##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended September 30, 2002

Commission file number 1-82

PHELPS DODGE CORPORATION

(a New York corporation)

13-1808503

(I.R.S. Employer Identification No.)

One North Central Avenue, Phoenix, AZ 85004

Registrants telephone number: (602) 366-8100

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. YesþNo o.
Number of Common Shares outstanding at November 8, 2002:
88,902,122 shares.





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TABLE OF CONTENTS



|                              |                                                                   |                                                                    |  |  |  |  |  | 
|----------------------------- | ----------------------------------------------------------------- | ------------------------------------------------------------------ |  |  |  |  |  | 
|Part I. Financial Information
|                              | Item 1. Financial Statements                                     
|                              |                                                                   | STATEMENT OF CONSOLIDATED OPERATIONS                              
|                              |                                                                   | CONSOLIDATED BALANCE SHEET                                        
|                              |                                                                   | CONSOLIDATED STATEMENT OF CASH FLOWS                              
|                              |                                                                   | CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY                    
|                              |                                                                   | FINANCIAL DATA BY BUSINESS SEGMENT                                
|                              |                                                                   | NOTES TO CONSOLIDATED FINANCIAL INFORMATION                       
|                              |                                                                   | REVIEW BY INDEPENDENT ACCOUNTANTS                                 
|                              |                                                                   | Report of Independent Accountants                                 
|                              | Item 2. Managements Discussion and Analysis                     
|                              |                                                                   | RESULTS OF OPERATIONS                                             
|                              |                                                                   | RESULTS OF PHELPS DODGE MINING COMPANY                            
|                              |                                                                   | RESULTS OF PHELPS DODGE INDUSTRIES                                
|                              |                                                                   | OTHER MATTERS RELATING TO THE STATEMENT OF CONSOLIDATED OPERATIONS
|                              |                                                                   | CHANGES IN FINANCIAL CONDITION                                    
|                              | Item 3. Quantitative and Qualitative Disclosure About Market Risk
|                              | Item 4. Controls and Procedures                                  
|Part II. Other Information   
|                              | Item 1. Legal Proceedings                                        
|                              | Item 6. Exhibits and Reports on Form 8-K                         
|Signatures                   
|Certifications               
|Index to Exhibits            
|EX-10.12                     
|EX-10.15                     
|EX-11                        
|EX-12                        
|EX-15                        



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##### Table of Contents



- i -

PHELPS DODGE CORPORATION

Quarterly Report on Form 10-Q

For the Quarter Ended September 30, 2002

Table of Contents

|                              |                                                                   |                                                                    |  |      |    | 
|----------------------------- | ----------------------------------------------------------------- | ------------------------------------------------------------------ |  | ---- | -- | 
|                              |                                                                   |                                                                    |  | Page
|                              |                                                                   |                                                                    |  |     
|Part I. Financial Information |                                                                   |                                                                    |  |     
|                             
|                             
|                             
|                             
|                              | Item 1. Financial Statements (unaudited)                          |                                                                    |  |      |   
|                             
|                             
|                             
|                             
|                              |                                                                   | Statement of Consolidated Operations                               |  |      | 1  | 
|                             
|                             
|                             
|                             
|                              |                                                                   | Consolidated Balance Sheet                                         |  |      | 2  | 
|                             
|                             
|                             
|                             
|                              |                                                                   | Consolidated Statement of Cash Flows                               |  |      | 3  | 
|                             
|                             
|                             
|                             
|                              |                                                                   | Consolidated Statement of Shareholders Equity                     |  |      | 4  | 
|                             
|                             
|                             
|                             
|                              |                                                                   | Financial Data by Business Segment                                 |  |      | 5  | 
|                             
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|                              |                                                                   | Notes to Consolidated Financial Information                        |  |      | 6  | 
|                             
|                             
|                             
|                             
|                              |                                                                   | Review by Independent Accountants                                  |  |      | 17 | 
|                             
|                             
|                             
|                             
|                              |                                                                   | Report of Independent Accountants                                  |  |      | 18 | 
|                             
|                             
|                             
|                             
|                              | Item 2. Managements Discussion and Analysis                      |                                                                    |  |      |   
|                             
|                             
|                             
|                             
|                              |                                                                   | Results of Operations                                              |  |      | 19 | 
|                             
|                             
|                             
|                             
|                              |                                                                   | Results of Phelps Dodge Mining Company                             |  |      | 24 | 
|                             
|                             
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|                             
|                              |                                                                   | Results of Phelps Dodge Industries                                 |  |      | 29 | 
|                             
|                             
|                             
|                             
|                              |                                                                   | Other Matters Relating to the Statement of Consolidated Operations |  |      | 31 | 
|                             
|                             
|                             
|                             
|                              |                                                                   | Changes in Financial Condition                                     |  |      | 32 | 
|                             
|                             
|                             
|                             
|                              | Item 3. Quantitative and Qualitative Disclosure About Market Risk |                                                                    |  | 35   |   
|                             
|                             
|                             
|                             
|                              | Item 4. Controls and Procedures                                   |                                                                    |  | 35   |   
|                             
|                             
|                             
|                             
|Part II. Other Information    |                                                                   |                                                                    |  |     
|                             
|                             
|                             
|                             
|                              | Item 1. Legal Proceedings                                         |                                                                    |  | 35   |   
|                             
|                             
|                             
|                             
|                              | Item 6. Exhibits and Reports on Form 8-K                          |                                                                    |  | 36   |   
|                             
|                             
|                             
|                             
|                              | Signatures                                                        |                                                                    |  | 36   |   
|                             
|                             
|                             
|                             
|                              | Certifications                                                    |                                                                    |  | 36   |   
|                             
|                             
|                             
|                             
|                              | Index to Exhibits                                                 |                                                                    |  | 38   |   





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##### Table of Contents



- 1-




PHELPS DODGE CORPORATION AND SUBSIDIARIES
Part I. Financial Information




Item 1. Financial Statements




STATEMENT OF CONSOLIDATED OPERATIONS
(Unaudited; in millions except per share data)

|                                                                                                                                                              |                                                                                      |   |               |       |               |  |        |       |      |  |                   |         |   |  |         |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------ | - | ------------- | ----- | ------------- |  | ------ | ----- | ---- |  | ----------------- | ------- | - |  | ------- | ------- | -
|                                                                                                                                                              |                                                                                      |   |               |       |               |  |        |       |      |  | Nine Months Ended
|                                                                                                                                                              |                                                                                      |   | Third Quarter |       | September 30,
|                                                                                                                                                              |                                                                                      |   |               |       |              
|                                                                                                                                                              |                                                                                      |   | 2002          |       | 2001          |  | 2002   |       | 2001
|                                                                                                                                                              |                                                                                      |   |               |       |               |  |        |       |     
|Sales and other operating revenues                                                                                                                            |                                                                                      | $ | 941.2         |       |               |  | 937.0  |       |      |  | 2,826.5           |         |   |  | 3,101.2 |        
|                                                                                                                                                              |                                                                                      |   |               |       |               |  |        |       |      |  |                   |         |   |  |         |        
|Operating costs and expenses                                                                                                                                  |                                                                                      |   |               |       |               |  |        |       |      |  |                   |         |   |  |         |        
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Cost of products sold (exclusive of items shown separately below)                    |   |               | 794.2 |               |  |        | 841.3 |      |  |                   | 2,370.2 |   |  |         | 2,672.5 |  
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Depreciation, depletion and amortization                                             |   |               | 105.2 |               |  |        | 108.6 |      |  |                   | 316.9   |   |  |         | 346.4   |  
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Selling and general administrative expense                                           |   |               | 26.8  |               |  |        | 25.9  |      |  |                   | 88.8    |   |  |         | 89.6    |  
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Exploration and research expense                                                     |   |               | 10.7  |               |  |        | 14.3  |      |  |                   | 28.6    |   |  |         | 46.2    |  
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Special items and provisions, net (see Note 2)                                       |   |               | 23.2  |               |  |        | (0.2  | )    |  |                   | 49.7    |   |  |         | (17.8   | )
|                                                                                                                                                              |                                                                                      |   |               |       |               |  |        |       |      |  |                   |         |   |  |         |        
|                                                                                                                                                              |                                                                                      |   | 960.1         |       |               |  | 989.9  |       |      |  | 2,854.2           |         |   |  | 3,136.9 |        
|                                                                                                                                                              |                                                                                      |   |               |       |               |  |        |       |      |  |                   |         |   |  |         |        
|Operating loss                                                                                                                                                |                                                                                      |   | (18.9         | )     |               |  | (52.9  | )     |      |  | (27.7             | )       |   |  | (35.7   | )      
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Interest expense                                                                     |   |               | (41.4 | )             |  |        | (58.7 | )    |  |                   | (143.4  | ) |  |         | (167.6  | )
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Capitalized interest                                                                 |   |               |      |               |  |        |      |      |  |                   |        |   |  |         | 0.6     |  
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Miscellaneous income and expense, net                                                |   |               | 0.9   |               |  |        | 3.2   |      |  |                   | 2.6     |   |  |         | 17.8    |  
|                                                                                                                                                              |                                                                                      |   |               |       |               |  |        |       |      |  |                   |         |   |  |         |        
|Loss before taxes, minority interests, equity in net earnings (losses) of affiliated
companies, extraordinary item and cumulative effect of accounting change |                                                                                      |   | (59.4         | )     |               |  | (108.4 | )     |      |  | (168.5            | )       |   |  | (184.9  | )      
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Benefit (provision) for taxes on income (see Note 8)                                 |   |               | 31.1  |               |  |        | 8.4   |      |  |                   | 101.6   |   |  |         | (5.7    | )
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Minority interests in consolidated subsidiaries                                      |   |               | (1.8  | )             |  |        | (0.6  | )    |  |                   | (5.5    | ) |  |         | (3.5    | )
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Equity in net earnings (losses) of affiliated companies                              |   |               | 0.8   |               |  |        | 0.2   |      |  |                   | 1.9     |   |  |         | (0.6    | )
|                                                                                                                                                              |                                                                                      |   |               |       |               |  |        |       |      |  |                   |         |   |  |         |        
|Loss before extraordinary item and cumulative effect of accounting change                                                                                     |                                                                                      |   | (29.3         | )     |               |  | (100.4 | )     |      |  | (70.5             | )       |   |  | (194.7  | )      
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Extraordinary loss on early extinguishment of debt, net of taxes of $4.7 in 2002     |   |               | (26.6 | )             |  |        |      |      |  |                   | (26.6   | ) |  |         |        |  
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Cumulative effect of accounting change, net of taxes of $10.1 in 2002 and $0 in 2001 |   |               |      |               |  |        |      |      |  |                   | (22.9   | ) |  |         | (2.0    | )
|                                                                                                                                                              |                                                                                      |   |               |       |               |  |        |       |      |  |                   |         |   |  |         |        
|Net loss                                                                                                                                                      |                                                                                      | $ | (55.9         | )     |               |  | (100.4 | )     |      |  | (120.0            | )       |   |  | (196.7  | )      
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Preferred stock dividends                                                            |   |               | (3.3  | )             |  |        |      |      |  |                   | (5.7    | ) |  |         |        |  
|                                                                                                                                                              |                                                                                      |   |               |       |               |  |        |       |      |  |                   |         |   |  |         |        
|Loss applicable to common shares                                                                                                                              |                                                                                      | $ | (59.2         | )     |               |  | (100.4 | )     |      |  | (125.7            | )       |   |  | (196.7  | )      
|                                                                                                                                                              |                                                                                      |   |               |       |               |  |        |       |      |  |                   |         |   |  |         |        
|Average number of shares outstanding  basic                                                                                                                  |                                                                                      |   | 88.6          |       |               |  | 78.5   |       |      |  | 82.6              |         |   |  | 78.5    |        
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|Basic loss per share before extraordinary item and cumulative
effect of accounting change                                                                     |                                                                                      | $ | (0.37         | )     |               |  | (1.28  | )     |      |  | (0.92             | )       |   |  | (2.48   | )      
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Extraordinary loss on early extinguishment of debt                                   |   |               | (0.30 | )             |  |        |      |      |  |                   | (0.32   | ) |  |         |        |  
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Cumulative effect of accounting change                                               |   |               |      |               |  |        |      |      |  |                   | (0.28   | ) |  |         | (0.03   | )
|                                                                                                                                                              |                                                                                      |   |               |       |               |  |        |       |      |  |                   |         |   |  |         |        
|Basic loss per share                                                                                                                                          |                                                                                      | $ | (0.67         | )     |               |  | (1.28  | )     |      |  | (1.52             | )       |   |  | (2.51   | )      
|                                                                                                                                                              |                                                                                      |   |               |       |               |  |        |       |      |  |                   |         |   |  |         |        
|Average number of shares outstanding  diluted*                                                                                                               |                                                                                      |   | 88.6          |       |               |  | 78.5   |       |      |  | 82.6              |         |   |  | 78.5    |        
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|Diluted loss per share before extraordinary item and cumulative
effect of accounting change                                                                   |                                                                                      | $ | (0.37         | )     |               |  | (1.28  | )     |      |  | (0.92             | )       |   |  | (2.48   | )      
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Extraordinary loss on early extinguishment of debt                                   |   |               | (0.30 | )             |  |        |      |      |  |                   | (0.32   | ) |  |         |        |  
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Cumulative effect of accounting change                                               |   |               |      |               |  |        |      |      |  |                   | (0.28   | ) |  |         | (0.03   | )
|                                                                                                                                                              |                                                                                      |   |               |       |               |  |        |       |      |  |                   |         |   |  |         |        
|Diluted loss per share*                                                                                                                                       |                                                                                      | $ | (0.67         | )     |               |  | (1.28  | )     |      |  | (1.52             | )       |   |  | (2.51   | )      
|                                                                                                                                                              |                                                                                      |   |               |       |               |  |        |       |      |  |                   |         |   |  |         |        



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|* |  | Diluted loss per share would have been anti-dilutive if based on fully diluted shares adjusted to reflect the conversion of mandatory convertible
preferred shares to common shares.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See Notes to Consolidated Financial Information.





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##### Table of Contents



- 2 -




CONSOLIDATED BALANCE SHEET
(Unaudited; in millions except par value data)

|                                                |                                                                                                                |                     |         |               |         |              |         |         |         | 
|----------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | ------------------- | ------- | ------------- | ------- | ------------ | ------- | ------- | ------- | 
|                                                |                                                                                                                |                     |         | September 30, |         | December 31,
|                                                |                                                                                                                |                     |         | 2002          |         | 2001        
|                                                |                                                                                                                |                     |         |               |         |             
|Assets                                          |                                                                                                                |                     |         |               |         |              |         |        
|                                               
|                                               
|                                               
|                                               
|                                                | Cash and cash equivalents                                                                                      |                     | $       | 437.4         |         |              |         | 386.9   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Accounts receivable, net                                                                                       |                     |         | 400.5         |         |              |         | 398.8   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Inventories and supplies                                                                                       |                     |         | 528.0         |         |              |         | 602.1   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Prepaid expenses and other current assets                                                                      |                     |         | 121.3         |         |              |         | 116.4   |        
|                                                |                                                                                                                |                     |         |               |         |              |         |        
|                                                |                                                                                                                | Current assets      |         |               | 1,487.2 |              |         |         | 1,504.2 | 
|                                               
|                                               
|                                               
|                                               
|                                                | Investments and long-term receivables                                                                          |                     |         | 133.8         |         |              |         | 105.3   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Net property, plant and equipment                                                                              |                     |         | 5,391.0       |         |              |         | 5,665.6 |        
|                                               
|                                               
|                                               
|                                               
|                                                | Non-current deferred income taxes                                                                              |                     |         | 61.2          |         |              |         | 56.3    |        
|                                               
|                                               
|                                               
|                                               
|                                                | Other assets and deferred charges                                                                              |                     |         | 241.7         |         |              |         | 287.4   |        
|                                                |                                                                                                                |                     |         |               |         |              |         |        
|                                                |                                                                                                                | $                   | 7,314.9 |               |         |              | 7,618.8 |        
|                                                |                                                                                                                |                     |         |               |         |              |         |        
|Liabilities                                     |                                                                                                                |                     |         |               |         |              |         |        
|                                               
|                                               
|                                               
|                                               
|                                                | Short-term debt                                                                                                |                     | $       | 36.7          |         |              |         | 59.3    |        
|                                               
|                                               
|                                               
|                                               
|                                                | Current portion of long-term debt                                                                              |                     |         | 136.4         |         |              |         | 269.7   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Accounts payable and accrued expenses                                                                          |                     |         | 628.1         |         |              |         | 673.7   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Dividends payable                                                                                              |                     |         | 3.3           |         |              |         |        |        
|                                               
|                                               
|                                               
|                                               
|                                                | Accrued income taxes                                                                                           |                     |         | 12.2          |         |              |         | 11.5    |        
|                                                |                                                                                                                |                     |         |               |         |              |         |        
|                                                |                                                                                                                | Current liabilities |         |               | 816.7   |              |         |         | 1,014.2 | 
|                                               
|                                               
|                                               
|                                               
|                                                | Long-term debt                                                                                                 |                     |         | 2,021.6       |         |              |         | 2,522.0 |        
|                                               
|                                               
|                                               
|                                               
|                                                | Deferred income taxes                                                                                          |                     |         | 437.2         |         |              |         | 441.8   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Other liabilities and deferred credits                                                                         |                     |         | 865.2         |         |              |         | 874.2   |        
|                                                |                                                                                                                |                     |         |               |         |              |         |        
|                                                |                                                                                                                |                     | 4,140.7 |               |         |              | 4,852.2 |        
|                                                |                                                                                                                |                     |         |               |         |              |         |        
|Minority interests in consolidated subsidiaries |                                                                                                                |                     | 63.1    |               |         |              | 59.4    |        
|                                                |                                                                                                                |                     |         |               |         |              |         |        
|Shareholders equity                            |                                                                                                                |                     |         |               |         |              |         |        
|                                               
|                                               
|                                               
|                                               
|                                                | Common shares, par value $6.25; 200.0 shares authorized;
88.9 outstanding in 2002 and 78.7 outstanding in 2001 |                     |         | 555.6         |         |              |         | 491.9   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Preferred shares, par value $1.00; 6.0 shares authorized;
2.0 outstanding in 2002                              |                     |         | 2.0           |         |              |         |        |        
|                                               
|                                               
|                                               
|                                               
|                                                | Capital in excess of par value                                                                                 |                     |         | 1,550.9       |         |              |         | 1,016.8 |        
|                                               
|                                               
|                                               
|                                               
|                                                | Retained earnings                                                                                              |                     |         | 1,371.9       |         |              |         | 1,497.6 |        
|                                               
|                                               
|                                               
|                                               
|                                                | Accumulated other comprehensive loss                                                                           |                     |         | (357.0        | )       |              |         | (292.7  | )      
|                                               
|                                               
|                                               
|                                               
|                                                | Other                                                                                                          |                     |         | (12.3         | )       |              |         | (6.4    | )      
|                                                |                                                                                                                |                     |         |               |         |              |         |        
|                                                |                                                                                                                |                     | 3,111.1 |               |         |              | 2,707.2 |        
|                                                |                                                                                                                |                     |         |               |         |              |         |        
|                                                |                                                                                                                | $                   | 7,314.9 |               |         |              | 7,618.8 |        
|                                                |                                                                                                                |                     |         |               |         |              |         |        

See Notes to Consolidated Financial Information.





