outstanding (Thousands) (h)................ Number of employees........................................................ Stock prices (Common shares) High(h)............................................................................... Low(h) ............................................................................... Close(h) ............................................................................. Copper Copper production (Own production -- thousand tons) . Copper sales (Own production -- thousand tons) ........... COMEX copper price(j) .................................................. Commercially recoverable copper reserves (Million tons) 2000(a) 1999(b) 1998(c) 1997(d) $ 243.3 70.3 (76.6) $ 237.0 (301.0) 49.7 (64.3) (315.6) 110.3 353.6 (41.2) 422.7 459.2 207.8 (56.0) 611.0 $6,036.7 1,452.1 342.0 $7,830.8 $ 157.5 $ 2.00 6,345.1 1,520.9 363.0 8,229.0 124.3 2.00 $$511.2 $422.3 $ 89.7 $7,830.8 $1,963.0 $3,105.0 $ 39.45 78,709 15,500 $ 73.00 $ 36.06 $ 55.81 1,200.3 1,200.6 $ 0.84 24.1 204.5 240.4 275.1 8,229.0 2,172.5 3,276.8 41.66 78,656 16,400 70.63 41.88 67.31 890.1 884.2 0.72 24.4 3,218.2 1,608.7 209.6 5,036.5 117.3 2.00 732 35.4 378.4 668.3 328.9 5,036.5 836.4 2,587.4 44.66 57,934 13,924 71.75 43.88 50.88 874.0 876.3 0.75 14.5 3,026.8 1,736.2 202.2 4,965.2 122.7 2.00 6,554 511.5 764.6 789.2 350.0 4,965.2 857.1 2,510.4 42.81 58,634 15,869 89.63 59.88 62.25 812.1 812.8 1.04 13.7 (a) Reported amounts include after-tax, non-recurring provisions of $56.4 million or 72 cents per common share for the 1999 and 2000 restructuring plans, offset by an income tax refund and related interest of $10.1 million or 13 cents per common share and an insurance settlement refund of $3.0 million or 4 cents per common share relating to a former Cyprus Amax coal property. (b) Reported amounts include after-tax, non-recurring provisions of $222.5 million or $3.61 per common share for asset impairments, $17.8 million or 29 cents per common share reflecting provisions for environmental costs. $65.7 million or $1.07 per common share for costs associated with a restructuring plan announced on June 30, 1999, and $3.5 million or 6 cents per common share for the cumulative effect of an accounting change, partially offset by a non-recurring gain of $30.0 million or 49 cents per common share for an adjustment of prior year's taxes. Phelps Dodge acquired Cyprus Amax Minerals Company on October 16, 1999. (c) Reported amounts include an after-tax gain of $131.1 million, or $2.24 per common share from the disposition of Accuride Corporation, an after-tax loss of $26.4 million or 45 cents per common share from the sale of our 44.6 percent interest in a South African mining company and a non-recurring, after-tax provision of $5.6 million, or 10 cents per common share for curtailments and indefinite closures primarily at Phelps Dodge Mining Company. (d) Reported amounts include non-recurring 1997 charges reflecting provisions for environmental costs, an early retirement program and asset dispositions of $31.6 million after taxes, or 51 cents per common share. 1996(e) 2,091.1 1.695.5 3,786.6 2,604.4 249.5 125.9 83.9 10.0 3,073.7 712.9 (68.0) 1.9 40.7 1995 2,488.7 1,696.7 4,185.4 2,691.4 223.5 123.6 73.2 (26.8) 3,084.9 1,100.5 (65.1) 3.1 37.2 1994(f) 1,820.7 1,468.5 3,289.2 2,375.7 195.3 107.1 53.0 157.7 2,888.8 400.4 (57.3) 20.7 11.3 1993 1,320.3 1,275.6 2,595.9 1,921.8 187.1 103.7 56.8 ____ 2,269.4 326.5 (54.5) 17.5 16.4 1992 1,397.7 1,181.6 2,579.3 1,841.1 162.3 105.4 49.9 -- 2,158.7 420.6 (47.4) 7.9 47.1 1991 1,325.3 1,109.0 2,434.3 1,722.2 138.9 98.7 50.6 -- 2,010.4 423.9 (47.4) 8.3 28.4 1990 1,447.8 1,187.9 2,635.7 1,653.6 133.0 93.7 47.4 -- 1,927.7 708.0 (51.2) 1.3 18.1 687.5 (220.0) (16.2) 10.5 461.8 -- 461.8 6.98 -- 6.98 66.2 1,075.7 (322.7) (12.9) 6.5 746.6 -- 746.6 --10.66 10.66 70.0 375.1 (104.7) (8.0) 8.6 271.0 -- 271.0 3.82 -- 3.82 71.0 305.9 --(105.9) (12.1) 187.9 -- 187.9 2.66 -- 2.66 70.6 428.2 (114.4) (12.8) 0.6 301.6 (79.9) 221.7 4.28 (1.13) 3.15 70.4 413.2 (131.4) (12.0) 3.1 272.9 -- 272.9 3.93 -- 3.93 69.5 676.2 (224.0) (9.6) 12.3 454.9 -- 454.9 6.56 -- 6.56 69.3 (e) Reported amounts include interest charges of $5.9 million and reclamation