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##### Table of Contents



- 3 -




CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited; in millions)

|                                                 |                                                                                 |                                                    |                                                     |                                                     |       |                   |        |         |       |       |        |  
|------------------------------------------------ | ------------------------------------------------------------------------------- | -------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | ----- | ----------------- | ------ | ------- | ----- | ----- | ------ | -
|                                                 |                                                                                 |                                                    |                                                     |                                                     |       | Nine Months Ended
|                                                 |                                                                                 |                                                    |                                                     |                                                     |       | September 30,    
|                                                 |                                                                                 |                                                    |                                                     |                                                     |       |                  
|                                                 |                                                                                 |                                                    |                                                     |                                                     |       | 2002              |        | 2001   
|                                                 |                                                                                 |                                                    |                                                     |                                                     |       |                   |        |        
|Operating activities                             |                                                                                 |                                                    |                                                     |                                                     |       |                   |        |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Net loss                                                                        |                                                    | $                                                   | (120.0                                              | )     |                   |        | (196.7  | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Adjustments to reconcile net loss to net cash
provided by operating activities: |                                                    |                                                     |                                                     |       |                   |        |         |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Depreciation, depletion and amortization           |                                                     |                                                     | 316.9 |                   |        |         | 346.4 |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Deferred income taxes                              |                                                     |                                                     | (21.5 | )                 |        |         | 1.0   |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Equity earnings (losses) net of dividends received |                                                     |                                                     | 1.2   |                   |        |         | 1.9   |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Special items and provisions                       |                                                     |                                                     | 50.9  |                   |        |         | (23.6 | )    
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Extraordinary loss on early extinguishment of debt |                                                     |                                                     | 31.3  |                   |        |         |      |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Cumulative effect of accounting change             |                                                     |                                                     | 33.0  |                   |        |         | 2.0   |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Changes in current assets and liabilities:         |                                                     |                                                     |       |                   |        |         |       |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 |                                                    | Accounts receivable, net                            |                                                     |       | 0.1               |        |         |       | 29.1  |       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 |                                                    | Proceeds from securitization of accounts receivable |                                                     |       | (14.4             | )      |         |       |      |       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 |                                                    | Inventories                                         |                                                     |       | 67.4              |        |         |       | 15.8  |       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 |                                                    | Supplies                                            |                                                     |       | 1.3               |        |         |       | (4.0  | )     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 |                                                    | Prepaid expenses and other current assets           |                                                     |       | (7.0              | )      |         |       | (12.5 | )     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 |                                                    | Interest payable                                    |                                                     |       | 16.8              |        |         |       | 52.7  |       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 |                                                    | Other accounts payable                              |                                                     |       | (32.2             | )      |         |       | (5.1  | )     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 |                                                    | Accrued income taxes                                |                                                     |       | 3.2               |        |         |       | (9.5  | )     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 |                                                    | Other accrued expenses                              |                                                     |       | (10.1             | )      |         |       | (26.0 | )     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Other adjustments, net                             |                                                     |                                                     | (15.6 | )                 |        |         | 5.7   |      
|                                                 |                                                                                 |                                                    |                                                     |                                                     |       |                   |        |        
|                                                 |                                                                                 |                                                    |                                                     | Net cash provided by operating activities           |       |                   | 301.3  |         |       |       | 177.2  |  
|                                                 |                                                                                 |                                                    |                                                     |                                                     |       |                   |        |        
|Investing activities                             |                                                                                 |                                                    |                                                     |                                                     |       |                   |        |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Capital outlays                                                                 |                                                    |                                                     | (86.5                                               | )     |                   |        | (201.9  | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Capitalized interest                                                            |                                                    |                                                     |                                                    |       |                   |        | (0.6    | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Investment in subsidiaries and other                                            |                                                    |                                                     | (2.0                                                | )     |                   |        | (47.7   | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from asset dispositions                                                |                                                    |                                                     | 34.7                                                |       |                   |        | 3.6     |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Other investing                                                                 |                                                    |                                                     | (33.6                                               | )     |                   |        | (2.8    | )    
|                                                 |                                                                                 |                                                    |                                                     |                                                     |       |                   |        |        
|                                                 |                                                                                 |                                                    |                                                     | Net cash used in investing activities               |       |                   | (87.4  | )       |       |       | (249.4 | )
|                                                 |                                                                                 |                                                    |                                                     |                                                     |       |                   |        |        
|Financing activities                             |                                                                                 |                                                    |                                                     |                                                     |       |                   |        |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Increase in debt                                                                |                                                    |                                                     | 21.8                                                |       |                   |        | 1,178.3 |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Payment of debt                                                                 |                                                    |                                                     | (742.2                                              | )     |                   |        | (885.2  | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Common dividends                                                                |                                                    |                                                     |                                                    |       |                   |        | (59.1   | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Preferred dividends                                                             |                                                    |                                                     | (2.4                                                | )     |                   |        |        |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Issuance of shares                                                              |                                                    |                                                     | 592.2                                               |       |                   |        | 0.4     |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Other, net                                                                      |                                                    |                                                     | (32.8                                               | )     |                   |        | 11.0    |      
|                                                 |                                                                                 |                                                    |                                                     |                                                     |       |                   |        |        
|                                                 |                                                                                 |                                                    |                                                     | Net cash provided by (used in) financing activities |       |                   | (163.4 | )       |       |       | 245.4  |  
|                                                 |                                                                                 |                                                    |                                                     |                                                     |       |                   |        |        
|Increase in cash and cash equivalents            |                                                                                 |                                                    | 50.5                                                |                                                     |       |                   | 173.2  |        
|                                                
|                                                
|                                                
|                                                
|Cash and cash equivalents at beginning of period |                                                                                 |                                                    | 386.9                                               |                                                     |       |                   | 250.0  |        
|                                                 |                                                                                 |                                                    |                                                     |                                                     |       |                   |        |        
|Cash and cash equivalents at end of period       |                                                                                 | $                                                  | 437.4                                               |                                                     |       |                   | 423.2  |        
|                                                 |                                                                                 |                                                    |                                                     |                                                     |       |                   |        |        

See Notes to Consolidated Financial Information.





---



##### Table of Contents



- 4 -




CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
(Unaudited; in millions)

|                              |                               |                                                |                                    |                          |  |               |       |                  |  |            |     |        |  |           |     |          |  |               |         |       |   |        |         |               |        |   |        |   |  |       |       |      |   |   |         |       |        |       |       |  
|----------------------------- | ----------------------------- | ---------------------------------------------- | ---------------------------------- | ------------------------ |  | ------------- | ----- | ---------------- |  | ---------- | --- | ------ |  | --------- | --- | -------- |  | ------------- | ------- | ----- | - | ------ | ------- | ------------- | ------ | - | ------ | - |  | ----- | ----- | ---- | - | - | ------- | ----- | ------ | ----- | ----- | -
|                              |                               |                                                |                                    |                          |  | Common Shares |       | Preferred Shares |  |            |     |        |  |           |     |          |  | Accumulated   |         |       |   |        |         |               |        |  
|                              |                               |                                                |                                    |                          |  |               |       |                  |  | Capital in |     |        |  |           |     | Other    |  |               |         |       |   |        |         |              
|                              |                               |                                                |                                    |                          |  | Number        |       | At Par           |  | Number     |     | At Par |  | Excess of |     | Retained |  | Comprehensive |         |       |   |        |         | Shareholders'
|                              |                               |                                                |                                    |                          |  | of Shares     |       | Value            |  | of Shares  |     | Value  |  | Par Value |     | Earnings |  | Income (Loss) |         | Other |   | Equity
|                              |                               |                                                |                                    |                          |  |               |       |                  |  |            |     |        |  |           |     |          |  |               |         |       |   |       
|Balance at December 31, 2001  |                               |                                                | 78.7                               |                          |  | $             | 491.9 |                  |  |            |    |        |  | $         |    |          |  | $             | 1,016.8 |       |   | $      | 1,497.6 |               |        | $ | (292.7 | ) |  | $     | (6.4  | )    |   | $ | 2,707.2 |      
|                             
|                             
|                             
|                             
|                              | Stock options exercised       |                                                |                                    |                          |  |               |       |                  |  |            |     |        |  |           |     |          |  |               |         | 0.2   |   |        |         |               |        |   |        |   |  |       |       |      |   |   |         | 0.2   |       
|                             
|                             
|                             
|                             
|                              | Restricted shares issued, net |                                                |                                    | 0.2                      |  |               |       | 1.2              |  |            |     |        |  |           |     |          |  |               |         | 6.5   |   |        |         |               |        |   |        |   |  |       |       | (5.9 | ) |   |         | 1.8   |       
|                             
|                             
|                             
|                             
|                              | Issuance of shares            |                                                |                                    | 10.0                     |  |               |       | 62.5             |  |            |     | 2.0    |  |           |     | 2.0      |  |               |         | 527.5 |   |        |         |               |        |   |        |   |  |       |       |      |   |   |         | 592.0 |       
|                             
|                             
|                             
|                             
|                              | Common shares purchased       |                                                |                                    |                          |  |               |       |                  |  |            |     |        |  |           |     |          |  |               |         | (0.1  | ) |        |         |               |        |   |        |   |  |       |       |      |   |   |         | (0.1  | )     
|                             
|                             
|                             
|                             
|                              | Dividends on preferred shares |                                                |                                    |                          |  |               |       |                  |  |            |     |        |  |           |     |          |  |               |         |       |   |        |         | (5.7          | )      |   |        |   |  |       |       |      |   |   |         | (5.7  | )     
|                             
|                             
|                             
|                             
|                              | Comprehensive income (loss):  |                                                |                                    |                          |  |               |       |                  |  |            |     |        |  |           |     |          |  |               |         |       |   |        |         |               |        |   |        |   |  |       |       |      |   |   |         |       |       
|                             
|                             
|                             
|                             
|                              |                               | Net loss                                       |                                    |                          |  |               |       |                  |  |            |     |        |  |           |     |          |  |               |         |       |   |        |         |               | (120.0 | ) |        |   |  |       |       |      |   |   |         |       | (120.0 | )    
|                             
|                             
|                             
|                             
|                              |                               | Other comprehensive income (loss),
net of tax: |                                    |                          |  |               |       |                  |  |            |     |        |  |           |     |          |  |               |         |       |   |        |         |               |        |   |        |   |  |       |       |      |   |   |         |       |        |      
|                             
|                             
|                             
|                             
|                              |                               |                                                | Translation adjustment             |                          |  |               |       |                  |  |            |     |        |  |           |     |          |  |               |         |       |   |        |         |               |        |   |        |   |  | (57.7 | )     |      |   |   |         |       |        | (57.7 | )    
|                             
|                             
|                             
|                             
|                              |                               |                                                | Net loss on derivative instruments |                          |  |               |       |                  |  |            |     |        |  |           |     |          |  |               |         |       |   |        |         |               |        |   |        |   |  | (6.3  | )     |      |   |   |         |       |        | (6.3  | )    
|                             
|                             
|                             
|                             
|                              |                               |                                                | Other investment adjustments       |                          |  |               |       |                  |  |            |     |        |  |           |     |          |  |               |         |       |   |        |         |               |        |   |        |   |  | (0.7  | )     |      |   |   |         |       |        | (0.7  | )    
|                             
|                             
|                             
|                             
|                              |                               |                                                | Unrealized gain on securities      |                          |  |               |       |                  |  |            |     |        |  |           |     |          |  |               |         |       |   |        |         |               |        |   |        |   |  | 0.4   |       |      |   |   |         |       |        | 0.4   |      
|                              |                               |                                                |                                    |                          |  |               |       |                  |  |            |     |        |  |           |     |          |  |               |         |       |   |        |         |               |        |   |        |   |  |       |       |      |   |   |         |      
|                              |                               |                                                |                                    | Other comprehensive loss |  |               |       |                  |  |            |     |        |  |           |     |          |  |               |         |       |   |        |         |               |        |   |        |   |  |       | (64.3 | )    |   |   |         |       |        |       | (64.3 | )
|                              |                               |                                                |                                    |                          |  |               |       |                  |  |            |     |        |  |           |     |          |  |               |         |       |   |        |         |               |        |   |        |   |  |       |       |      |   |   |         |      
|                              |                               | Comprehensive loss                             |                                    |                          |  |               |       |                  |  |            |     |        |  |           |     |          |  |               |         |       |   |        |         |               |        |   |        |   |  |       |       |      |   |   |         |       | (184.3 | )    
|                              |                               |                                                |                                    |                          |  |               |       |                  |  |            |     |        |  |           |     |          |  |               |         |       |   |        |         |               |        |   |        |   |  |       |       |      |   |   |         |      
|Balance at September 30, 2002 |                               |                                                | 88.9                               |                          |  | $             | 555.6 |                  |  |            | 2.0 |        |  | $         | 2.0 |          |  | $             | 1,550.9 |       |   | $      | 1,371.9 |               |        | $ | (357.0 | ) |  | $     | (12.3 | )    |   | $ | 3,111.1 |      
|                              |                               |                                                |                                    |                          |  |               |       |                  |  |            |     |        |  |           |     |          |  |               |         |       |   |        |         |               |        |   |        |   |  |       |       |      |   |   |         |      

See Notes to Consolidated Financial Information.





---



##### Table of Contents



- 5 -




FINANCIAL DATA BY BUSINESS SEGMENT
(Unaudited; in millions)

|                          |                                          |                        |  |              |         |           |  |                         |       |       |  |            |       |              |  |         |         |  |  |         |         |  |  |        |        |   |  |         |         | 
|------------------------- | ---------------------------------------- | ---------------------- |  | ------------ | ------- | --------- |  | ----------------------- | ----- | ----- |  | ---------- | ----- | ------------ |  | ------- | ------- |  |  | ------- | ------- |  |  | ------ | ------ | - |  | ------- | ------- | 
|                          |                                          |                        |  |              |         |           |  | Phelps Dodge Industries |       |       |  |            |       |              |  |         |         |  |  |        
|                          |                                          |                        |  | Phelps Dodge |         |           |  |                         |       |       |  | Corporate, |       |              |  |        
|                          |                                          |                        |  | Mining       |         | Specialty |  | Wire &                  |       |       |  |            |       | Segment      |  | Other & |         |  |  |        
|                          |                                          |                        |  | Company      |         | Chemicals |  | Cable                   |       | Total |  | Subtotal   |       | Eliminations |  | Totals 
|                         
|Third Quarter 2002        |                                          |                        |  |              |         |           |  |                         |       |       |  |            |       |              |  |         |         |  |  |         |         |  |  |        |        |   |  |        
|                         
|                         
|                         
|                         
|                          | Sales & other operating revenues:        |                        |  |              |         |           |  |                         |       |       |  |            |       |              |  |         |         |  |  |         |         |  |  |        |        |   |  |         |        
|                         
|                         
|                         
|                         
|                          |                                          | Unaffiliated customers |  | $            | 629.3   |           |  |                         | 138.5 |       |  |            | 173.4 |              |  |         | 311.9   |  |  |         | 941.2   |  |  |        |       |   |  |         | 941.2   | 
|                         
|                         
|                         
|                         
|                          |                                          | Intersegment           |  |              | 33.6    |           |  |                         |      |       |  |            | 0.1   |              |  |         | 0.1     |  |  |         | 33.7    |  |  |        | (33.7  | ) |  |         |        | 
|                         
|                         
|                         
|                         
|                          | Depreciation, depletion and amortization |                        |  | 83.0         |         |           |  | 10.1                    |       |       |  | 10.1       |       |              |  | 20.2    |         |  |  | 103.2   |         |  |  | 2.0    |        |   |  | 105.2   |        
|                         
|                         
|                         
|                         
|                          | Special items and provisions, net        |                        |  | (8.1         | )       |           |  | 1.1                     |       |       |  | (22.5      | )     |              |  | (21.4   | )       |  |  | (29.5   | )       |  |  | 6.3    |        |   |  | (23.2   | )      
|                         
|                         
|                         
|                         
|                          | Operating income (loss)                  |                        |  | (1.6         | )       |           |  | 12.1                    |       |       |  | (19.1      | )     |              |  | (7.0    | )       |  |  | (8.6    | )       |  |  | (10.3  | )      |   |  | (18.9   | )      
|                         
|                         
|                         
|                         
|                          | Assets at September 30                   |                        |  | 5,375.1      |         |           |  | 652.2                   |       |       |  | 525.8      |       |              |  | 1,178.0 |         |  |  | 6,553.1 |         |  |  | 761.8  |        |   |  | 7,314.9 |        
|                         
|                         
|                         
|                         
|                          | Capital outlays and investments          |                        |  | 27.2         |         |           |  | 7.1                     |       |       |  | 2.5        |       |              |  | 9.6     |         |  |  | 36.8    |         |  |  | 0.9    |        |   |  | 37.7    |        
|                         
|Third Quarter 2001        |                                          |                        |  |              |         |           |  |                         |       |       |  |            |       |              |  |         |         |  |  |         |         |  |  |        |        |   |  |        
|                         
|                         
|                         
|                         
|                          | Sales & other operating revenues:        |                        |  |              |         |           |  |                         |       |       |  |            |       |              |  |         |         |  |  |         |         |  |  |        |        |   |  |         |        
|                         
|                         
|                         
|                         
|                          |                                          | Unaffiliated customers |  | $            | 614.7   |           |  |                         | 138.2 |       |  |            | 184.1 |              |  |         | 322.3   |  |  |         | 937.0   |  |  |        |       |   |  |         | 937.0   | 
|                         
|                         
|                         
|                         
|                          |                                          | Intersegment           |  |              | 31.7    |           |  |                         |      |       |  |            |      |              |  |         |        |  |  |         | 31.7    |  |  |        | (31.7  | ) |  |         |        | 
|                         
|                         
|                         
|                         
|                          | Depreciation, depletion and amortization |                        |  | 85.3         |         |           |  | 10.6                    |       |       |  | 11.9       |       |              |  | 22.5    |         |  |  | 107.8   |         |  |  | 0.8    |        |   |  | 108.6   |        
|                         
|                         
|                         
|                         
|                          | Special items and provisions, net        |                        |  |             |         |           |  |                        |       |       |  |           |       |              |  |        |         |  |  |        |         |  |  | 0.2    |        |   |  | 0.2     |        
|                         
|                         
|                         
|                         
|                          | Operating income (loss)                  |                        |  | (52.7        | )       |           |  | 10.7                    |       |       |  | 2.9        |       |              |  | 13.6    |         |  |  | (39.1   | )       |  |  | (13.8  | )      |   |  | (52.9   | )      
|                         
|                         
|                         
|                         
|                          | Assets at September 30                   |                        |  | 5,801.3      |         |           |  | 711.4                   |       |       |  | 644.6      |       |              |  | 1,356.0 |         |  |  | 7,157.3 |         |  |  | 620.6  |        |   |  | 7,777.9 |        
|                         
|                         
|                         
|                         
|                          | Capital outlays and investments          |                        |  | 46.6         |         |           |  | 7.7                     |       |       |  | 1.7        |       |              |  | 9.4     |         |  |  | 56.0    |         |  |  | 0.5    |        |   |  | 56.5    |        
|                         
|Nine
Months Ended 9/30/02 |                                          |                        |  |              |         |           |  |                         |       |       |  |            |       |              |  |         |         |  |  |         |         |  |  |        |        |   |  |        
|                         
|                         
|                         
|                         
|                          | Sales & other operating revenues:        |                        |  |              |         |           |  |                         |       |       |  |            |       |              |  |         |         |  |  |         |         |  |  |        |        |   |  |         |        
|                         
|                         
|                         
|                         
|                          |                                          | Unaffiliated customers |  | $            | 1,885.5 |           |  |                         | 408.3 |       |  |            | 532.7 |              |  |         | 941.0   |  |  |         | 2,826.5 |  |  |        |       |   |  |         | 2,826.5 | 
|                         
|                         
|                         
|                         
|                          |                                          | Intersegment           |  |              | 107.9   |           |  |                         |      |       |  |            | 0.3   |              |  |         | 0.3     |  |  |         | 108.2   |  |  |        | (108.2 | ) |  |         |        | 
|                         
|                         
|                         
|                         
|                          | Depreciation, depletion and amortization |                        |  | 248.1        |         |           |  | 31.3                    |       |       |  | 31.4       |       |              |  | 62.7    |         |  |  | 310.8   |         |  |  | 6.1    |        |   |  | 316.9   |        
|                         
|                         
|                         
|                         
|                          | Special items and provisions, net        |                        |  | 26.6         |         |           |  | 1.1                     |       |       |  | (22.5      | )     |              |  | (21.4   | )       |  |  | 5.2     |         |  |  | (54.9  | )      |   |  | (49.7   | )      
|                         
|                         
|                         
|                         
|                          | Operating income (loss)                  |                        |  | 52.0         |         |           |  | 42.3                    |       |       |  | (13.0      | )     |              |  | 29.3    |         |  |  | 81.3    |         |  |  | (109.0 | )      |   |  | (27.7   | )      
|                         
|                         
|                         
|                         
|                          | Assets at September 30                   |                        |  | 5,375.1      |         |           |  | 652.2                   |       |       |  | 525.8      |       |              |  | 1,178.0 |         |  |  | 6,553.1 |         |  |  | 761.8  |        |   |  | 7,314.9 |        
|                         
|                         
|                         
|                         
|                          | Capital outlays and investments          |                        |  | 65.3         |         |           |  | 12.3                    |       |       |  | 6.8        |       |              |  | 19.1    |         |  |  | 84.4    |         |  |  | 4.1    |        |   |  | 88.5    |        
|                         
|Nine
Months Ended 9/30/01 |                                          |                        |  |              |         |           |  |                         |       |       |  |            |       |              |  |         |         |  |  |         |         |  |  |        |        |   |  |        
|                         
|                         
|                         
|                         
|                          | Sales & other operating revenues:        |                        |  |              |         |           |  |                         |       |       |  |            |       |              |  |         |         |  |  |         |         |  |  |        |        |   |  |         |        
|                         
|                         
|                         
|                         
|                          |                                          | Unaffiliated customers |  | $            | 2,054.1 |           |  |                         | 447.7 |       |  |            | 599.4 |              |  |         | 1,047.1 |  |  |         | 3,101.2 |  |  |        |       |   |  |         | 3,101.2 | 
|                         
|                         
|                         
|                         
|                          |                                          | Intersegment           |  |              | 120.6   |           |  |                         |      |       |  |            | 0.1   |              |  |         | 0.1     |  |  |         | 120.7   |  |  |        | (120.7 | ) |  |         |        | 
|                         
|                         
|                         
|                         
|                          | Depreciation, depletion and amortization |                        |  | 273.8        |         |           |  | 33.3                    |       |       |  | 35.9       |       |              |  | 69.2    |         |  |  | 343.0   |         |  |  | 3.4    |        |   |  | 346.4   |        
|                         
|                         
|                         
|                         
|                          | Special items and provisions, net        |                        |  | (10.0        | )       |           |  |                        |       |       |  | (3.3       | )     |              |  | (3.3    | )       |  |  | (13.3   | )       |  |  | 31.1   |        |   |  | 17.8    |        
|                         
|                         
|                         
|                         
|                          | Operating income (loss)                  |                        |  | (79.1        | )       |           |  | 49.1                    |       |       |  | 13.8       |       |              |  | 62.9    |         |  |  | (16.2   | )       |  |  | (19.5  | )      |   |  | (35.7   | )      
|                         
|                         
|                         
|                         
|                          | Assets at September 30                   |                        |  | 5,801.3      |         |           |  | 711.4                   |       |       |  | 644.6      |       |              |  | 1,356.0 |         |  |  | 7,157.3 |         |  |  | 620.6  |        |   |  | 7,777.9 |        
|                         
|                         
|                         
|                         
|                          | Capital outlays and investments          |                        |  | 161.8        |         |           |  | 21.7                    |       |       |  | 54.1       |       |              |  | 75.8    |         |  |  | 237.6   |         |  |  | 12.0   |        |   |  | 249.6   |        
|                         





---



##### Table of Contents



- 6 -




NOTES TO CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)



|1. |  | General Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The unaudited consolidated financial information of Phelps Dodge
Corporation (the Company, which may be referred to as Phelps Dodge, PD,
we, us or ours) presented herein has been prepared in accordance with the
instructions to Form 10-Q and does not include all of the information and
note disclosures required by generally accepted accounting principles.
Therefore, this information should be read in conjunction with the
consolidated financial statements and notes thereto included in our Form
10-K for the year ended December 31, 2001. This information reflects all
adjustments that are, in the opinion of management, necessary to a fair
statement of the results for the interim periods reported.
|  
|   |  | The results of operations for the three-month and nine-month periods ended
September 30, 2002, are not necessarily indicative of the results to be
expected for the full year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|2. |  | Special Items and Provisions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |  | Special items and provisions are unpredictable and atypical of the
Companys operations in a given period. This supplemental information is
not a substitute for any U.S. generally accepted accounting principles
(GAAP) measure and should be evaluated within the context of our U.S. GAAP
results.                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |  | The following schedules summarize the special items and provisions for the
third quarter and nine months ended September 30, 2002:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

Note: Supplemental Data

(Unaudited; gains (losses) in millions except per share amounts)

|                                         |                                                   |                                                                      |                                                               |          |                    |           |       |      |       |      |       |      |       |       |  
|---------------------------------------- | ------------------------------------------------- | -------------------------------------------------------------------- | ------------------------------------------------------------- | -------- | ------------------ | --------- | ----- | ---- | ----- | ---- | ----- | ---- | ----- | ----- | -
|                                         |                                                   |                                                                      |                                                               |          | 2002 Third Quarter
|                                         |                                                   |                                                                      |                                                               |          |                   
|Statement of
Consolidated                | Pre-tax                                           |                                                                      | After-tax                                                     |          | $/Share           
|Operations Line
Item                     |                                                   | Earnings                                                             |                                                               | Earnings |                    | After-tax
|                                         |                                                   |                                                                      |                                                               |          |                    |          
|Special items and provisions, net:       |                                                   |                                                                      |                                                               |          |                    |           |       |      |       |      |       |     
|                                        
|                                        
|                                        
|                                        
|                                         | PDMC -                                            |                                                                      |                                                               |          |                    |           |       |      |       |      |       |      |      
|                                        
|                                        
|                                        
|                                        
|                                         |                                                   | Environmental provisions,
net                                        |                                                               | $        | (2.5               | )         |       |      | (2.5  | )    |       |      | (0.03 | )    
|                                        
|                                        
|                                        
|                                        
|                                         |                                                   | October 2001 restructuring:                                          |                                                               |          |                    |           |       |      |       |      |       |      |       |      
|                                        
|                                        
|                                        
|                                        
|                                         |                                                   |                                                                      | Reassessment of employee
activities and take-or-pay
contracts |          |                    | 4.4       |       |      |       | 4.4  |       |      |       | 0.05  |  
|                                        
|                                        
|                                        
|                                        
|                                         |                                                   |                                                                      | Additional retirement
benefits                                |          |                    | (6.4      | )     |      |       | (6.4 | )     |      |       | (0.07 | )
|                                        
|                                        
|                                        
|                                        
|                                         |                                                   | Environmental insurance
recoveries, net                              |                                                               |          | (3.6               | )         |       |      | (2.5  | )    |       |      | (0.03 | )    
|                                         |                                                   |                                                                      |                                                               |          |                    |           |       |      |       |      |       |      |       |      
|                                         |                                                   |                                                                      | (8.1                                                          | )        |                    |           | (7.0  | )    |       |      | (0.08 | )   
|                                         |                                                   |                                                                      |                                                               |          |                    |           |       |      |       |      |       |      |       |      
|                                         | PDI -                                             |                                                                      |                                                               |          |                    |           |       |      |       |      |       |      |      
|                                        
|                                        
|                                        
|                                        
|                                         |                                                   | September 2002 restructuring
programs                                |                                                               |          | (23.0              | )         |       |      | (22.2 | )    |       |      | (0.25 | )    
|                                        
|                                        
|                                        
|                                        
|                                         |                                                   | Environmental provisions,
net*                                       |                                                               |          | 0.3                |           |       |      | 0.3   |      |       |      |      |      
|                                        
|                                        
|                                        
|                                        
|                                         |                                                   | Reassessment of prior
restructuring programs**                       |                                                               |          | 1.3                |           |       |      | 1.3   |      |       |      | 0.02  |      
|                                         |                                                   |                                                                      |                                                               |          |                    |           |       |      |       |      |       |      |       |      
|                                         |                                                   |                                                                      | (21.4                                                         | )        |                    |           | (20.6 | )    |       |      | (0.23 | )   
|                                         |                                                   |                                                                      |                                                               |          |                    |           |       |      |       |      |       |      |       |      
|                                         | Corporate and other -                             |                                                                      |                                                               |          |                    |           |       |      |       |      |       |      |      
|                                        
|                                        
|                                        
|                                        
|                                         |                                                   | Environmental provisions,
net                                        |                                                               |          | (0.5               | )         |       |      | (2.9  | )    |       |      | (0.03 | )    
|                                        
|                                        
|                                        
|                                        
|                                         |                                                   | Environmental insurance
recoveries, net                              |                                                               |          | 6.8                |           |       |      | 6.1   |      |       |      | 0.07  |      
|                                        
|                                        
|                                        
|                                        
|                                         |                                                   | Historic Cyprus Amax
lawsuit settlement                              |                                                               |          |                   |           |       |      | (0.6  | )    |       |      | (0.01 | )    
|                                        
|                                        
|                                        
|                                        
|                                         |                                                   | Historic Cyprus Amax
arbitration award with
regard to Plateau Mining |                                                               |          |                   |           |       |      | (0.5  | )    |       |      | (0.01 | )    
|                                         |                                                   |                                                                      |                                                               |          |                    |           |       |      |       |      |       |      |       |      
|                                         |                                                   |                                                                      | 6.3                                                           |          |                    |           | 2.1   |      |       |      | 0.02  |     
|                                         |                                                   |                                                                      |                                                               |          |                    |           |       |      |       |      |       |      |       |      
|                                         |                                                   |                                                                      | (23.2                                                         | )        |                    |           | (25.5 | )    |       |      | (0.29 | )   
|                                         |                                                   |                                                                      |                                                               |          |                    |           |       |      |       |      |       |      |       |      
|Taxes:                                   |                                                   |                                                                      |                                                               |          |                    |           |       |      |       |      |       |     
|                                        
|                                        
|                                        
|                                        
|                                         | Tax benefit for 2001 net
operating loss carryback |                                                                      |                                                               |         |                    |           |       | 28.1 |       |      |       | 0.32 |      
|                                         |                                                   |                                                                      |                                                               |          |                    |           |       |      |       |      |       |      |       |      
|Extraordinary loss  debt
extinguishment |                                                   |                                                                      | (31.3                                                         | )        |                    |           | (26.6 | )    |       |      | (0.30 | )   
|                                         |                                                   |                                                                      |                                                               |          |                    |           |       |      |       |      |       |      |       |      
|Total                                    |                                                   | $                                                                    | (54.5                                                         | )        |                    |           | (24.0 | )    |       |      | (0.27 | )   
|                                         |                                                   |                                                                      |                                                               |          |                    |           |       |      |       |      |       |      |       |      



|*  |  | Includes reassessment of $0.6 million for prior restructuring
programs.                                             
|-- |  | --------------------------------------------------------------------------------------------------------------------
|  
|  
|  
|  
|** |  | Includes $(0.1) million related to an increase in equipment
reserve, reflected in net property, plant and equipment.



---



##### Table of Contents



- 7 -

(Unaudited; gains (losses) in millions except per share amounts)

|                                         |                                                         |                                                                      |                                                               |          |                    |           |       |      |       |      |       |       |       |       |  
|---------------------------------------- | ------------------------------------------------------- | -------------------------------------------------------------------- | ------------------------------------------------------------- | -------- | ------------------ | --------- | ----- | ---- | ----- | ---- | ----- | ----- | ----- | ----- | -
|                                         |                                                         |                                                                      |                                                               |          | Nine Months Ended 
|                                         |                                                         |                                                                      |                                                               |          | September 30, 2002
|                                         |                                                         |                                                                      |                                                               |          |                   
|Statement
of Consolidated                | Pre-tax                                                 |                                                                      | After-tax                                                     |          | $/Share           
|Operations Line
Item                     |                                                         | Earnings                                                             |                                                               | Earnings |                    | After-tax
|                                         |                                                         |                                                                      |                                                               |          |                    |          
|Special items and provisions, net:       |                                                         |                                                                      |                                                               |          |                    |           |       |      |       |      |       |      
|                                        
|                                        
|                                        
|                                        
|                                         | PDMC -                                                  |                                                                      |                                                               |          |                    |           |       |      |       |      |       |       |      
|                                        
|                                        
|                                        
|                                        
|                                         |                                                         | Environmental provisions,
net                                        |                                                               | $        | (2.5               | )         |       |      | (2.5  | )    |       |       | (0.03 | )    
|                                        
|                                        
|                                        
|                                        
|                                         |                                                         | October 2001 restructuring:                                          |                                                               |          |                    |           |       |      |       |      |       |       |       |      
|                                        
|                                        
|                                        
|                                        
|                                         |                                                         |                                                                      | Reassessment of employee
activities and take-or-pay
contracts |          |                    | 4.4       |       |      |       | 4.4  |       |       |       | 0.05  |  
|                                        
|                                        
|                                        
|                                        
|                                         |                                                         |                                                                      | Additional retirement
benefits                                |          |                    | (6.4      | )     |      |       | (6.4 | )     |       |       | (0.08 | )
|                                        
|                                        
|                                        
|                                        
|                                         |                                                         | Environmental insurance
recoveries, net                              |                                                               |          | 8.5                |           |       |      | 7.2   |      |       |       | 0.09  |      
|                                        
|                                        
|                                        
|                                        
|                                         |                                                         | Sale of non-core real estate                                         |                                                               |          | 22.6               |           |       |      | 22.6  |      |       |       | 0.27  |      
|                                         |                                                         |                                                                      |                                                               |          |                    |           |       |      |       |      |       |       |       |      
|                                         |                                                         |                                                                      | 26.6                                                          |          |                    |           | 25.3  |      |       |      | 0.30  |      
|                                         |                                                         |                                                                      |                                                               |          |                    |           |       |      |       |      |       |       |       |      
|                                         | PDI -                                                   |                                                                      |                                                               |          |                    |           |       |      |       |      |       |       |      
|                                        
|                                        
|                                        
|                                        
|                                         |                                                         | September 2002 restructuring
programs                                |                                                               |          | (23.0              | )         |       |      | (22.2 | )    |       |       | (0.27 | )    
|                                        
|                                        
|                                        
|                                        
|                                         |                                                         | Environmental provisions,
net                                        |                                                               |          | 0.3                |           |       |      | 0.3   |      |       |       |      |      
|                                        
|                                        
|                                        
|                                        
|                                         |                                                         | Reassessment of prior
restructuring programs                         |                                                               |          | 1.3                |           |       |      | 1.3   |      |       |       | 0.02  |      
|                                         |                                                         |                                                                      |                                                               |          |                    |           |       |      |       |      |       |       |       |      
|                                         |                                                         |                                                                      | (21.4                                                         | )        |                    |           | (20.6 | )    |       |      | (0.25 | )    
|                                         |                                                         |                                                                      |                                                               |          |                    |           |       |      |       |      |       |       |       |      
|                                         | Corporate and other -                                   |                                                                      |                                                               |          |                    |           |       |      |       |      |       |       |      
|                                        
|                                        
|                                        
|                                        
|                                         |                                                         | Environmental provisions,
net                                        |                                                               |          | (12.6              | )         |       |      | (12.6 | )    |       |       | (0.15 | )    
|                                        
|                                        
|                                        
|                                        
|                                         |                                                         | Environmental insurance
recoveries, net                              |                                                               |          | 15.4               |           |       |      | 13.0  |      |       |       | 0.16  |      
|                                        
|                                        
|                                        
|                                        
|                                         |                                                         | Historic Cyprus Amax
lawsuit settlement                              |                                                               |          | (11.2              | )         |       |      | (9.5  | )    |       |       | (0.12 | )    
|                                        
|                                        
|                                        
|                                        
|                                         |                                                         | Historic Cyprus Amax
arbitration award with
regard to Plateau Mining |                                                               |          | (46.5              | )         |       |      | (45.0 | )    |       |       | (0.54 | )    
|                                         |                                                         |                                                                      |                                                               |          |                    |           |       |      |       |      |       |       |       |      
|                                         |                                                         |                                                                      | (54.9                                                         | )        |                    |           | (54.1 | )    |       |      | (0.65 | )    
|                                         |                                                         |                                                                      |                                                               |          |                    |           |       |      |       |      |       |       |       |      
|                                         |                                                         |                                                                      | (49.7                                                         | )        |                    |           | (49.4 | )    |       |      | (0.60 | )    
|                                         |                                                         |                                                                      |                                                               |          |                    |           |       |      |       |      |       |       |       |      
|Miscellaneous income and
expense, net:   |                                                         |                                                                      |                                                               |          |                    |           |       |      |       |      |       |      
|                                        
|                                        
|                                        
|                                        
|                                         | Cost investment write-downs                             |                                                                      |                                                               | (1.2     | )                  |           |       | (1.2 | )     |      |       | (0.01 | )    
|                                         |                                                         |                                                                      |                                                               |          |                    |           |       |      |       |      |       |       |       |      
|Taxes:                                   |                                                         |                                                                      |                                                               |          |                    |           |       |      |       |      |       |      
|                                        
|                                        
|                                        
|                                        
|                                         | Release of taxes provided with
regard to Plateau Mining |                                                                      |                                                               |         |                    |           |       | 13.0 |       |      |       | 0.16  |      
|                                        
|                                        
|                                        
|                                        
|                                         | Tax benefit for 2001 net
operating loss carryback       |                                                                      |                                                               |         |                    |           |       | 66.6 |       |      |       | 0.80  |      
|                                         |                                                         |                                                                      |                                                               |          |                    |           |       |      |       |      |       |       |       |      
|                                         |                                                         |                                                                      |                                                              |          |                    |           | 79.6  |      |       |      | 0.96  |      
|                                         |                                                         |                                                                      |                                                               |          |                    |           |       |      |       |      |       |       |       |      
|Extraordinary loss  debt
extinguishment |                                                         |                                                                      | (31.3                                                         | )        |                    |           | (26.6 | )    |       |      | (0.32 | )    
|                                         |                                                         |                                                                      |                                                               |          |                    |           |       |      |       |      |       |       |       |      
|Cumulative effect of
accounting change   |                                                         |                                                                      | (33.0                                                         | )        |                    |           | (22.9 | )    |       |      | (0.28 | )    
|                                         |                                                         |                                                                      |                                                               |          |                    |           |       |      |       |      |       |       |       |      
|Total                                    |                                                         | $                                                                    | (115.2                                                        | )        |                    |           | (20.5 | )    |       |      | (0.25 | )    
|                                         |                                                         |                                                                      |                                                               |          |                    |           |       |      |       |      |       |       |       |      



| |  | In the 2002 third quarter, a special, net pre-tax loss of $54.5 million
was recognized consisting of (i) a $23.0 million pre-tax charge ($22.2
million after-tax) for asset impairments associated with the temporary
closure of two U.S. wire and cable plants and the consolidation of certain
wire and cable operations; (ii) a $0.7 million net charge (before and
after taxes) for the reassessment of prior restructuring programs; (iii) a
$2.7 million charge (before and after taxes) for environmental provisions
(refer to Note 4); (iv) a $31.3 million extraordinary charge ($26.6
million after-tax) for the early extinguishment of debt; and (v) a $3.2
million gain ($2.7 million after-tax), net of fees and expenses, from
recoveries associated with insurance settlements on historic environmental
claims. In addition, the 2002 third quarter included a net tax benefit of
$25.5 million consisting of a special current tax benefit of $28.1 million
associated with the 2001 net operating losses resulting from recent U.S.
tax legislation partially offset by year-to-date adjustments ($2.6
million) reflecting refinements in forecast estimates of U.S. net
operating loss carrybacks for 2002 (refer to Note 8 for a further
discussion of income taxes).
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In the second quarter of 2002, a special, net pre-tax loss of $31.0
million was recognized consisting of (i) a $46.5 million pre-tax charge
($44.5 million after-tax) associated with an award made in a binding
arbitration proceeding filed against Cyprus Amax Minerals Company (Cyprus
Amax) by Plateau Mining Corporation (a former subsidiary of Cyprus Amax);
(ii) an $11.2 million charge including expenses ($8.9 million after-tax)
for the settlement of a lawsuit related to Amax Oil & Gas acquired with
the Cyprus Amax purchase; (iii) a $0.7 million charge (before and after
taxes) from the write-off of a cost basis investment; (iv) a $22.6 million
gain (before and after taxes) on the sale of a non-core parcel of real
estate in New Mexico; and (v) a $4.8 million net gain ($3.8 million
after-tax) from recoveries associated with insurance settlements on
historic environmental claims. The taxes associated with special items
were a net benefit of $18.3 million, including release of deferred taxes
previously provided ($13.0 million) and year-to-date adjustments ($2.0
million) reflecting refinements in forecast estimates of U.S. net
operating loss carrybacks (refer to Note 8 for a further discussion of
income taxes).                    