reserves of $10 million for the court-ordered rescission of a 1986 sale of property in Maspeth, New York, by Phelps Dodge to the United States Postal Service. The after-tax effect was $10.7 million, or 16 cents per common share. (f) Reported amounts include non-recurring 1994 fourth quarter provisions for environmental costs and asset dispositions of $91.7 million after taxes, or $1.29 per common share. (g) Prior to 1994, minority interests in the income of consolidated subsidiaries were included in cost of products sold. For comparative purposes, prior period amounts have been reclassified to conform with the current year presentation. (h) In 1992, Phelps Dodge's stock split two-for-one. All per share amounts and the average number of shares outstanding have been retroactively revised for all periods presented. (i) Based on average number of shares outstanding (diluted). 1996(e) 1995 1994(f) 1993 1992 1991 1990 528.7 227.9 (43.7) 712.9 2,879.8 1.544.7 391.9 4,816.4 128.6 1.95 4,297 273.2 837.5 560.4 735.6 4,816.4 554.6 2,755.9 42.59 64,711 16.033 77.63 54.63 67.50 770.4 771.6 1.06 12.1 898.7 246.2 (44.4) 1,100.5 2,776.4 1,336.4 533.1 4,645.9 125.6 1.80 2,761 162.7 959.0 405.2 950.2 4,645.9 613.1 2,677.7 39.04 68,593 15,343 70.50 51.88 62.25 712.7 696.6 1.35 12.3 335.1 113.6 (48.3) 400.4 2,411.9 1,407.7 314.2 4,133.8 1 19.2 1.69 76 3.9 542.6 432.3 558.2 4,133.8 622.3 2,187.6 30.95 70,672 15,498 65.00 47.63 61.88 572.8 560.6 1.07 10.6 234.2 135.0 (42.7) 326.5 2,074.5 1,323.0 323.4 3,720.9 116.1 1.65 130 5.6 385.0 391.0 447.4 3,720.9 547.3 2,022.1 28.67 70,531 14,799 55.63 39.13 48.75 547.7 543.9 0.85 10.1 374.1 93.0 ( 46.5) 420.6 1,874.3 1,265.0 301.9 3,441.2 113.0 1.61 _ -- 430.7 329.4 449.1 3,441.2 373.8 1,972.4 28.03 70,374 14,567 53.00 32.00 48.50 537.0 537.7 1.03 10.5 376.2 91.7 (44.0) 423.9 1,675.7 1,153.6 221.9 3,051.2 104.0 1.50 60 1.9 481.0 366.2 341.7 3,051.2 382.0 1,859.3 26.71 69,622 13,931 39.63 26.19 33.50 538.1 553.9 1.05 10.8 598.5 156.1 (46.6) 708.0 1,522.9 1,157.8 146.7 2,827.4 103.7 1.50 760 21.8 641.9 294.8 349.2 2,827.4 403.5 1,682.9 24.43 68,882 14,066 35.81 23.06 28.31 560.7 556.7 1.19 11.8 (e) Reported amounts include interest charges of $5.9 million and reclamation reserves of $10 million for the court-ordered rescission of a 1986 sale of property in Maspcth, New York, by Phelps Dodge to the United States Postal Service. The after-tax effect was $10.7 million, or 16 cents per common share. (f) Reported amounts include non-recurring 1994 fourth quarter provisions for environmental costs and asset dispositions of $91.7 million after taxes, or $1.29 per common share. (g) All years have been presented to conform with SFAS No. 131. Prior to 1994, minority interests in the income of consolidated subsidiaries were included in cost of products sold For comparative purposes, prior period amounts have been reclassified to conform with the current year presentation. (h) In 1992, the Corporation's stock split two-for-one. All per share amounts and the average number of shares outstanding have been retroactively revised for all periods presented. (i) Based on number of shares outstanding. (j) New York Commodity Exchange annual average spot price per pound -- cathodes. Shareholder Information Ttorisfor oriel Dividend Paying Agent and Registrar Mellon Investor Services LLC Overpeck Centre 85 Challenger Road Ridgefield Park, New Jersey 07660 Phelps Dodge Shareholder Services |800| 27V-1240 Internet: www.nielbn-invesior.eom Independent Accountants Pc icewaJerliouseCooper s UP 1850 North Centred Avenue Suite 700 Phoenix, Arizona 85004-4545 (602) 264-8000 PIcelps Dodge Common Shoes Phelps Dodge common shares ore listed on the New York Stock Exchange The ticker symbol is PD Form 1 OK Annual Report The Annual Report on Form 10-K for 2000 is filed with the Securities and Exchange Commission. Additional copies of this report may be obtained, excluding exhibits, in a reasonabtahme without charge upon written request tO: Secretary of the Corporation 2600 North Centred Avenue Phoenix, Arizona 85004-301 4 Corpoiofe Address Phelps Dodge Corpotation 2600 North Centred Avenue Phoenix, Arizona 85004-3014 |602) 234-8100 Internet wwwphelpsdodge.com