---



##### Table of Contents



- 8 -



| |  | In the 2002 first quarter, a special, net pre-tax loss of $29.7 million
was recognized consisting of (i) pre-tax charges of $33.0 million ($22.9
million after-tax) for the cumulative effect of an accounting change
(refer to Note 3 for further discussion); (ii) a $12.1 million charge
(before and after taxes) for environmental provisions (refer to Note 4);
(iii) a $0.5 million write-off ($0.4 million after-tax) of a cost basis
investment; and (iv) a $15.9 million gain ($13.1 million after-tax), net
of fees and expenses, from recoveries associated with insurance
settlements reached with companies on historic environmental claims. In
addition, the 2002 first quarter included a tax benefit of $38.5 million
for net operating loss carryback prior to 2002 resulting from recent U.S.
tax legislation (refer to Note 8).
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The following schedules summarize the special items and provisions for the
third quarter and nine months ended September 30, 2001:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

Note: Supplemental Data

(Unaudited; gains (losses) in millions except per share amounts)

|                                   |                       |                                         |  |                    |     |           |  |  |     |  |  |  |   | 
|---------------------------------- | --------------------- | --------------------------------------- |  | ------------------ | --- | --------- |  |  | --- |  |  |  | - | 
|                                   |                       |                                         |  | 2001 Third Quarter
|                                   |                       |                                         |  |                   
|Statement of Consolidated          |                       | Pre-tax                                 |  | After-tax          |     | $/Share  
|Operations Line Item               |                       | Earnings                                |  | Earnings           |     | After-tax
|                                   |                       |                                         |  |                    |     |          
|Special items and provisions, net: |                       |                                         |  |                    |     |           |  |  |     |  |  | 
|                                  
|                                  
|                                  
|                                  
|                                   | Corporate and other - |                                         |  |                    |     |           |  |  |     |  |  |  |  
|                                  
|                                  
|                                  
|                                  
|                                   |                       | Environmental insurance
recoveries, net |  | $                  | 0.2 |           |  |  | 0.2 |  |  |  |  | 
|                                   |                       |                                         |  |                    |     |           |  |  |     |  |  |  |   | 

(Unaudited; gains (losses) in millions except per share amounts)

|                                       |                                      |                                         |      |                    |       |           |      |     |       |   |       |      |       |  
|-------------------------------------- | ------------------------------------ | --------------------------------------- | ---- | ------------------ | ----- | --------- | ---- | --- | ----- | - | ----- | ---- | ----- | -
|                                       |                                      |                                         |      | Nine Months Ended 
|                                       |                                      |                                         |      | September 30, 2001
|                                       |                                      |                                         |      |                   
|Statement of Consolidated              |                                      | Pre-tax                                 |      | After-tax          |       | $/Share  
|Operations Line Item                   |                                      | Earnings                                |      | Earnings           |       | After-tax
|                                       |                                      |                                         |      |                    |       |          
|Special items and provisions, net:     |                                      |                                         |      |                    |       |           |      |     |       |   |       |     
|                                      
|                                      
|                                      
|                                      
|                                       | PDMC -                               |                                         |      |                    |       |           |      |     |       |   |       |      |      
|                                      
|                                      
|                                      
|                                      
|                                       |                                      | Restructuring programs                  |      | $                  | (10.0 | )         |      |     | (10.0 | ) |       |      | (0.13 | )
|                                       |                                      |                                         |      |                    |       |           |      |     |       |   |       |      |       |  
|                                       | PDI -                                |                                         |      |                    |       |           |      |     |       |   |       |      |      
|                                      
|                                      
|                                      
|                                      
|                                       |                                      | Hopkinsville
facility write-down        |      |                    | (3.3  | )         |      |     | (3.3  | ) |       |      | (0.04 | )
|                                       |                                      |                                         |      |                    |       |           |      |     |       |   |       |      |       |  
|                                       | Corporate and other -                |                                         |      |                    |       |           |      |     |       |   |       |      |      
|                                      
|                                      
|                                      
|                                      
|                                       |                                      | Environmental insurance
recoveries, net |      |                    | 38.3  |           |      |     | 38.3  |   |       |      | 0.49  |  
|                                      
|                                      
|                                      
|                                      
|                                       |                                      | Restructuring programs                  |      |                    | (1.3  | )         |      |     | (1.3  | ) |       |      | (0.01 | )
|                                      
|                                      
|                                      
|                                      
|                                       |                                      | Other                                   |      |                    | (5.9  | )         |      |     | (5.9  | ) |       |      | (0.08 | )
|                                       |                                      |                                         |      |                    |       |           |      |     |       |   |       |      |       |  
|                                       |                                      |                                         | 31.1 |                    |       |           | 31.1 |     |       |   | 0.40  |     
|                                       |                                      |                                         |      |                    |       |           |      |     |       |   |       |      |       |  
|                                       |                                      |                                         | 17.8 |                    |       |           | 17.8 |     |       |   | 0.23  |     
|                                       |                                      |                                         |      |                    |       |           |      |     |       |   |       |      |       |  
|Miscellaneous income and
expense, net: |                                      |                                         |      |                    |       |           |      |     |       |   |       |     
|                                      
|                                      
|                                      
|                                      
|                                       | Interest on prior
years tax refunds |                                         |      | 4.3                |       |           |      | 4.3 |       |   |       | 0.05 |      
|                                      
|                                      
|                                      
|                                      
|                                       | Other                                |                                         |      | 1.5                |       |           |      | 1.5 |       |   |       | 0.02 |      
|                                       |                                      |                                         |      |                    |       |           |      |     |       |   |       |      |       |  
|                                       |                                      |                                         | 5.8  |                    |       |           | 5.8  |     |       |   | 0.07  |     
|                                       |                                      |                                         |      |                    |       |           |      |     |       |   |       |      |       |  
|Cumulative effect of
accounting change |                                      |                                         | (2.0 | )                  |       |           | (2.0 | )   |       |   | (0.03 | )   
|                                       |                                      |                                         |      |                    |       |           |      |     |       |   |       |      |       |  
|Total                                  |                                      | $                                       | 21.6 |                    |       |           | 21.6 |     |       |   | 0.27  |     
|                                       |                                      |                                         |      |                    |       |           |      |     |       |   |       |      |       |  



| |  | In the third quarter of 2001, a special gain of $0.2 million (before and
after taxes), net of fees and expenses, was recognized consisting of
recoveries associated with settlements reached with insurance companies on
historic environmental liability claims.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In the 2001 second quarter, a net special loss of $7.5 million (before and
after taxes) was recognized consisting of an $11.3 million (before and
after taxes) restructuring charge primarily for employee severance and
benefit costs associated with restructuring of our professional,
administrative and operations support functions, as well as various other
operational improvement initiatives. The restructuring charge was
partially offset by a special, net gain of $3.8 million (before and after
taxes) comprising (i) additional recoveries associated with settlements
reached with several insurance companies on historic environmental
liability claims, net of fees and expenses ($7.2 million before and after
taxes); (ii) the write-down of the closed Hopkinsville,



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##### Table of Contents



- 9 -



| |  | Kentucky, magnet wire facility ($3.3 million before and after taxes); (iii) special
charges of $5.9 million (before and after taxes) related to a
trade settlement and the assessment of the potential of selling Phelps
Dodge Industries; and (iv) a special gain of $5.8 million (before and after taxes)
primarily related to interest income of $4.3 million (before and after
taxes) on prior years tax refunds.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In the 2001 first quarter, a special, net gain of $28.9 million (before
and after taxes) was recognized consisting of $30.9 million (before and
after taxes), net of fees and expenses, in recoveries associated with
settlements reached with several insurance companies on historic
environmental liability claims, partially offset by a $2.0 million (before
and after taxes) charge for the cumulative effect of an accounting change
(refer to Note 9 for further discussion).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Restructuring Programs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | On September 10, 2002, we announced the temporary closure of two U.S. wire
and cable plants and other actions to improve efficiencies and consolidate
certain wire and cable operations. These temporary closures and internal
changes are expected to reduce our costs and align our business with
current market conditions. The actions include: (i) the temporary closure
of the Laurinburg, N.C., magnet wire plant at the end of 2002, with
production being shifted to the El Paso, Texas, and Fort Wayne, Indiana,
facilities; (ii) the temporary closure of the West Caldwell, N.J., High
Performance Conductors facility pending recovery of markets served by this
location, with production of certain products relocated to our Inman,
S.C., facility; (iii) operational and production support at other High
Performance Conductors facilities being streamlined in order to reduce
costs and increase operating efficiencies; and (iv) the restructuring and
consolidation of certain administrative functions. These actions resulted
in a special, pre-tax charge of $23.0 million ($22.2 million after-tax) in
the 2002 third quarter of which $16.9 million (before and after taxes) was
recognized as asset impairments and $6.1 million ($5.3 million after-tax)
was recognized for severance-related expenses associated with the
restructuring and temporary closures. The amount of the asset impairment
was determined through an assessment of the fair market value, which was
based on independent appraisals, of the existing assets at the wire and
cable plants. We also did an impairment test on the goodwill at our wire
and cable plants based on projected cash flows and determined that an
impairment loss was not required. The restructuring plan includes the
reduction of approximately 300 positions and charges associated with
employee severance ($3.3 million, of which $0.7 million was paid in the
2002 third quarter) and pension and other postretirement obligations ($2.8
million).
|
| |  | In the fourth quarter of 2001, Phelps Dodge announced a series of actions
to address the then current economic environment, including changes in
copper operations that led us to temporarily curtail approximately 220,000
metric tons of copper production annually (including our partners share),
and the reduction of approximately 1,600 positions mostly in January 2002.
The Chino and Miami mines were temporarily closed, the Bagdad and
Sierrita mines are operating at one-half capacity, the Chino smelter and
the Miami refinery were temporarily closed (approximately 1,500 positions), and
Columbian Chemicals Company temporarily closed its El Dorado, Arkansas,
facility (approximately 100 positions). In the second quarter of 2001, we announced a
restructuring of our professional, administrative and operational support
functions, as well as various other operational improvements, which led to
a reduction of approximately 500 positions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             



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##### Table of Contents



- 10 -



| |  | The following schedule presents a roll-forward from December 31, 2001, of
the liabilities incurred in connection with the 2001 restructuring
programs, which were reflected as current liabilities in our consolidated
balance sheet:
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(Unaudited; $ in millions)

|                    |                                   |                          |      |          |     |       |      |           |      |         |       |      |      |   |     |     |     | 
|------------------- | --------------------------------- | ------------------------ | ---- | -------- | --- | ----- | ---- | --------- | ---- | ------- | ----- | ---- | ---- | - | --- | --- | --- | 
|                    |                                   |                          |      |          |     |       |      | Reassess- |      |         |       |      |      |   |     |    
|                    |                                   |                          |      | 12/31/01 |     | ments |      | Payments  |      | 9/30/02
|                    |                                   |                          |      |          |     |       |      |           |      |        
|PDMC -              |                                   |                          |      |          |     |       |      |           |      |         |       |      |      |   |     |    
|                   
|                   
|                   
|                   
|                    | Employee severance                |                          | $    | 9.4      |     |       |      | (2.0      | )    |         |       | (5.9 | )    |   |     | 1.5 |    
|                   
|                   
|                   
|                   
|                    | Mothballing/take-or-pay
contracts |                          |      | 8.3      |     |       |      | (2.4      | )    |         |       | (5.4 | )    |   |     | 0.5 |    
|                    |                                   |                          |      |          |     |       |      |           |      |         |       |      |      |   |     |     |    
|                    |                                   |                          | 17.7 |          |     |       | (4.4 | )         |      |         | (11.3 | )    |      |   | 2.0 |    
|                    |                                   |                          |      |          |     |       |      |           |      |         |       |      |      |   |     |     |    
|PDI -               |                                   |                          |      |          |     |       |      |           |      |         |       |      |      |   |     |    
|                   
|                   
|                   
|                   
|Specialty Chemicals |                                   |                          |      |          |     |       |      |           |      |         |       |      |      |   |     |    
|                   
|                   
|                   
|                   
|                    |                                   | Disposal and dismantling |      |          | 0.5 |       |      |           | (0.4 | )       |       |      | (0.1 | ) |     |     |    | 
|                   
|                   
|                   
|                   
|                    |                                   | Employee severance       |      |          | 0.8 |       |      |           | (0.1 | )       |       |      | (0.6 | ) |     |     | 0.1 | 
|                    |                                   |                          |      |          |     |       |      |           |      |         |       |      |      |   |     |     |    
|                    |                                   |                          | 1.3  |          |     |       | (0.5 | )         |      |         | (0.7  | )    |      |   | 0.1 |    
|                    |                                   |                          |      |          |     |       |      |           |      |         |       |      |      |   |     |     |    
|Total               |                                   | $                        | 19.0 |          |     |       | (4.9 | )         |      |         | (12.0 | )    |      |   | 2.1 |    
|                    |                                   |                          |      |          |     |       |      |           |      |         |       |      |      |   |     |     |    

Note: In the 2002 third quarter, reassessments were $(4.9) million, including
a reclass of $(0.1) million to long-term liabilities, and payments were $(2.6)
million.



| |  | PDMCs reassessment of $2.0 million of employee termination benefits was
made because subsequently, as the plan was being implemented, it was
determined that certain employees identified in the restructuring plan
would be retained to fill open positions or would not be eligible for
supplemental unemployment as originally anticipated. In addition, there
was reassessment of $2.4 million related to savings from renegotiated
contracts or from reduced penalties on demand contracts. In addition, a
$6.4 million charge was recognized for additional pension-related
benefits, which are included in long-term liabilities, for employees at
our Chino, Miami, Sierrita and Bagdad operations since these operations
will remain curtailed beyond one year from their January 2002 curtailment.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | PDIs specialty chemicals segment reassessment related to (i) a reclass of
$0.1 million to long-term pension benefits and (ii) $0.4 million for an
adjustment to disposal and dismantling charges for the El Dorado plant
facility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | In the second quarters of 2000 and 1999, we announced plans to reduce
operating costs and restructure operations at our mining and wire and
cable segments. Refer to the Companys Form 10-K for the year ended
December 31, 2001, for additional discussion.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | The following schedule presents a roll-forward from December 31, 2001, of
the liabilities incurred in connection with the June 2000 restructuring
program, which were reflected as current liabilities in our consolidated
balance sheet:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

(Unaudited; $ in millions)

|             |                               |  |          |     |       |  |           |      |         |  |  |      |   |  |  |     | 
|------------ | ----------------------------- |  | -------- | --- | ----- |  | --------- | ---- | ------- |  |  | ---- | - |  |  | --- | 
|             |                               |  |          |     |       |  | Reassess- |      |         |  |  |      |   |  | 
|             |                               |  | 12/31/01 |     | ments |  | Payments  |      | 9/30/02
|             |                               |  |          |     |       |  |           |      |        
|PDI -        |                               |  |          |     |       |  |           |      |         |  |  |      |   |  |  |    
|            
|            
|            
|            
|Wire & Cable |                               |  |          |     |       |  |           |      |         |  |  |      |   |  |  |    
|            
|            
|            
|            
|             | Plant removal
and dismantling |  | $        | 1.9 |       |  |           | (1.3 | )       |  |  | (0.1 | ) |  |  | 0.5 | 
|             |                               |  |          |     |       |  |           |      |         |  |  |      |   |  |  |     | 

Note: In the 2002 third quarter, reassessments were $(0.7) million, including
currency translation adjustments of $(0.2) million, and payments were $(0.1)
million.



| |  | PDIs wire and cable segment reassessment related to (i) a $0.5 million
adjustment to plant dismantling charges related to the wire and cable
plant closures in Venezuela and (ii) a $0.8 million non-cash deduction
related to the devaluation of Venezuelan currency.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents



- 11 -



| |  | The following schedule presents a roll-forward from December 31, 2001, of
the liabilities incurred in connection with the June 1999 restructuring
program, which were reflected as current liabilities in our consolidated
balance sheet:
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(Unaudited; $ in millions)

|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |     | 
|------------------- | --------------------------------- | - | -------- | --- | ----- |  | --------- | ---- | ------- |  | ---- | ---- | - |  | --- | --- | 
|                    |                                   |   |          |     |       |  | Reassess- |      |         |  |      |      |   |  |    
|                    |                                   |   | 12/31/01 |     | ments |  | Payments  |      | 9/30/02
|                    |                                   |   |          |     |       |  |           |      |        
|PDMC -              |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |    
|                   
|                   
|                   
|                   
|                    | Employee severance                |   | $        | 0.2 |       |  |           | (0.1 | )       |  |      | (0.1 | ) |  |     |    | 
|                   
|                   
|                   
|                   
|                    | Mothballing/take-or-pay
contracts |   |          | 1.4 |       |  |           |     |         |  |      | (0.7 | ) |  |     | 0.7 | 
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |     | 
|                    |                                   |   | 1.6      |     |       |  | (0.1      | )    |         |  | (0.8 | )    |   |  | 0.7 |    
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |     | 
|PDI -               |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |    
|                   
|                   
|                   
|                   
|Specialty Chemicals |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |    
|                   
|                   
|                   
|                   
|                    | Disposal and
dismantling          |   |          | 0.3 |       |  |           | (0.3 | )       |  |      |     |   |  |     |    | 
|                   
|                   
|                   
|                   
|                    | Environmental                     |   |          | 0.6 |       |  |           | (0.6 | )       |  |      |     |   |  |     |    | 
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |     | 
|                    |                                   |   | 0.9      |     |       |  | (0.9      | )    |         |  |     |      |   |  |    |    
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |     | 
|Wire & Cable        |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |    
|                   
|                   
|                   
|                   
|                    | Take-or-pay
contracts             |   |          | 1.1 |       |  |           | (0.1 | )       |  |      |     |   |  |     | 1.0 | 
|                   
|                   
|                   
|                   
|                    | Plant removal and
dismantling     |   |          | 0.2 |       |  |           | (0.2 | )       |  |      |     |   |  |     |    | 
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |     | 
|                    |                                   |   | 1.3      |     |       |  | (0.3      | )    |         |  |     |      |   |  | 1.0 |    
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |     | 
|                    |                                   |   | 2.2      |     |       |  | (1.2      | )    |         |  |     |      |   |  | 1.0 |    
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |     | 
|Total               |                                   | $ | 3.8      |     |       |  | (1.3      | )    |         |  | (0.8 | )    |   |  | 1.7 |    
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |     | 

Note: In the 2002 third quarter, reassessments were $(1.2) million, including
a reclass of $(0.1) million to long-term liabilities, and payments were $(0.2)
million.



|   |  | PDMCs reassessment included a $0.1 million reclass to long-term
liabilities related to pension and other postretirement benefits.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | PDIs specialty chemicals segment reassessment related to a Philippine
plant for (i) a $0.3 million adjustment to disposal and dismantling
charges and (ii) $0.6 million for environmental costs that were relieved
as the property was sold during the period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   |  | PDIs wire and cable segment reassessment related to (i) a $0.1 million
adjustment related to a lease contract and (ii) a $0.2 million adjustment
related to dismantling charges at a Venezuelan plant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|3. |  | Accounting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   |  | Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible
Assets. Under SFAS No. 142, goodwill and intangible assets that have
indefinite useful lives will not be amortized but rather will be tested at
least annually for impairment. Intangible assets that have finite useful
lives will continue to be amortized over their useful lives. As of
December 31, 2001, the Company had goodwill of $115.2 million less
accumulated amortization of $26.7 million associated with the specialty
chemicals segment and goodwill of $70.8 million less accumulated
amortization of $16.2 million associated with the wire and cable segment,
for a total of $143.1 million, net. Upon completion of the transitional
impairment tests, the net book value of three of the Companys
international wire and cable reporting units was determined to be less
than the related carrying amount. The resulting impairment loss
recognized upon adoption of SFAS No. 142 was $33.0 million, pre-tax ($22.9
million, after-tax), and has been recognized as a cumulative effect of a
change in accounting principle. The pro forma effect of not amortizing
goodwill on the third quarter and nine months ended September 30, 2001,
would have reduced goodwill amortization expense by $1.9 million and $5.7
million, respectively, reduced net loss by $1.5 million and $4.7 million,
respectively, and reduced loss per share by 2 cents and 6 cents,
respectively.
|  
|   |  | In August 2001, the Financial Accounting Standard Board (FASB) issued SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
This Statement supersedes SFAS No. 121 and the accounting and reporting
provisions of Accounting Principles Board (APB) Opinion No. 30, and also
amends Accounting Research Bulletin (ARB) No. 51. This Statement requires
that one accounting model be used for long-lived assets to be disposed of
by sale, whether previously held and used or newly acquired, and will
broaden the presentation of discontinued operations to include more
disposal transactions. This Statement was adopted by the Company on
January 1, 2002, with no significant effect on our financial reporting or
disclosures, and was utilized in the determination of our wire                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               



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##### Table of Contents



- 12 -



|   |  | and cable segments asset impairment charge in the 2002 third quarter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | In June 2001, FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. With the adoption of this Statement, retirement obligations
will be recognized when they are incurred and displayed as liabilities and
the initial measurement will be at fair value. In addition, the asset
retirement cost will be capitalized as part of the assets carrying value
and subsequently allocated to expense over the assets useful life. This
Statement is required to be adopted by the Company on or before January 1,
2003. We are in the process of determining the effect SFAS No. 143 will
have on our financial reporting and disclosures and are developing
procedures to effect its implementation. At this time, we cannot estimate
its impact.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   |  | In April 2002, FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. Under SFAS No. 4, all gains and losses from extinguishment
of debt were required to be aggregated and, if material, classified as an
extraordinary item, net of related income tax effect. This Statement
eliminates SFAS No. 4 and, thus, the exception to applying APB No. 30 to
all gains and losses related to extinguishments of debt. As a result,
gains and losses from extinguishment of debt should be classified as
extraordinary items only if they meet the criteria in APB No. 30.
Applying the provisions of APB No. 30 will distinguish transactions that
are part of an entitys recurring operations from those that are unusual
or infrequent or that meet the criteria for classification as an
extraordinary item. Under SFAS No. 13, the required accounting treatment
of certain lease modifications that have economic effects similar to
sale-leaseback transactions was inconsistent with the required accounting
treatment for sale-leaseback transactions. This Statement amends SFAS No.
13 to require that those lease modifications be accounted for in the same
manner as sale-leaseback transactions. This Statement is required to be
adopted by the Company on or before January 1, 2003.
|  
|   |  | In June 2002, FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. This Statement addresses financial
accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). The principal difference between this Statement and EITF
94-3 relates to its requirements for recognition of a liability for a cost
associated with an exit or disposal activity. This Statement requires
that a liability for a cost associated with an exit or disposal activity
be recognized when the liability is incurred. Under EITF 94-3, a
liability was recognized at the date of an entitys commitment to an exit
plan. This Statement is effective for exit or disposal activities that
are initiated after December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                
|  
|4. |  | Environmental, and Reclamation and Closure Matters                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   |  | As of December 31, 2001, we had a reserve balance of $311.2 million for
estimated future costs associated with environmental matters at closed
facilities and closed portions of certain operating facilities. During
the first nine months of 2002, we had a $14.8 million net increase in the
reserve estimate ($18.3 million of additions and $3.5 million of
reductions), partially offset by $13.8 million of spending against the
reserve. As of September 30, 2002, the reserve balance was $312.2
million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   |  | The sites for which Phelps Dodge has received a notice of potential
liability or an information request that currently are considered to be
significant are the Pinal Creek site in Miami, Arizona, the former
American Zinc and Chemical site in Langeloth, Pennsylvania, and the Tohono
Oodham Indian Nation site in Arizona. At September 30, 2002, the cost
range for reasonably possible outcomes for all reservable remediation
sites was estimated to be from $288 million to $533 million of which $312
million has been reserved.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | Phelps Dodge has a number of sites that are not the subject of an
environmental reserve because it is not probable that a successful claim
will be made against the Company for those sites, but for which there is a
reasonably possible likelihood of an environmental remediation liability.
As of September 30, 2002, the cost range for reasonably possible out-                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



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|   |  | comes for all such sites was estimated to be
from $4 million to $37 million. The liabilities arising from potential
environmental obligations that have not been reserved at this time may be
material to the results of a single quarter or year in the future.
Management, however, believes the liability arising from potential
environmental obligations is not likely to have a material adverse effect
on the Companys liquidity or financial position.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | As of December 31, 2001, we had a mine reclamation and closure reserve
balance of $130.1 million. During the first nine months of 2002, we
recorded a $15.2 million provision to the reserve, partially offset by
$1.1 million in spending. As of September 30, 2002, the reserve balance
was $144.2 million. We have estimated that total reclamation and closure
costs aggregate approximately $660 million, leaving
approximately $516 million remaining to be accrued. These
aggregate closure costs may increase or decrease materially in the
future as a result of changes in regulations, technology, mine plans
or other factors. In addition, closure activities and expenditures
are generally made over a number of years or potentially greater
periods commencing near the end of the mine life. The Companys accounting policy is to
recognize estimated final reclamation costs over the life of active mining
properties on a units-of-production basis. Non-operating sites currently
on care-and-maintenance status suspend accruing mine closure costs until
the site resumes production. When management determines a mine should be
permanently closed, any unrecognized closure obligation is recognized.                                                                                                                                                                                               
|  
|   |  | We have contingencies regarding environmental, and reclamation and closure
matters. Please also see Note 6.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|5. |  | Acquisitions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   |  | In December 1997, we acquired a 60 percent interest in the Brazilian
copper and aluminum wire and cable manufacturing business (the Business)
of Alcoa Aluminio, S.A. (Aluminio) for $72 million. At that time, the
fair value of the Business was approximately $120 million. As part of the
purchase agreement, Aluminio was given an optional exit mechanism to sell
to the Company all, but not less than all, of its remaining shares in the
Business. The agreement stipulated that Aluminio could exercise its
option between December 31, 2000, and January 1, 2006. Under the terms of
the agreement, the exit price would be the greater of (a) the sum of (i)
the aggregate amount of cash paid in by Aluminio to subscribe to capital
increases, plus (ii) $48 million, or (b) the value of shareholders equity
represented by Aluminios shares. In early January 2001, Aluminio gave
the Company notice of its intent to exercise the option. As a result of
other commitments by Aluminio under the purchase agreement, the exit price
was renegotiated and the transaction to acquire Aluminios remaining 40
percent interest in the Business closed in March 2001 for $44.8 million.
The final settlement price of $44.8 million was allocated to goodwill
($13.0 million), fixed assets ($3.2 million), other net assets ($1.3
million) and minority interests in consolidated subsidiaries ($27.3
million).
|  
|6. |  | Contingencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   |  | During an ordinary course review of the Companys public filings, the
staff of the Securities and Exchange Commission (SEC) has recently
commented on several matters reflected in those filings. The matters
commented upon include aspects of the Companys calculation of its proven
and probable reserves of copper and molybdenum at its operating,
curtailed and development properties. In this comment process, the SEC
staff has, among other things, indicated that it may require that the
Company use as its metals pricing assumption for these purposes the
average COMEX price for copper over the prior three years (approximately
76 cents per pound) and the three-year historical average price for
molybdenum as published in Metals Week(approximately $2.50 per pound for
oxide). In determining its proven and probable reserves, the Company has
used metals price assumptions that are higher and that it believes are
generally consistent with average historical prices over recent full
economic and pricing cycles. The Company is currently discussing these
issues with the SEC staff and evaluating the potential effects of using
the lower price assumptions in its reserve determinations.                                                                                                                                                                                                  
|  
|   |  | Depending on the outcome of the ongoing discussions with the SEC staff, a
portion of the Companys proven and probable reserves of copper and
molybdenum may be reclassified to mineralized material. Any such
reclassifi-                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



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| |  | cation of reserves at an operating property would increase
depreciation and amortization charges, including possibly for prior
periods, but the Company does not expect any such increases to be
material. Further, there would be no effect on the Companys mine plans,
production levels or expected operating cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The SEC staff has also commented upon the Companys impairment analyses
of its curtailed properties under SFAS Nos. 121 and 144. Such analyses
involve numerous judgments and estimates and the Company is currently
evaluating these comments and discussing them with the SEC staff. In
addition, management is now conducting its customary impairment review of
all its curtailed properties based upon all information currently
available. In light of these ongoing reviews and discussions, additional
impairment charges, which could be material in amount, may be recognized,
including possibly in prior periods.                                                                                                                                                                                                                                  
|
| |  | Any additional impairment charges may materially reduce net income in the
periods in which they are recognized, and it is possible that they may
materially reduce the Companys shareholders equity. They would have no
effect on the Companys mine plans, production levels or expected
operating cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | The SEC staff has also commented on certain of the Companys estimates
for recognizing depreciation and amortization expenses at certain of its
mining properties. Further, the SEC staff has commented on the Companys
basis for recognition of closure costs at temporarily closed mining
operations and upon the Companys estimates for two contingent matters.
The Company continues to evaluate these comments and discuss these issues
with the SEC staff. It is possible that additional charges, which could
be material in amount, may be recognized in prior periods. There would
be no effect on the Companys expected operating cash flows arising from
any such changes.                                                                                                                                                                       
|
| |  | The Company is continuing to discuss all of these issues with the staff
of the SEC, and no final determinations will be made until the conclusion
of those discussions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | Our mining operations are subject to laws and regulations establishing new
requirements for mined land reclamation and financial assurance. New
Mexico passed a mined land reclamation law in 1993 authorizing regulations
that were adopted in 1994. The permitting process for New Mexico mining
operations commenced in December 1994. Two New Mexico State agencies, the
New Mexico Environment Department (NMED) and the New Mexico Mining and
Minerals Division (MMD) are charged with approving the applications for
facility closure and reclamation.                                                                                                                                                                                                                                                                                                  
|
| |  | In August 2001, the initial public hearing was held before an NMED Hearing
Officer on Chinos plan to protect water quality. A second public hearing
was held in February 2002 on the Chino plan to discuss a draft permit
proposed jointly by Chino and NMED. The Company is awaiting the NMED
Hearing Officers decision. The cost estimate to carry out this plan,
including water treatment for 100 years, if needed, is $386 million in
current dollars. This figure compares to Chinos initial proposal of
approximately $100 million. For purposes of calculating the required
amount of financial assurance, the present value of the plan when adjusted
to reflect the appropriate escalation and discount rates, is approximately
$180 million to $200 million. The plan also calls for studies over the
next four to five years to refine the plan.
|
| |  | A public hearing on the Tyrone plan was held in May 2002 before the NMED
Hearing Officer. NMED proposed a plan with a cost estimate of $440
million in current dollars with a financial assurance estimate based on an
adjusted present value of $265 million. The Company presented a revised plan with a cost
estimate of $331 million in current dollars and an estimated present value
of the estimated costs of $179 million. A hearing officers decision on
the Tyrone permit is anticipated later this year. The Company has been
advised that the State intends to issue a draft permit for a Cobre closure
plan. The Company expects the cost estimate for the Cobre plan to be
approximately $40 million in current dollars.                                                                                                                        
|
| |  | On September 13, 2002, the New Mexico Mining Commission denied a proposal
for a five-year extension of the October 1, 2002, deadline for approval of
closeout plans under the New Mexico Mining Act Rules. The five-                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



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- 15 -



|   |  | year extension was recommended by MMD based upon an agreement reached between
MMD and the Company for interim financial assurance and a plan to evaluate
and supplement scientific studies supporting the plans submitted by Chino,
Tyrone and Cobre. As a result of the Mining Commissions
decision, October 1, 2002, deadline remained in place. As noted above, the NMED
Hearing Officer has not yet issued decisions on the NMED permits for the
Chino and Tyrone proposed closure plans, and NMED has not yet issued a
closure permit for the Cobre operation. Because action by NMED is a
prerequisite to closeout plan approval by MMD, the Chino, Tyrone and Cobre
operations were unable to obtain approval of their closeout plans by the
October 1 deadline.                                                                                                                                                                                                                                                                                       
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | On October 21, 2002, the operations received notices of violation from MMD
requiring the operations to have closeout plans in place by April 30, 2003
(Chino), September 30, 2003 (Tyrone) and June 30, 2003 (Cobre).
Currently, the three operations are responding to requests from MMD for
additional information. Because the deadline was not met, the three
operations may also be subject to further administrative action, including
civil penalties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   |  | On November 1, 2002, each of the operations filed a Petition for Review
and Request for Expedited Hearing with the New Mexico Mining Commission
requesting the notices of violation be rescinded or, alternatively, the
Commission determine that civil penalties are not warranted and the
abatement schedule should be modified. A date for the hearing has not yet
been established.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   |  | The Company is continuing to negotiate with the State regarding the amount
of interim financial assurance required to cover the cost estimates for
the three operations. A portion of the plans will require the issuance of
a waiver of certain standards as authorized by the New Mexico Mining Act
for mines that existed when the law was enacted. The final cost estimates
also are subject to the results of the hearings and any subsequent
judicial appeals. Actual reclamation costs may differ significantly from
the cost estimate based on a variety of factors including possible changes
in legal standards over time and potential cost savings from use of the
Companys own personnel and equipment at each site versus third-party
contractor costs (under New Mexico law, financial assurance requirements
are calculated based on estimated third-party costs), advances in
technology and reclamation techniques, and opportunities to prepare each
site for more efficient reclamation through careful development of the
site over time.
|  
|   |  | In September 2000, RAG American Coal Company (RAG) filed a complaint
against Cyprus Amax Minerals Company and Amax Energy Inc. (collectively,
Cyprus). The complaint alleges claims relating to breach of contract,
fraud, negligent misrepresentation, and negligence arising from alleged
inaccuracies in financial statements relating to the sale by Cyprus of its
coal subsidiary to RAG in June 1999. The complaint seeks damages in the
amount of $115 million under four different legal theories (breach of
contract, fraud, negligent misrepresentation and negligence). On April
18, 2002, the Court issued its decision on the motion to dismiss filed by
Cyprus. The Court granted Cyprus motion to dismiss with respect to the
negligent misrepresentation and negligence claims, and denied Cyprus
motion with respect to the contract and fraud claims. We will continue to
advance the litigation.                                                                                                                                          
|  
|7. |  | Earnings Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   |  | Basic earnings per share is computed by dividing income available to
common shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share is similar to
basic earnings per share except that the denominator is increased to
include the number of additional common shares that would have been outstanding if dilutive potential common shares
were issued. The weighted average number of diluted common shares
outstanding for the quarter and nine-month period ended September 30,
2002, excluded 5.0 million and 2.0 million of the diluted potential common
shares from mandatory convertible preferred shares, respectively, and 0.3
million of restricted stock issued to employees (excluded as they were
anti-dilutive). The weighted average number of diluted common shares
outstanding for the quarter and nine-month period ended September 30,
2001, excluded 0.2 million of restricted stock issued to employees.                                                                      



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- 16 -



|
|
|

|                     |  |               |       |                   |  |      |       |      |  |  |       |  |  |  |       | 
|-------------------- |  | ------------- | ----- | ----------------- |  | ---- | ----- | ---- |  |  | ----- |  |  |  | ----- | 
|                     |  | Third Quarter |       | First Nine Months
|                     |  |               |       |                  
|                     |  | 2002          |       | 2001              |  | 2002 |       | 2001
|                     |  |               |       |                   |  |      |       |     
|Outstanding options  |  |               | 9.1   |                   |  |      | 7.7   |      |  |  | 7.5   |  |  |  | 7.8   | 
|                    
|                    
|                    
|                    
|Average option price |  | $             | 55.91 |                   |  |      | 61.69 |      |  |  | 60.90 |  |  |  | 61.89 | 



|8.  |  | Benefit for Taxes on Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Companys income tax benefit for the 2002 third quarter comprised the
following items: (i) an additional $28.1 million special tax benefit
associated with 2001 net operating losses that, based on new tax
legislation, may be carried back to recover prior years taxes; (ii) a
$5.0 million benefit recognized for the 2002 third quarter net operating
losses that, based on the March enactment of the Job Creation and Worker
Assistance Act of 2002, may also be carried back to recover prior years
taxes; and (iii) a $2.0 million expense for taxes on earnings at
international operations. The Companys income tax benefit for the nine
months ended September 30, 2002, comprised the following items: (i) a
$66.6 million tax benefit associated with the carryback of 2001 net
operating losses that, based on new tax legislation, may be carried back
to recover prior years taxes; (ii) a $39.8 million benefit recognized for
the first nine months of 2002 net operating losses, based on new tax
legislation; (iii) a $17.8 million expense for taxes on earnings at
international operations; and (iv) a $13.0 million benefit for release of
deferred taxes previously provided.
|   
|    |  | The Company completed its 2001 federal income tax return in August 2002
and filed for a $59 million refund, which was received in the 2002 third
quarter, resulting from carrying back the 2001 net operating loss in
accordance with the March enactment of the Job Creation and Worker
Assistance Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|9.  |  | Accounting for Derivative Instruments and Hedging Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|    |  | The Company does not purchase, hold or sell derivative contracts unless we
have an existing asset, obligation or anticipate a future activity that is
likely to occur and will expose us to market risk. We do not enter into
any contracts for speculative purposes. We use various strategies to
manage our market risk, including the use of derivative contracts to
limit, offset or reduce our market exposure. Derivative instruments are
used to manage well-defined commodity price, energy, foreign exchange and
interest rate risks from our primary business activities. The fair values
of our derivative instruments are based on quoted market prices for
similar instruments at period end. Please refer to Managements
Discussion and Analysis and Note 19 to the Consolidated Financial
Statements included in the Companys Form 10-K for the year ended December
31, 2001, for a discussion on our derivative instruments.                                                                                                                                                                                                                                                                 
|   
|    |  | During the 2002 third quarter and the nine-month period ended September
30, 2002, we reclassified approximately $2.6 million and $9.4 million,
respectively, of other comprehensive losses to the statement of
consolidated operations, principally as a result of our floating-to-fixed
interest rate swaps.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    |  | On January 1, 2001, the Company adopted SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, (as amended by SFAS No.
137) and SFAS No. 138, Accounting for Certain Derivative Instruments and
Certain Hedging Activities. The implementation resulted in a cumulative
effect charge of $2.0 million (before and after taxes), or 3 cents per
share, and a cumulative reduction to other comprehensive income of $7.1
million (before and after taxes).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|10. |  | Debt and Other Financing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|    |  | In July 2002, $480.7 million of long-term debt was purchased on the open
market for $511.2 million, which resulted in a 2002 third quarter pre-tax
extraordinary loss of $31.3 million ($26.6 million after-tax) including
issuance costs and other book adjustments ($0.8 million).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



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- 17 -



|   
|---
|11.
|   
|   
|   
|   
|   
|   
|   
|   




REVIEW BY INDEPENDENT ACCOUNTANTS

The financial information as of September 30, 2002, and for the
three-month and nine-month periods ended September 30, 2002 and 2001, included
in Part I pursuant to Rule 10-01 of Regulation S-X has been reviewed by
PricewaterhouseCoopers LLP (PricewaterhouseCoopers), the Companys independent
accountants, in accordance with standards established by the American Institute
of Certified Public Accountants. PricewaterhouseCoopers report is included in
this quarterly report.

PricewaterhouseCoopers does not carry out any significant or additional
procedures beyond those that would have been necessary if its report had not
been included in this quarterly report. Accordingly, such report is not a
report or part of a registration statement within the meaning of Sections 7
and 11 of the Securities Act of 1933 and the liability provisions of Section 11
of such Act do not apply.



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- 18 -




Report of Independent Accountants

To the Board of Directors and Shareholders
of Phelps Dodge Corporation

We have reviewed the accompanying consolidated balance sheet of Phelps Dodge
Corporation and its subsidiaries as of September 30, 2002 and the related
statement of consolidated operations for each of the three-month and nine-month
periods ended September 30, 2002 and 2001, the consolidated statement of cash
flows for the nine-month periods ended September 30, 2002 and 2001 and the
consolidated statement of shareholders equity for the nine-month period ended
September 30, 2002. This financial information is the responsibility of the
Corporations management.

We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with auditing standards generally accepted in the United States
of America, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express such
an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated interim financial information for it
to be in conformity with accounting principles generally accepted in the United
States of America.

We previously audited in accordance with auditing standards generally accepted
in the United States of America, the consolidated balance sheet as of December
31, 2001, and the related consolidated statements of operations, of cash flows
and of shareholders equity for the year then ended (not presented herein), and
in our report dated January 28, 2002 we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the information set
forth in the accompanying consolidated balance sheet as of December 31, 2001,
is fairly stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.



/s/ PricewaterhouseCoopers LLP
Phoenix, Arizona
October 25, 2002



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##### Table of Contents



- 19 -




Item 2. Managements Discussion and Analysis

The United States securities laws provide a safe harbor for certain
forward-looking statements. This quarterly report contains forward-looking
statements that express expectations of future events or results. All
statements based on future expectations rather than historical facts are
forward-looking statements that involve a number of risks and uncertainties,
and Phelps Dodge Corporation (the Company, which may be referred to as Phelps
Dodge, PD, we, us or ours) cannot give assurance that such statements will
prove to be correct. Please refer to Managements Discussion and
Analysis in
the Companys report on Form 10-K for the year ended December 31, 2001, for a
further discussion of our operations, including our critical accounting
policies. Additionally, please refer to Note 3 to our unaudited September 30,
2002, consolidated financial information for a discussion on the adoption of
SFAS No. 142.




RESULTS OF OPERATIONS

Consolidated Financial Results

(Unaudited; $ in millions except per share amounts)

|                                                                   |  |               |       |      |  |  |        |  
|------------------------------------------------------------------ |  | ------------- | ----- | ---- |  |  | ------ | -
|                                                                   |  | Third Quarter
|                                                                   |  |              
|                                                                   |  | 2002          |       | 2001
|                                                                   |  |               |       |     
|Sales and other operating revenues                                 |  | $             | 941.2 |      |  |  | 937.0  |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Operating loss                                                     |  | $             | (18.9 | )    |  |  | (52.9  | )
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Loss before extraordinary item                                     |  | $             | (29.3 | )    |  |  | (100.4 | )
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Extraordinary item                                                 |  |               | (26.6 | )    |  |  |       |  
|                                                                   |  |               |       |      |  |  |        |  
|Net loss                                                           |  | $             | (55.9 | )    |  |  | (100.4 | )
|                                                                   |  |               |       |      |  |  |        |  
|Loss before extraordinary item per
common share, basic and diluted |  | $             | (0.37 | )    |  |  | (1.28  | )
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Extraordinary item                                                 |  |               | (0.30 | )    |  |  |       |  
|                                                                   |  |               |       |      |  |  |        |  
|Net loss per common
share, basic and diluted                       |  | $             | (0.67 | )    |  |  | (1.28  | )
|                                                                   |  |               |       |      |  |  |        |  

The Company had a consolidated loss in the 2002 third quarter of $55.9
million, or 67 cents per common share, including a special, net loss of $24.0
million, or 27 cents per common share, after taxes. In the 2001 third quarter,
the consolidated loss was $100.4 million, or $1.28 per share, including a
special gain of $0.2 million, after taxes.

The $44.5 million decrease in consolidated loss in the 2002 third quarter
compared with the corresponding 2001 period primarily was due to a lower
implied unit cost of copper production, as defined on page 25, (approximately
$43 million including higher molybdenum earnings of approximately $16 million),
slightly higher copper prices (approximately $11 million), lower interest
expense ($17.3 million), higher tax benefits resulting primarily from new tax
legislation ($22.7 million), partially offset by an extraordinary loss on the
early extinguishment of debt ($26.6 million), and a decrease in profits at our
wire and cable segment due primarily to temporary closure of two facilities and
restructuring charges ($23.0 million).

(Unaudited; $ in millions except per share amounts)

|                                                                                                             |  |   |                   |   |      |  |         |   | 
|------------------------------------------------------------------------------------------------------------ |  | - | ----------------- | - | ---- |  | ------- | - | 
|                                                                                                             |  |   | Nine Months Ended
|                                                                                                             |  |   | September 30,    
|                                                                                                             |  |   |                  
|                                                                                                             |  |   | 2002              |   | 2001
|                                                                                                             |  |   |                   |   |     
|Sales and other operating revenues                                                                           |  | $ | 2,826.5           |   |      |  | 3,101.2 |  
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Operating loss                                                                                               |  | $ | (27.7             | ) |      |  | (35.7   | )
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Loss before extraordinary item
and cumulative effect of
accounting change                                    |  | $ | (70.5             | ) |      |  | (194.7  | )
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Extraordinary item                                                                                           |  |   | (26.6             | ) |      |  |        |  
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Cumulative effect of
accounting change                                                                       |  |   | (22.9             | ) |      |  | (2.0    | )
|                                                                                                             |  |   |                   |   |      |  |         |  
|Net loss                                                                                                     |  | $ | (120.0            | ) |      |  | (196.7  | )
|                                                                                                             |  |   |                   |   |      |  |         |  
|Basic and diluted loss before
extraordinary item and cumulative
effect of accounting change per
common share |  | $ | (0.92             | ) |      |  | (2.48   | )
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Extraordinary item                                                                                           |  |   | (0.32             | ) |      |  |        |  
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Cumulative effect of
accounting change                                                                       |  |   | (0.28             | ) |      |  | (0.03   | )
|                                                                                                             |  |   |                   |   |      |  |         |  
|Basic and diluted net loss per
common share                                                                  |  | $ | (1.52             | ) |      |  | (2.51   | )
|                                                                                                             |  |   |                   |   |      |  |         |  

The Company had a consolidated loss for the nine months ended September
30, 2002, of $120.0 million, or $1.52 per common share, including a special,
net loss of $20.5 million, or 25 cents per share, after taxes. By comparison,
the loss for the nine months ended September 30, 2001, was $196.7 million, or
$2.51 per common share, including special, net gains of $21.6 million, or 27
cents per common share.

The $76.7 million decrease in consolidated loss for the nine months ended
September 30, 2002, compared with the corresponding 2001 period, was primarily
the result of a lower implied unit cost of copper production (approximately
$138 million including higher molybdenum earnings of approximately $17
million), lower interest expense ($24.2 million), higher tax benefit ($107.3
million), and the sale of non-core real estate ($22.6 million), partially
offset by historic Cyprus Amax lawsuit settlement or awards expense ($57.7
million), lower copper prices (approximately $50 million), extraordinary loss
on the early extinguishment of debt ($26.6 million), cumulative effect of



---



##### Table of Contents



- 20 -

adopting SFAS No. 142 ($22.9 million), a decrease in profits at our wire
and cable segment due primarily to the temporary closure of two facilities and
restructuring charges ($23.0 million) and lower net environmental insurance
recoveries/provisions ($29.2 million).

Special Items

Throughout Managements Discussion and Analysis there is disclosure and
discussion of what management believes to be special items. We view special
items as unpredictable and atypical of our operations in the period. We
believe consistent identification, disclosure and discussion of such items,
both favorable and unfavorable, provide additional information to assess the
quality of our performance and our earnings or losses. This supplemental
information is not a substitute for any U.S. generally accepted accounting
principles (GAAP) measure and should be evaluated within the context of our
U.S. GAAP results. Any supplemental information references to earnings, losses
or results excluding special items or before special items is our non-GAAP
measure of items that may not be comparable to similarly titled measures
reported by other companies.

Note: Supplemental Data

(Unaudited; $ in millions)

|                                                        |  |               |       |      |  |  |        |  
|------------------------------------------------------- |  | ------------- | ----- | ---- |  |  | ------ | -
|                                                        |  | Third Quarter
|                                                        |  |              
|                                                        |  | 2002          |       | 2001
|                                                        |  |               |       |     
|Special items, net of taxes                             |  | $             | (24.0 | )    |  |  | 0.2    |  
|                                                       
|                                                       
|                                                       
|                                                       
|Earnings (losses) excluding
special items (after taxes) |  | $             | (31.9 | )    |  |  | (100.6 | )

|                                                        |  |                   |       |      |  |  |        |  
|------------------------------------------------------- |  | ----------------- | ----- | ---- |  |  | ------ | -
|                                                        |  | Nine Months Ended
|                                                        |  | September 30,    
|                                                        |  |                  
|                                                        |  | 2002              |       | 2001
|                                                        |  |                   |       |     
|Special items, net of taxes                             |  | $                 | (20.5 | )    |  |  | 21.6   |  
|                                                       
|                                                       
|                                                       
|                                                       
|Earnings (losses) excluding
special items (after taxes) |  | $                 | (99.5 | )    |  |  | (218.3 | )



---



##### Table of Contents



- 21 -

Note: Supplemental Data

The following schedules summarize the special items and provisions for the
third quarters and nine months ended September 30, 2002 and 2001:

(Unaudited; gains (losses) in millions except per share amounts)

|                                                  |                                        |                                         |       |                    |      |                    |       |           |      |          |       |           |       |           |     |     |     |  |     |     |     |  |   |   |   | 
|------------------------------------------------- | -------------------------------------- | --------------------------------------- | ----- | ------------------ | ---- | ------------------ | ----- | --------- | ---- | -------- | ----- | --------- | ----- | --------- | --- | --- | --- |  | --- | --- | --- |  | - | - | - | 
|                                                  |                                        |                                         |       | 2002 Third Quarter |      | 2001 Third Quarter
|                                                  |                                        |                                         |       |                    |      |                   
|                                                  |                                        |                                         |       | Pre-tax            |      | After-tax          |       | $/share   |      | Pre-tax  |       | After-tax |       | $/share  
|                                                  |                                        |                                         |       | Earnings           |      | Earnings           |       | After-tax |      | Earnings |       | Earnings  |       | After-tax
|                                                  |                                        |                                         |       |                    |      |                    |       |           |      |          |       |           |       |          
|Special items and provisions, net:                |                                        |                                         |       |                    |      |                    |       |           |      |          |       |           |       |           |     |     |     |  |     |     |     |  |   |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | PDMC (see Business Segment disclosure) |                                         | $     | (8.1               | )    |                    |       | (7.0      | )    |          |       | (0.08     | )     |           |     |    |     |  |     |    |     |  |   |  |  
|                                                  |                                        |                                         |       |                    |      |                    |       |           |      |          |       |           |       |           |     |     |     |  |     |     |     |  |   |   |  
|                                                  | PDI (see Business Segment disclosure)  |                                         |       | (21.4              | )    |                    |       | (20.6     | )    |          |       | (0.23     | )     |           |     |    |     |  |     |    |     |  |   |  |  
|                                                  |                                        |                                         |       |                    |      |                    |       |           |      |          |       |           |       |           |     |     |     |  |     |     |     |  |   |   |  
|                                                  | Corporate and other -                  |                                         |       |                    |      |                    |       |           |      |          |       |           |       |           |     |     |     |  |     |     |     |  |   |   |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                        | Environmental provisions, net           |       |                    | (0.5 | )                  |       |           | (2.9 | )        |       |           | (0.03 | )         |     |     |    |  |     |     |    |  |   |   |  | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                        | Environmental insurance recoveries, net |       |                    | 6.8  |                    |       |           | 6.1  |          |       |           | 0.07  |           |     |     | 0.2 |  |     |     | 0.2 |  |   |   |  | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                        | Historic Cyprus Amax lawsuit settlement |       |                    |     |                    |       |           | (0.6 | )        |       |           | (0.01 | )         |     |     |    |  |     |     |    |  |   |   |  | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                        | Historic Cyprus Amax arbitration award  |       |                    |     |                    |       |           | (0.5 | )        |       |           | (0.01 | )         |     |     |    |  |     |     |    |  |   |   |  | 
|                                                  |                                        |                                         |       |                    |      |                    |       |           |      |          |       |           |       |           |     |     |     |  |     |     |     |  |   |   |  
|                                                  |                                        |                                         | 6.3   |                    |      |                    | 2.1   |           |      |          | 0.02  |           |       |           | 0.2 |     |     |  | 0.2 |     |     |  |  |  
|                                                  |                                        |                                         |       |                    |      |                    |       |           |      |          |       |           |       |           |     |     |     |  |     |     |     |  |   |   |  
|                                                  |                                        |                                         | (23.2 | )                  |      |                    | (25.5 | )         |      |          | (0.29 | )         |       |           | 0.2 |     |     |  | 0.2 |     |     |  |  |  
|                                                  |                                        |                                         |       |                    |      |                    |       |           |      |          |       |           |       |           |     |     |     |  |     |     |     |  |   |   |  
|Tax benefit for 2001 net operating loss carryback |                                        |                                         |      |                    |      |                    | 28.1  |           |      |          | 0.32  |           |       |           |    |     |     |  |    |     |     |  |  |  
|                                                  |                                        |                                         |       |                    |      |                    |       |           |      |          |       |           |       |           |     |     |     |  |     |     |     |  |   |   |  
|Extraordinary loss  debt extinguishment          |                                        |                                         | (31.3 | )                  |      |                    | (26.6 | )         |      |          | (0.30 | )         |       |           |    |     |     |  |    |     |     |  |  |  
|                                                  |                                        |                                         |       |                    |      |                    |       |           |      |          |       |           |       |           |     |     |     |  |     |     |     |  |   |   |  
|                                                  | Total                                  |                                         | $     | (54.5              | )    |                    |       | (24.0     | )    |          |       | (0.27     | )     |           |     | 0.2 |     |  |     | 0.2 |     |  |   |  |  
|                                                  |                                        |                                         |       |                    |      |                    |       |           |      |          |       |           |       |           |     |     |     |  |     |     |     |  |   |   |  

(Unaudited; gains (losses) in millions except per share amounts)

|                                         |                                                         |                                         |       |                    |       |                    |       |           |       |          |       |           |       |           |      |       |      |   |      |       |      |   |       |       |       |  
|---------------------------------------- | ------------------------------------------------------- | --------------------------------------- | ----- | ------------------ | ----- | ------------------ | ----- | --------- | ----- | -------- | ----- | --------- | ----- | --------- | ---- | ----- | ---- | - | ---- | ----- | ---- | - | ----- | ----- | ----- | -
|                                         |                                                         |                                         |       | Nine Months Ended  |       | Nine Months Ended 
|                                         |                                                         |                                         |       | September 30, 2002 |       | September 30, 2001
|                                         |                                                         |                                         |       |                    |       |                   
|                                         |                                                         |                                         |       | Pre-tax            |       | After-tax          |       | $/share   |       | Pre-tax  |       | After-tax |       | $/share  
|                                         |                                                         |                                         |       | Earnings           |       | Earnings           |       | After-tax |       | Earnings |       | Earnings  |       | After-tax
|                                         |                                                         |                                         |       |                    |       |                    |       |           |       |          |       |           |       |          
|Special items and provisions, net:       |                                                         |                                         |       |                    |       |                    |       |           |       |          |       |           |       |           |      |       |      |   |      |       |      |   |       |      
|                                        
|                                        
|                                        
|                                        
|                                         | PDMC (see Business Segment disclosure)                  |                                         | $     | 26.6               |       |                    |       | 25.3      |       |          |       | 0.30      |       |           |      | (10.0 | )    |   |      | (10.0 | )    |   |       | (0.13 | )    
|                                         |                                                         |                                         |       |                    |       |                    |       |           |       |          |       |           |       |           |      |       |      |   |      |       |      |   |       |       |      
|                                         | PDI (see Business Segment disclosure)                   |                                         |       | (21.4              | )     |                    |       | (20.6     | )     |          |       | (0.25     | )     |           |      | (3.3  | )    |   |      | (3.3  | )    |   |       | (0.04 | )    
|                                         |                                                         |                                         |       |                    |       |                    |       |           |       |          |       |           |       |           |      |       |      |   |      |       |      |   |       |       |      
|                                         | Corporate and other -                                   |                                         |       |                    |       |                    |       |           |       |          |       |           |       |           |      |       |      |   |      |       |      |   |       |       |      
|                                        
|                                        
|                                        
|                                        
|                                         |                                                         | Environmental provisions, net           |       |                    | (12.6 | )                  |       |           | (12.6 | )        |       |           | (0.15 | )         |      |       |     |   |      |       |     |   |       |       |      |  
|                                        
|                                        
|                                        
|                                        
|                                         |                                                         | Environmental insurance recoveries, net |       |                    | 15.4  |                    |       |           | 13.0  |          |       |           | 0.16  |           |      |       | 38.3 |   |      |       | 38.3 |   |       |       | 0.49  |  
|                                        
|                                        
|                                        
|                                        
|                                         |                                                         | Historic Cyprus Amax lawsuit settlement |       |                    | (11.2 | )                  |       |           | (9.5  | )        |       |           | (0.12 | )         |      |       |     |   |      |       |     |   |       |       |      |  
|                                        
|                                        
|                                        
|                                        
|                                         |                                                         | Historic Cyprus Amax arbitration award  |       |                    | (46.5 | )                  |       |           | (45.0 | )        |       |           | (0.54 | )         |      |       |     |   |      |       |     |   |       |       |      |  
|                                        
|                                        
|                                        
|                                        
|                                         |                                                         | Restructuring programs                  |       |                    |      |                    |       |           |      |          |       |           |      |           |      |       | (1.3 | ) |      |       | (1.3 | ) |       |       | (0.01 | )
|                                        
|                                        
|                                        
|                                        
|                                         |                                                         | Other                                   |       |                    |      |                    |       |           |      |          |       |           |      |           |      |       | (5.9 | ) |      |       | (5.9 | ) |       |       | (0.08 | )
|                                         |                                                         |                                         |       |                    |       |                    |       |           |       |          |       |           |       |           |      |       |      |   |      |       |      |   |       |       |      
|                                         |                                                         |                                         | (54.9 | )                  |       |                    | (54.1 | )         |       |          | (0.65 | )         |       |           | 31.1 |       |      |   | 31.1 |       |      |   | 0.40  |      
|                                         |                                                         |                                         |       |                    |       |                    |       |           |       |          |       |           |       |           |      |       |      |   |      |       |      |   |       |       |      
|                                         |                                                         |                                         | (49.7 | )                  |       |                    | (49.4 | )         |       |          | (0.60 | )         |       |           | 17.8 |       |      |   | 17.8 |       |      |   | 0.23  |      
|                                         |                                                         |                                         |       |                    |       |                    |       |           |       |          |       |           |       |           |      |       |      |   |      |       |      |   |       |       |      
|                                         | Miscellaneous income and expense, net:                  |                                         |       |                    |       |                    |       |           |       |          |       |           |       |           |      |       |      |   |      |       |      |   |       |       |      
|                                        
|                                        
|                                        
|                                        
|                                         |                                                         | Cost investment write-downs             |       |                    | (1.2  | )                  |       |           | (1.2  | )        |       |           | (0.01 | )         |      |       |     |   |      |       |     |   |       |       |      |  
|                                        
|                                        
|                                        
|                                        
|                                         |                                                         | Interest on prior years tax refunds    |       |                    |      |                    |       |           |      |          |       |           |      |           |      |       | 4.3  |   |      |       | 4.3  |   |       |       | 0.05  |  
|                                        
|                                        
|                                        
|                                        
|                                         |                                                         | Other                                   |       |                    |      |                    |       |           |      |          |       |           |      |           |      |       | 1.5  |   |      |       | 1.5  |   |       |       | 0.02  |  
|                                         |                                                         |                                         |       |                    |       |                    |       |           |       |          |       |           |       |           |      |       |      |   |      |       |      |   |       |       |      
|                                         |                                                         |                                         | (1.2  | )                  |       |                    | (1.2  | )         |       |          | (0.01 | )         |       |           | 5.8  |       |      |   | 5.8  |       |      |   | 0.07  |      
|                                         |                                                         |                                         |       |                    |       |                    |       |           |       |          |       |           |       |           |      |       |      |   |      |       |      |   |       |       |      
|Taxes:                                   |                                                         |                                         |       |                    |       |                    |       |           |       |          |       |           |       |           |      |       |      |   |      |       |      |   |       |      
|                                        
|                                        
|                                        
|                                        
|                                         | Release of taxes provided with regard to Plateau Mining |                                         |       |                   |       |                    |       | 13.0      |       |          |       | 0.16      |       |           |      |      |      |   |      |      |      |   |       |      |      
|                                        
|                                        
|                                        
|                                        
|                                         | Tax benefit for 2001 net operating loss carryback       |                                         |       |                   |       |                    |       | 66.6      |       |          |       | 0.80      |       |           |      |      |      |   |      |      |      |   |       |      |      
|                                         |                                                         |                                         |       |                    |       |                    |       |           |       |          |       |           |       |           |      |       |      |   |      |       |      |   |       |       |      
|                                         |                                                         |                                         |      |                    |       |                    | 79.6  |           |       |          | 0.96  |           |       |           |     |       |      |   |     |       |      |   |      |      
|                                         |                                                         |                                         |       |                    |       |                    |       |           |       |          |       |           |       |           |      |       |      |   |      |       |      |   |       |       |      
|Extraordinary loss  debt extinguishment |                                                         |                                         | (31.3 | )                  |       |                    | (26.6 | )         |       |          | (0.32 | )         |       |           |     |       |      |   |     |       |      |   |      |      
|                                         |                                                         |                                         |       |                    |       |                    |       |           |       |          |       |           |       |           |      |       |      |   |      |       |      |   |       |       |      
|Cumulative effect of accounting change   |                                                         |                                         | (33.0 | )                  |       |                    | (22.9 | )         |       |          | (0.28 | )         |       |           | (2.0 | )     |      |   | (2.0 | )     |      |   | (0.03 | )    
|                                         |                                                         |                                         |       |                    |       |                    |       |           |       |          |       |           |       |           |      |       |      |   |      |       |      |   |       |       |      
|                                         | Total                                                   |                                         | $     | (115.2             | )     |                    |       | (20.5     | )     |          |       | (0.25     | )     |           |      | 21.6  |      |   |      | 21.6  |      |   |       | 0.27  |      
|                                         |                                                         |                                         |       |                    |       |                    |       |           |       |          |       |           |       |           |      |       |      |   |      |       |      |   |       |       |      



---



##### Table of Contents



- 22 -

Restructuring Programs

On September 10, 2002, we announced the temporary closure of two U.S. wire
and cable plants and other actions to improve efficiencies and consolidate
certain wire and cable operations. These temporary closures and internal
changes are expected to reduce our costs and align our business with current
market conditions. The actions include: (i) the temporary closure of the
Laurinburg, N.C., magnet wire plant at the end of 2002, with production being
shifted to the El Paso, Texas, and Fort Wayne, Indiana, facilities; (ii) the
temporary closure of the West Caldwell, N.J., High Performance Conductors
facility pending recovery of markets served by this location, with production
of certain products relocated to our Inman, S.C., facility; (iii) operational
and production support at other High Performance Conductors facilities being
streamlined in order to reduce costs and increase operating efficiencies; and
(iv) the restructuring and consolidation of certain administrative functions.
These actions resulted in a special, pre-tax charge of $23.0 million ($22.2
million after-tax) in the 2002 third quarter of which $16.9 million (before and
after taxes) was recognized as asset impairments and $6.1 million ($5.3 million
after-tax) was recognized for severance-related expenses associated with the
restructuring and temporary closures. The amount of the asset impairment was
determined through an assessment of the fair market value, which was based on
independent appraisals, of the existing assets at the wire and cable plants.
We also did an impairment test on the goodwill at our wire and cable plants
based on projected cash flows and determined that an impairment loss was not
required. The restructuring plan includes the reduction of approximately 300
positions and charges associated with employee severance ($3.3 million, of
which $0.7 million was paid in the 2002 third quarter) and pension and other
postretirement obligations ($2.8 million).

In the fourth quarter of 2001, Phelps Dodge announced a series of actions
to address the then current economic environment, including changes in copper
operations that led us to temporarily curtail approximately 220,000 metric tons
of copper production annually (including our partners share), and the
reduction of approximately 1,600 positions mostly in January 2002. The Chino
and Miami mines were temporarily closed, the Bagdad and Sierrita mines are
operating at one-half capacity, the Chino smelter and the Miami refinery were
temporarily closed (approximately 1,500 positions), and Columbian Chemicals Company
temporarily closed its El Dorado, Arkansas, facility (approximately 100 positions). In the
second quarter of 2001, we announced a restructuring of our professional,
administrative and operational support functions, as well as various other
operational improvements, which led to a reduction of approximately 500
positions.

The following schedule presents a roll-forward from December 31, 2001, of
the liabilities incurred in connection with the 2001 restructuring programs,
which were reflected as current liabilities in our consolidated balance sheet:

(Unaudited; $ in millions)

|                    |                                   |   |          |     |       |  |           |      |         |  |       |      |   |  |     |     | 
|------------------- | --------------------------------- | - | -------- | --- | ----- |  | --------- | ---- | ------- |  | ----- | ---- | - |  | --- | --- | 
|                    |                                   |   |          |     |       |  | Reassess- |      |         |  |       |      |   |  |    
|                    |                                   |   | 12/31/01 |     | ments |  | Payments  |      | 9/30/02
|                    |                                   |   |          |     |       |  |           |      |        
|PDMC -              |                                   |   |          |     |       |  |           |      |         |  |       |      |   |  |     |    
|                   
|                   
|                   
|                   
|                    | Employee severance                |   | $        | 9.4 |       |  |           | (2.0 | )       |  |       | (5.9 | ) |  |     | 1.5 | 
|                   
|                   
|                   
|                   
|                    | Mothballing/take-or-pay
contracts |   |          | 8.3 |       |  |           | (2.4 | )       |  |       | (5.4 | ) |  |     | 0.5 | 
|                    |                                   |   |          |     |       |  |           |      |         |  |       |      |   |  |     |     | 
|                    |                                   |   | 17.7     |     |       |  | (4.4      | )    |         |  | (11.3 | )    |   |  | 2.0 |    
|                    |                                   |   |          |     |       |  |           |      |         |  |       |      |   |  |     |     | 
|PDI -               |                                   |   |          |     |       |  |           |      |         |  |       |      |   |  |     |    
|                   
|                   
|                   
|                   
|Specialty Chemicals |                                   |   |          |     |       |  |           |      |         |  |       |      |   |  |     |    
|                   
|                   
|                   
|                   
|                    | Disposal and
dismantling          |   |          | 0.5 |       |  |           | (0.4 | )       |  |       | (0.1 | ) |  |     |    | 
|                   
|                   
|                   
|                   
|                    | Employee severance                |   |          | 0.8 |       |  |           | (0.1 | )       |  |       | (0.6 | ) |  |     | 0.1 | 
|                    |                                   |   |          |     |       |  |           |      |         |  |       |      |   |  |     |     | 
|                    |                                   |   | 1.3      |     |       |  | (0.5      | )    |         |  | (0.7  | )    |   |  | 0.1 |    
|                    |                                   |   |          |     |       |  |           |      |         |  |       |      |   |  |     |     | 
|Total               |                                   | $ | 19.0     |     |       |  | (4.9      | )    |         |  | (12.0 | )    |   |  | 2.1 |    
|                    |                                   |   |          |     |       |  |           |      |         |  |       |      |   |  |     |     | 

Note: In the 2002 third quarter, reassessments were $(4.9) million, including
a reclass of $(0.1) million to long-term liabilities, and payments were $(2.6)
million.

PDMCs reassessment of $2.0 million of employee termination benefits was
made because subsequently, as the plan was being implemented, it was determined
that certain employees identified in the restructuring plan would be retained
to fill open positions or would not be eligible for supplemental unemployment
as originally anticipated. In addition, there was reassessment of $2.4 million
related to savings from renegotiated contracts or from reduced penalties on
demand contracts. In addition, a $6.4 million charge was recognized for
additional pension-related benefits, which are included in long-term
liabilities, for employees at our Chino, Miami, Sierrita and Bagdad operations
since these operations will remain curtailed beyond one year from their January
2002 curtailment.

PDIs specialty chemicals segment reassessment related to (i) a reclass of
$0.1 million to long-term pension benefits and (ii) $0.4 million for an
adjustment to disposal and dismantling charges for the El Dorado plant
facility.



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##### Table of Contents



- 23 -

In the second quarters of 2000 and 1999, we announced plans to reduce
operating costs and restructure operations at our mining and wire and cable
segments. Refer to the Companys Form 10-K for the year ended December 31,
2001, for additional discussion.

The following schedule presents a roll-forward from December 31, 2001, of
the liabilities incurred in connection with the June 2000 restructuring
program, which were reflected as current liabilities in our consolidated
balance sheet:

(Unaudited; $ in millions)

|             |                               |  |          |     |       |  |           |      |         |  |  |      |   |  |  |     | 
|------------ | ----------------------------- |  | -------- | --- | ----- |  | --------- | ---- | ------- |  |  | ---- | - |  |  | --- | 
|             |                               |  |          |     |       |  | Reassess- |      |         |  |  |      |   |  | 
|             |                               |  | 12/31/01 |     | ments |  | Payments  |      | 9/30/02
|             |                               |  |          |     |       |  |           |      |        
|PDI -        |                               |  |          |     |       |  |           |      |         |  |  |      |   |  |  |    
|            
|            
|            
|            
|Wire & Cable |                               |  |          |     |       |  |           |      |         |  |  |      |   |  |  |    
|            
|            
|            
|            
|             | Plant removal
and dismantling |  | $        | 1.9 |       |  |           | (1.3 | )       |  |  | (0.1 | ) |  |  | 0.5 | 
|             |                               |  |          |     |       |  |           |      |         |  |  |      |   |  |  |     | 

Note: In the 2002 third quarter, reassessments were $(0.7) million, including
currency translation adjustments of $(0.2) million, and payments were $(0.1)
million.

PDIs wire and cable segment reassessment related to (i) a $0.5 million
adjustment to plant dismantling charges related to the wire and cable plant
closures in Venezuela and (ii) a $0.8 million non-cash deduction related to the
devaluation of Venezuelan currency.

The following schedule presents a roll-forward from December 31, 2001, of
the liabilities incurred in connection with the June 1999 restructuring
program, which were reflected as current liabilities in our consolidated
balance sheet:

(Unaudited; $ in millions)

|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |     | 
|------------------- | --------------------------------- | - | -------- | --- | ----- |  | --------- | ---- | ------- |  | ---- | ---- | - |  | --- | --- | 
|                    |                                   |   |          |     |       |  | Reassess- |      |         |  |      |      |   |  |    
|                    |                                   |   | 12/31/01 |     | ments |  | Payments  |      | 9/30/02
|                    |                                   |   |          |     |       |  |           |      |        
|PDMC -              |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |    
|                   
|                   
|                   
|                   
|                    | Employee severance                |   | $        | 0.2 |       |  |           | (0.1 | )       |  |      | (0.1 | ) |  |     |    | 
|                   
|                   
|                   
|                   
|                    | Mothballing/take-or-pay
contracts |   |          | 1.4 |       |  |           |     |         |  |      | (0.7 | ) |  |     | 0.7 | 
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |     | 
|                    |                                   |   | 1.6      |     |       |  | (0.1      | )    |         |  | (0.8 | )    |   |  | 0.7 |    
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |     | 
|PDI -               |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |    
|                   
|                   
|                   
|                   
|Specialty Chemicals |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |    
|                   
|                   
|                   
|                   
|                    | Disposal and
dismantling          |   |          | 0.3 |       |  |           | (0.3 | )       |  |      |     |   |  |     |    | 
|                   
|                   
|                   
|                   
|                    | Environmental                     |   |          | 0.6 |       |  |           | (0.6 | )       |  |      |     |   |  |     |    | 
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |     | 
|                    |                                   |   | 0.9      |     |       |  | (0.9      | )    |         |  |     |      |   |  |    |    
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |     | 
|Wire & Cable        |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |    
|                   
|                   
|                   
|                   
|                    | Take-or-pay
contracts             |   |          | 1.1 |       |  |           | (0.1 | )       |  |      |     |   |  |     | 1.0 | 
|                   
|                   
|                   
|                   
|                    | Plant removal and
dismantling     |   |          | 0.2 |       |  |           | (0.2 | )       |  |      |     |   |  |     |    | 
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |     | 
|                    |                                   |   | 1.3      |     |       |  | (0.3      | )    |         |  |     |      |   |  | 1.0 |    
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |     | 
|                    |                                   |   | 2.2      |     |       |  | (1.2      | )    |         |  |     |      |   |  | 1.0 |    
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |     | 
|Total               |                                   | $ | 3.8      |     |       |  | (1.3      | )    |         |  | (0.8 | )    |   |  | 1.7 |    
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |     | 

Note: In the 2002 third quarter, reassessments were $(1.2) million, including
a reclass of $(0.1) million to long-term liabilities, and payments were $(0.2)
million.

PDMCs reassessment included a $0.1 million reclass to long-term
liabilities related to pension and other postretirement benefits.

PDIs specialty chemicals segment reassessment related to a Philippine
plant for (i) a $0.3 million adjustment to disposal and dismantling charges and
(ii) $0.6 million for environmental costs that were relieved as the property
was sold during the period.

PDIs wire and cable segment reassessment related to (i) a $0.1 million
adjustment related to a lease contract and (ii) a $0.2 million adjustment
related to dismantling charges at a Venezuelan plant.

Quest for ZeroOperational Improvement
Program

Phelps Dodge announced in
October 2001 that it was commencingQuest for
Zero, a comprehensive, lean-production program, designed to, among other
things, improve operating income by a targeted $250 million
annually. Quest
for Zeroencompasses both the October 2001 program and the $150 million cost
improvement program announced in May 2001. The



---



##### Table of Contents



- 24 -

Companys goal is to achieve these combined annual operating income
improvements of $400 million by the end of 2003 when compared with the results
that were then expected for 2001.

In order to achieve the full $400 million target, Phelps Dodge Mining
Company chartered five full-time business improvement teams to drive
performance improvement projects and best practices. The elimination of
variance and waste are key factors in this process, coupled with the rapid
transfer of best practices to all business units. On a quarterly basis, we
document improvement successes, failures and potential projects yet to be
implemented. New project ideas are generated at internal conferences where
statistical analysis tools are utilized on current performance data to identify
improvement opportunities. Improvement projects are prioritized and
implemented accordingly.

During the 2002
third quarter, we achieved $52 million (an annual run rate of
over $200 million) in improvements,
bringing total improvements since the program was announced to $204 million. These
improvements resulted from a combination of administrative and operating staff
reductions and mining operation refinements and improvements, including,
reduced mining rates at Tyrone, increased residual leach production at Morenci,
incremental expansion at Cerro Verde, improved mine planning and sequencing at
Sierrita, and a reduction in acid usage and improvements in leach recovery.
Key elements of the plan going forward include six-sigma quality programs,
technology innovations, global procurement savings and improved operating
practices.

Business Segments

Results for 2002 and 2001 can be meaningfully compared by separate
reference to our reporting divisions, Phelps Dodge Mining Company and Phelps
Dodge Industries. Phelps Dodge Mining Company is a business segment that
includes our worldwide copper operations from mining through rod production,
marketing and sales; molybdenum operations from mining through manufacturing,
marketing and sales; other mining operations and investments; and worldwide
mineral exploration and development programs. Phelps Dodge Industries includes
our specialty chemicals segment and our wire and cable segment.




RESULTS OF PHELPS DODGE MINING COMPANY

Phelps Dodge Mining Company (PDMC) is our international business segment
that comprises a group of companies involved in vertically integrated copper
operations including mining, concentrating, electrowinning, smelting, refining,
rod production, marketing and sales, and related activities. PDMC sells copper
to others primarily as rod, cathode or concentrate, and as rod to our wire and
cable segment. In addition, PDMC at times smelts and refines copper and
produces copper rod for customers on a toll basis. Toll arrangements require
the tolling customer to deliver appropriate copper bearing material to our
facilities, which we then process into a product that is returned to the
customer. The customer pays the Company for processing its material into the
specified products. PDMC is also an integrated producer of molybdenum, with
mining, roasting and processing facilities producing molybdenum-based
chemical and metallurgical products. In addition, it produces gold,
silver, molybdenum, copper sulfate, rhenium and copper chemicals as
by-products, and sulfuric acid from its air quality control facilities. This
business segment also includes worldwide mineral exploration and development
programs, and a process technology center that directs its activities at
improving existing processes and developing new cost-competitive technologies.



---



##### Table of Contents



- 25 -

(Unaudited; $ in millions except per pound amounts)

|                                                             |                                        |   |               |       |      |  |       |       | 
|------------------------------------------------------------ | -------------------------------------- | - | ------------- | ----- | ---- |  | ----- | ----- | 
|                                                             |                                        |   | Third Quarter
|                                                             |                                        |   |              
|                                                             |                                        |   | 2002          |       | 2001
|                                                             |                                        |   |               |       |     
|Sales and other operating revenues
to unaffiliated customers |                                        | $ | 629.3         |       |      |  | 614.7 |      
|                                                            
|                                                            
|                                                            
|                                                            
|Operating loss                                               |                                        | $ | (1.6          | )     |      |  | (52.7 | )    
|                                                            
|                                                            
|                                                            
|                                                            
|Copper production (thousand short tons):                     |                                        |   |               |       |      |  |       |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Total production                       |   |               | 312.8 |      |  |       | 328.3 | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Less minority participants shares (A) |   |               | 58.6  |      |  |       | 54.6  | 
|                                                             |                                        |   |               |       |      |  |       |      
|                                                             | Net Phelps Dodge share                 |   |               | 254.2 |      |  |       | 273.7 | 
|                                                             |                                        |   |               |       |      |  |       |      
|Copper sales (thousand short tons):                          |                                        |   |               |       |      |  |       |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Net Phelps Dodge share
from own mines  |   |               | 267.4 |      |  |       | 294.7 | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Purchased copper                       |   |               | 118.9 |      |  |       | 98.5  | 
|                                                             |                                        |   |               |       |      |  |       |      
|                                                             | Total copper sales                     |   |               | 386.3 |      |  |       | 393.2 | 
|                                                             |                                        |   |               |       |      |  |       |      
|LME average spot copper price
per pound  cathodes           |                                        | $ | 0.69          |       |      |  | 0.67  |      
|                                                            
|                                                            
|                                                            
|                                                            
|COMEX average spot copper price
per pound  cathodes         |                                        | $ | 0.69          |       |      |  | 0.68  |      
|                                                            
|                                                            
|                                                            
|                                                            
|Implied unit cost of
copper production                       |                                        | $ | 0.68          |       |      |  | 0.76  |      
|                                                            
|                                                            
|                                                            
|                                                            
|Implied cash unit cost of
copper production                  |                                        | $ | 0.51          |       |      |  | 0.61  |      
|                                                            
|                                                            
|                                                            
|                                                            
|Molybdenum production (million pounds)                       |                                        |   | 12.1          |       |      |  | 11.9  |      
|                                                            
|                                                            
|                                                            
|                                                            
|Molybdenum sales (million pounds):                           |                                        |   |               |       |      |  |       |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Net Phelps Dodge share
from own mines  |   |               | 10.8  |      |  |       | 12.6  | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Purchased molybdenum                   |   |               | 1.7   |      |  |       | 0.5   | 
|                                                             |                                        |   |               |       |      |  |       |      
|                                                             |                                        |   | 12.5          |       |      |  | 13.1  |      
|                                                             |                                        |   |               |       |      |  |       |      
|Metals Week:                                                 |                                        |   |               |       |      |  |       |      
|                                                            
|                                                            
|                                                            
|                                                            
|Molybdenum oxide price per pound                             |                                        | $ | 4.71          |       |      |  | 2.42  |      

(Unaudited; $ in millions except per pound amounts)

|                                                             |                                       |   |                   |         |      |  |         |         | 
|------------------------------------------------------------ | ------------------------------------- | - | ----------------- | ------- | ---- |  | ------- | ------- | 
|                                                             |                                       |   | Nine Months Ended
|                                                             |                                       |   | September 30,    
|                                                             |                                       |   |                  
|                                                             |                                       |   | 2002              |         | 2001
|                                                             |                                       |   |                   |         |     
|Sales and other operating revenues
to unaffiliated customers |                                       | $ | 1,885.5           |         |      |  | 2,054.1 |        
|                                                            
|                                                            
|                                                            
|                                                            
|Operating income (loss)                                      |                                       | $ | 52.0              |         |      |  | (79.1   | )      
|                                                            
|                                                            
|                                                            
|                                                            
|Copper production (thousand short tons):                     |                                       |   |                   |         |      |  |         |        
|                                                            
|                                                            
|                                                            
|                                                            
|Total production                                             |                                       |   | 951.3             |         |      |  | 1,045.4 |        
|                                                            
|                                                            
|                                                            
|                                                            
|Less minority
participants shares (A)                       |                                       |   | 185.3             |         |      |  | 183.7   |        
|                                                             |                                       |   |                   |         |      |  |         |        
|Net Phelps Dodge share                                       |                                       |   | 766.0             |         |      |  | 861.7   |        
|                                                             |                                       |   |                   |         |      |  |         |        
|Copper sales (thousand short tons):                          |                                       |   |                   |         |      |  |         |        
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Net Phelps Dodge share
from own mines |   |                   | 800.6   |      |  |         | 894.7   | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Purchased copper                      |   |                   | 364.5   |      |  |         | 308.8   | 
|                                                             |                                       |   |                   |         |      |  |         |        
|                                                             | Total copper sales                    |   |                   | 1,165.1 |      |  |         | 1,203.5 | 
|                                                             |                                       |   |                   |         |      |  |         |        
|LME average spot copper price
per pound  cathodes           |                                       | $ | 0.71              |         |      |  | 0.74    |        
|                                                            
|                                                            
|                                                            
|                                                            
|COMEX average spot copper price
per pound  cathodes         |                                       | $ | 0.72              |         |      |  | 0.75    |        
|                                                            
|                                                            
|                                                            
|                                                            
|Implied unit cost of
copper production                       |                                       | $ | 0.69              |         |      |  | 0.78    |        
|                                                            
|                                                            
|                                                            
|                                                            
|Implied cash unit cost of
copper production                  |                                       | $ | 0.53              |         |      |  | 0.63    |        
|                                                            
|                                                            
|                                                            
|                                                            
|Molybdenum production (million pounds)                       |                                       |   | 33.1              |         |      |  | 41.1    |        
|                                                            
|                                                            
|                                                            
|                                                            
|Molybdenum sales (million pounds):                           |                                       |   |                   |         |      |  |         |        
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Net Phelps Dodge share
from own mines |   |                   | 34.9    |      |  |         | 41.7    | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Purchased molybdenum                  |   |                   | 7.1     |      |  |         | 1.2     | 
|                                                             |                                       |   |                   |         |      |  |         |        
|                                                             |                                       |   | 42.0              |         |      |  | 42.9    |        
|                                                             |                                       |   |                   |         |      |  |         |        
|Metals Week:                                                 |                                       |   |                   |         |      |  |         |        
|                                                            
|                                                            
|                                                            
|                                                            
|Molybdenum oxide price per pound                             |                                       | $ | 3.94              |         |      |  | 2.37    |        



---

|(A) |  | Minority participant interests include (i) a 15 percent undivided
interest in Morenci, Arizona, copper mining complex held by Sumitomo Metal
Mining Arizona, Inc., (ii) a one-third partnership interest in Chino Mines
Company in New Mexico held by Heisei Minerals Corporation, (iii) a 20
percent partnership interest in Candelaria in Chile held by SMMA
Candelaria, Inc., a jointly owned indirect subsidiary of Sumitomo Metal
Mining Co., Ltd., and Sumitomo Corporation, and (iv) a 49 percent
partnership interest in the El Abra copper mining operation in Chile held
by Corporación Nacional del Cobre de Chile (CODELCO).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Note: Supplemental Data

Implied unit cost of copper production measures the all-in cost of
each pound of copper produced by PDMC. As the title indicates, this measure is
the cost implied by the market price of copper (i.e., London Metal Exchange
average spot) for a given period versus PDMCs operating income (loss) for the
same period.



---



##### Table of Contents



- 26 -

PDMC calculates its all-in operating margin per pound of copper sold by
dividing its operating income (loss) excluding special items by the total
pounds of copper sold from its own mines for its own account (as disclosed in
the table above). This results in an all-in operating margin (i.e., inclusive
of cost of products sold; depreciation, depletion and amortization; selling and
general administrative expense; and exploration and research expense for the
segments operations) that is compared to the market price of copper to render
an implied cost of copper production. Following is the calculation of implied
unit cost of copper production for the third quarters and nine-month periods
ended September 30, 2002 and 2001:

(Unaudited; $ in millions except per pound amounts)

|                                                   |                                                 |   |               |      |               |  |       |       |      |  |             |      |  |  |         |       |  
|-------------------------------------------------- | ----------------------------------------------- | - | ------------- | ---- | ------------- |  | ----- | ----- | ---- |  | ----------- | ---- |  |  | ------- | ----- | -
|                                                   |                                                 |   |               |      |               |  |       |       |      |  | Nine Months
|                                                   |                                                 |   |               |      |               |  |       |       |      |  | Ended      
|                                                   |                                                 |   | Third Quarter |      | September 30,
|                                                   |                                                 |   |               |      |              
|                                                   |                                                 |   | 2002          |      | 2001          |  | 2002  |       | 2001
|                                                   |                                                 |   |               |      |               |  |       |       |     
|PDMC implied unit cost of
copper production        |                                                 |   |               |      |               |  |       |       |      |  |             |      |  |  |         |      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Operating income (loss)                         |   | $             | (1.6 | )             |  |       | (52.7 | )    |  |             | 52.0 |  |  |         | (79.1 | )
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Special operating items                         |   |               | (8.1 | )             |  |       |      |      |  |             | 26.6 |  |  |         | (10.0 | )
|                                                   |                                                 |   |               |      |               |  |       |       |      |  |             |      |  |  |         |       |  
|                                                   | Operating income (loss)
excluding special items |   | $             | 6.5  |               |  |       | (52.7 | )    |  |             | 25.4 |  |  |         | (69.1 | )
|                                                   |                                                 |   |               |      |               |  |       |       |      |  |             |      |  |  |         |       |  
|Copper sales from own mines -
million pounds       |                                                 |   | 534.9         |      |               |  | 589.5 |       |      |  | 1,601.3     |      |  |  | 1,789.5 |      
|                                                  
|                                                  
|                                                  
|                                                  
|Operating margin  per
pound copper sold           |                                                 | $ | 0.01          |      |               |  | (0.09 | )     |      |  | 0.02        |      |  |  | (0.04   | )    
|                                                  
|                                                  
|                                                  
|                                                  
|LME average spot copper
price per pound  cathodes |                                                 | $ | 0.69          |      |               |  | 0.67  |       |      |  | 0.71        |      |  |  | 0.74    |      
|                                                  
|                                                  
|                                                  
|                                                  
|Implied unit cost of copper
production per pound   |                                                 | $ | 0.68          |      |               |  | 0.76  |       |      |  | 0.69        |      |  |  | 0.78    |      

Note: Our measure of implied unit cost of copper production may not be comparable to
similarly titled measures reported by other companies.

PDMC  Sales

PDMCs sales and other operating revenues to unaffiliated customers
increased by $14.6 million, or 2 percent, in the 2002 third quarter and
decreased by $168.6 million, or 8 percent, in the first nine months of 2002
compared with the corresponding 2001 periods. The decrease in the nine-month
period reflected lower copper prices (approximately $78 million) and lower
sales volumes (approximately $143 million), partially offset by higher
molybdenum prices (approximately $31 million).

PDMC  Operating Income (Loss)

PDMC reported an operating loss of $1.6 million in the 2002 third quarter
including a special, net pre-tax loss of $8.1 million, compared with an
operating loss of $52.7 million in the corresponding 2001 period. This
decrease in operating loss primarily reflected a lower implied unit cost of
copper production (approximately $43 million including higher molybdenum
earnings of approximately $16 million) and slightly higher copper prices
(approximately $11 million).

PDMC reported operating income of $52.0 million for the first nine months
of 2002 including a special, net pre-tax gain of $26.6 million, compared with
an operating loss of $79.1 million including a special, net pre-tax charge of
$10.0 million in the corresponding 2001 period. This increase primarily
reflected a lower implied unit cost of copper production (approximately $138
million including higher molybdenum earnings of approximately $17 million) and
the sale of non-core real estate ($22.6 million), partially offset by lower
copper prices (approximately $50 million).

The New York Commodity Exchange (COMEX) spot price per pound of copper
cathode, primarily upon which we base our U.S. sales, averaged 69 cents and 72
cents in the third quarter and first nine months of 2002, respectively,
compared with 68 cents and 75 cents in the corresponding 2001 periods. The
London Metal Exchange (LME) spot price per pound of copper cathode, primarily
upon which we base our international sales, averaged 69 cents and 71 cents in
the third quarter and first nine months of 2002, respectively, compared with 67
cents and 74 cents in the corresponding 2001 periods.

In the 2002 third quarter, the full and cash implied unit cost of copper
production decreased 8 and 10 cents per pound, respectively, compared with the
corresponding 2001 quarter. For the first nine months of 2002, the full and
cash implied unit costs of copper production decreased 9 cents and 10 cents per
pound, respectively, compared with the corresponding 2001 period. For the
third quarter (compared with the prior third quarter), approximately 5 cents of
the cost improvement was due in part to higher molybdenum prices, which impact
both our primary molybdenum production and cost credits at our by-product
mines, 1 cent was due to lower energy costs, and the remainder was primarily
due to operational improvements associated with the CompanysQuest for Zero
program, net of approximately 1 cent per pound of higher
care-and-maintenance costs.



---



##### Table of Contents



- 27 -

Energy, including electricity, diesel fuel and natural gas, represents a
significant portion of the production costs for our operations. During the
first quarter of 2001, our Arizona and New Mexico operations were affected
adversely by significantly higher costs for all three. In response, the
Company implemented a power cost stabilization plan in March 2001 that
consisted of an additional negotiated firm power contract; the construction of
a power co-generation plant in New Mexico; short-term, alternating production
curtailments at the Companys Tyrone, Sierrita, Bagdad and Henderson
operations; and a partial production curtailment at Chino. As a result, in the
third quarter and the first nine months of 2002, energy costs from copper
mining through smelting were approximately 12 cents per pound of copper, which
were lower than the corresponding 2001 periods by approximately 1 cent per
pound and 4 cents per pound, respectively.

Note: Supplemental Data

(Unaudited; $ in millions)

|                                                        |  |               |      |      |  |  |       |  
|------------------------------------------------------- |  | ------------- | ---- | ---- |  |  | ----- | -
|                                                        |  | Third Quarter
|                                                        |  |              
|                                                        |  | 2002          |      | 2001
|                                                        |  |               |      |     
|Special, pre-tax items                                  |  | $             | (8.1 | )    |  |  |      |  
|                                                       
|                                                       
|                                                       
|                                                       
|Segment operating income (loss)
excluding special items |  | $             | 6.5  |      |  |  | (52.7 | )

|                                                        |  |                   |      |      |  |  |       |  
|------------------------------------------------------- |  | ----------------- | ---- | ---- |  |  | ----- | -
|                                                        |  | Nine Months Ended
|                                                        |  | September 30,    
|                                                        |  |                  
|                                                        |  | 2002              |      | 2001
|                                                        |  |                   |      |     
|Special, pre-tax items                                  |  | $                 | 26.6 |      |  |  | (10.0 | )
|                                                       
|                                                       
|                                                       
|                                                       
|Segment operating income (loss)
excluding special items |  | $                 | 25.4 |      |  |  | (69.1 | )

Special items and provisions in operating income (loss) were as follows:

(Unaudited; $ in millions)

|                                        |                                                               |   |               |      |      |  |   |   | 
|--------------------------------------- | ------------------------------------------------------------- | - | ------------- | ---- | ---- |  | - | - | 
|                                        |                                                               |   | Third Quarter
|                                        |                                                               |   |              
|                                        |                                                               |   | 2002          |      | 2001
|                                        |                                                               |   |               |      |     
|Environmental provisions, net           |                                                               | $ | (2.5          | )    |      |  |  |  
|                                       
|                                       
|                                       
|                                       
|October 2001 restructuring:             |                                                               |   |               |      |      |  |   |  
|                                       
|                                       
|                                       
|                                       
|                                        | Reassessment of employee activities
and take-or-pay contracts |   |               | 4.4  |      |  |   |  | 
|                                       
|                                       
|                                       
|                                       
|                                        | Additional retirement benefits                                |   |               | (6.4 | )    |  |   |  | 
|                                       
|                                       
|                                       
|                                       
|Environmental insurance
recoveries, net |                                                               |   | (3.6          | )    |      |  |  |  
|                                        |                                                               |   |               |      |      |  |   |  
|Special, pre-tax items                  |                                                               | $ | (8.1          | )    |      |  |  |  
|                                        |                                                               |   |               |      |      |  |   |  

|                                        |                                                               |   |                   |      |      |  |       |   | 
|--------------------------------------- | ------------------------------------------------------------- | - | ----------------- | ---- | ---- |  | ----- | - | 
|                                        |                                                               |   | Nine Months Ended
|                                        |                                                               |   | September 30,    
|                                        |                                                               |   |                  
|                                        |                                                               |   | 2002              |      | 2001
|                                        |                                                               |   |                   |      |     
|Environmental provisions, net           |                                                               | $ | (2.5              | )    |      |  |      |  
|                                       
|                                       
|                                       
|                                       
|April 2001 operational
improvement plan |                                                               |   |                  |      |      |  | (10.0 | )
|                                       
|                                       
|                                       
|                                       
|October 2001 restructuring:             |                                                               |   |                   |      |      |  |       |  
|                                       
|                                       
|                                       
|                                       
|                                        | Reassessment of employee activities
and take-or-pay contracts |   |                   | 4.4  |      |  |       |  | 
|                                       
|                                       
|                                       
|                                       
|                                        | Additional retirement benefits                                |   |                   | (6.4 | )    |  |       |  | 
|                                       
|                                       
|                                       
|                                       
|Environmental insurance
recoveries, net |                                                               |   | 8.5               |      |      |  |      |  
|                                       
|                                       
|                                       
|                                       
|Sale of non-core real estate            |                                                               |   | 22.6              |      |      |  |      |  
|                                        |                                                               |   |                   |      |      |  |       |  
|Special, pre-tax items                  |                                                               | $ | 26.6              |      |      |  | (10.0 | )
|                                        |                                                               |   |                   |      |      |  |       |  

PDMC  Other Matters

In the 2001 fourth quarter, Phelps Dodge announced a series of actions to
address the then current economic environment, including changes in copper
operations that led to curtailment of approximately 220,000 metric tons of
copper production annually (including our partners share), 14 million pounds
of by-product molybdenum annually, and the reduction of approximately 1,500
positions mostly in January 2002. These operations remain temporarily
curtailed as a result of the continued adverse economic environment. We
believe our curtailment plan allows us the maximum flexibility to quickly
re-start operations when copper market fundamentals experience a sustained
improvement. The decision to recommence operations at these sites will depend
on several factors including then prevailing copper prices, managements
assessment of copper market fundamentals and its estimates of future copper
price trends and the extent to which any such new production is necessary for
the efficient integration of the Companys other copper-producing operations at
that time. Managements assessment of copper market fundamentals will reflect
its judgment about future global economic activity and demand, and



---



##### Table of Contents



- 28 -

its estimates of the likelihood and timing of curtailed or new projects of
competitors being brought back to production. While there is no single copper
price threshold that would necessarily trigger the recommencement of operations
at any of these sites, management does not expect to recommence operations
until there has been a significant improvement in copper market fundamentals or
a production integration inefficiency that could be alleviated by such
recommencement.

Any material change in the price we receive for copper, or in our unit
production costs, has a significant effect on our results. Our share of
current annual production, after our late 2001 announced curtailments, is
approximately 2 billion pounds of copper. Accordingly, each 1 cent per pound
change in our average annual realized copper price, or in our average unit
production costs, causes a variation in annual operating income before taxes of
approximately $20 million.

Our share of current molybdenum annual production, after our late 2001
announced curtailments, is approximately 44 million pounds. Approximately 75
percent of our molybdenum contracts are priced based on the average of the
previous 30 days of published prices (i.e., Platts Metals Week, Ryans Notes,
or Metal Bulletin) for molybdenum oxide, plus premiums. Accordingly, each
$1.00 per pound change in our average annual realized molybdenum price, causes
a variation in annual operating income before taxes of approximately $33
million (subject to any negotiated limitations in outstanding customer
agreements).

From time to time, we may purchase or sell copper price protection
contracts for a portion of our expected future mine production. We do this to
limit the effects of potential decreases in copper selling prices. We did not
have any outstanding copper price protection contracts on September 30, 2002.

PDMC  New Mexico Reclamation

Our mining operations are subject to laws and regulations establishing new
requirements for mined land reclamation and financial assurance. New Mexico
passed a mined land reclamation law in 1993 authorizing regulations that were
adopted in 1994. The permitting process for New Mexico mining operations
commenced in December 1994. Two New Mexico State agencies, the New Mexico
Environment Department (NMED) and the New Mexico Mining and Minerals Division
(MMD) are charged with approving the applications for facility closure and
reclamation.

In August 2001, the initial public hearing was held before an NMED Hearing
Officer on Chinos plan to protect water quality. A second public hearing was
held in February 2002 on the Chino plan to discuss a draft permit proposed
jointly by Chino and NMED. The Company is awaiting the NMED Hearing Officers
decision. The cost estimate to carry out this plan, including water treatment
for 100 years, if needed, is $386 million in current dollars. This figure
compares to Chinos initial proposal of approximately $100 million. For
purposes of calculating the required amount of financial assurance, the present
value of the plan when adjusted to reflect the appropriate escalation and
discount rates, is approximately $180 million to $200 million. The plan also
calls for studies over the next four to five years to refine the plan.

A public hearing on the Tyrone plan was held in May 2002 before the NMED
Hearing Officer. NMED proposed a plan with a cost estimate of $440 million in
current dollars with a financial assurance estimate based on an adjusted
present value of $265 million. The Company presented a revised plan with a
cost estimate of $331 million in current dollars and an estimated present value
of the estimated costs of $179 million. A hearing officers decision on the
Tyrone permit is anticipated later this year. The Company has been advised
that the State intends to issue a draft permit for a Cobre closure plan. The
Company expects the cost estimate for the Cobre plan to be approximately $40
million in current dollars.

On September 13, 2002, the New Mexico Mining Commission denied a proposal
for a five-year extension of the October 1, 2002, deadline for approval of
closeout plans under the New Mexico Mining Act Rules. The five-year extension
was recommended by MMD based upon an agreement reached between MMD and the
Company for interim financial assurance and a plan to evaluate and supplement
scientific studies supporting the plans submitted by Chino, Tyrone and Cobre.
As a result of the Mining Commissions decision, the October 1, 2002, deadline
remained in place. As noted above, the NMED Hearing Officer has not yet issued
decisions on the NMED permits for the Chino and Tyrone proposed closure plans,
and NMED has not yet issued a closure permit for the Cobre operation. Because
action by NMED is a prerequisite to closeout plan approval by MMD, the Chino,
Tyrone and Cobre operations were unable to obtain approval of their closeout
plans by the October 1 deadline.

On October 21, 2002, the operations received notices of violation from MMD
requiring the operations to have closeout plans in place by April 30, 2003
(Chino), September 30, 2003 (Tyrone) and June 30, 2003 (Cobre). Currently, the
three operations are responding to requests from MMD for additional infor-



---



##### Table of Contents



- 29 -

mation. Because the deadline was not met, the three operations may also
be subject to further administrative action, including civil penalties.

On November 1, 2002, each of the operations filed a Petition for Review
and Request for Expedited Hearing with the New Mexico Mining Commission
requesting the notices of violation be rescinded or, alternatively, the
Commission determine that civil penalties are not warranted and the abatement
schedule should be modified. A date for the hearing has not yet been
established.

The Company is continuing to negotiate with the State regarding the amount
of interim financial assurance required to cover the cost estimates for the
three operations. A portion of the plans will require the issuance of a waiver
of certain standards as authorized by the New Mexico Mining Act for mines that
existed when the law was enacted. The final cost estimates also are subject to
the results of the hearings and any subsequent judicial appeals. Actual
reclamation costs may differ significantly from the cost estimate based on a
variety of factors including possible changes in legal standards over time and
potential cost savings from use of the Companys own personnel and equipment at
each site versus third-party contractor costs (under New Mexico law, financial
assurance requirements are calculated based on estimated third-party costs),
advances in technology and reclamation techniques, and opportunities to prepare
each site for more efficient reclamation through careful development of the
site over time.




RESULTS OF PHELPS DODGE INDUSTRIES

Phelps Dodge Industries (PDI), our manufacturing division, produces
engineered products principally for the global energy, telecommunications,
transportation and specialty chemicals sectors. Its operations are
characterized by products with significant market share, internationally
competitive cost and quality, and specialized engineering capabilities. The
manufacturing division includes our specialty chemicals segment and our wire
and cable segment. Our specialty chemicals segment includes Columbian
Chemicals Company and its subsidiaries (Columbian Chemicals or Columbian). Our
wire and cable segment consists of three worldwide product line businesses
including magnet wire, energy and telecommunications cables, and specialty
conductors.

(Unaudited; $ in millions)

|                                                             |                     |   |               |       |      |  |       |       | 
|------------------------------------------------------------ | ------------------- | - | ------------- | ----- | ---- |  | ----- | ----- | 
|                                                             |                     |   | Third Quarter
|                                                             |                     |   |              
|                                                             |                     |   | 2002          |       | 2001
|                                                             |                     |   |               |       |     
|Sales and other operating revenues -
unaffiliated customers: |                     |   |               |       |      |  |       |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Specialty chemicals |   | $             | 138.5 |      |  |       | 138.2 | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Wire and cable      |   |               | 173.4 |      |  |       | 184.1 | 
|                                                             |                     |   |               |       |      |  |       |       | 
|                                                             |                     | $ | 311.9         |       |      |  | 322.3 |      
|                                                             |                     |   |               |       |      |  |       |       | 
|Operating
income (loss):                                     |                     |   |               |       |      |  |       |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Specialty chemicals |   | $             | 12.1  |      |  |       | 10.7  | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Wire and cable      |   |               | (19.1 | )    |  |       | 2.9   | 
|                                                             |                     |   |               |       |      |  |       |       | 
|                                                             |                     | $ | (7.0          | )     |      |  | 13.6  |      
|                                                             |                     |   |               |       |      |  |       |       | 

|                                                             |                     |   |                   |       |      |  |         |       | 
|------------------------------------------------------------ | ------------------- | - | ----------------- | ----- | ---- |  | ------- | ----- | 
|                                                             |                     |   | Nine Months Ended
|                                                             |                     |   | September 30,    
|                                                             |                     |   |                  
|                                                             |                     |   | 2002              |       | 2001
|                                                             |                     |   |                   |       |     
|Sales and other operating revenues -
unaffiliated customers: |                     |   |                   |       |      |  |         |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Specialty chemicals |   | $                 | 408.3 |      |  |         | 447.7 | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Wire and cable      |   |                   | 532.7 |      |  |         | 599.4 | 
|                                                             |                     |   |                   |       |      |  |         |       | 
|                                                             |                     | $ | 941.0             |       |      |  | 1,047.1 |      
|                                                             |                     |   |                   |       |      |  |         |       | 
|Operating
income (loss):                                     |                     |   |                   |       |      |  |         |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Specialty chemicals |   | $                 | 42.3  |      |  |         | 49.1  | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Wire and cable      |   |                   | (13.0 | )    |  |         | 13.8  | 
|                                                             |                     |   |                   |       |      |  |         |       | 
|                                                             |                     | $ | 29.3              |       |      |  | 62.9    |      
|                                                             |                     |   |                   |       |      |  |         |       | 

PDI  Sales

PDI reported sales to unaffiliated customers of $311.9 million and $941.0
million in the 2002 third quarter and the nine months ended September 30, 2002,
respectively, compared with sales of $322.3 million and $1,047.1 million in the
corresponding 2001 periods.



---



##### Table of Contents



- 30 -

The decrease of $10.4 million in the 2002 third quarter was primarily due
to a reduction in wire and cable sales in North America resulting from lower
sales volumes (approximately $9 million). The decrease of $106.1 million for the first nine
months of 2002 was due to (i) lower specialty chemicals sales resulting
primarily from lower average unit selling prices worldwide (approximately $13
million) and lower sales volumes (approximately $26 million) and (ii) lower
wire and cable sales resulting primarily from lower sales volumes due to
continued economic weakness in the United States (approximately $58 million), reduced sales
in Central and South America due to lower demand (approximately $22 million),
partially offset by higher sales volumes in Thailand (approximately $14
million).

PDI  Operating Income (Loss)

PDI reported an operating loss of $7.0 million in the 2002 third quarter,
including a special, net pre-tax loss of $21.4 million, compared with operating
income of $13.6 million in the 2001 third quarter. The decrease in operating
income in the third quarter of $20.6 million was primarily due to the recording
of a $23.0 million special, pre-tax charge associated with the temporary
closure of the Laurinburg, North Carolina, magnet wire plant, the temporary
closure of the West Caldwell, New Jersey, High Performance Conductors facility,
and restructuring and consolidation of certain administrative functions
announced in the 2002 third quarter. The special, pre-tax charge included
$16.9 million for asset impairments and $6.1 million for severance-related
expenses associated with the restructuring and temporary closures.

PDI reported operating income of $29.3 million for the nine months ended
September 30, 2002, including a special, net pre-tax loss of $21.4 million,
compared with operating income of $62.9 million, including a special, pre-tax
loss of $3.3 million, in the corresponding 2001 period. The wire and cable
segment decreased $26.8 million primarily due to the recording of a $23.0
million special charge mentioned above and lower sales volumes in North America
resulting from reduced demand (approximately $12 million), partially offset by
higher sales volumes in Thailand (approximately $7 million). Also, the first
nine months of 2001 included a special, pre-tax charge of $3.3 million for the
write-down of the closed Hopkinsville, Kentucky, magnet wire facility. The
specialty chemicals segment decreased $6.8 million primarily due to lower sales
volumes in North America (approximately $12 million), partially offset by the
absence of goodwill amortization ($3.1 million) and a special, pre-tax gain in
the third quarter of 2002 ($1.1 million).

Note: Supplemental Data

(Unaudited; $ in millions)

|                                                   |  |               |       |      |  |  |      | 
|-------------------------------------------------- |  | ------------- | ----- | ---- |  |  | ---- | 
|                                                   |  | Third Quarter
|                                                   |  |              
|                                                   |  | 2002          |       | 2001
|                                                   |  |               |       |     
|Special, pre-tax items                             |  | $             | (21.4 | )    |  |  |     | 
|                                                  
|                                                  
|                                                  
|                                                  
|Segment operating earnings
excluding special items |  | $             | 14.4  |      |  |  | 13.6 | 

|                                                   |  |                   |       |      |  |  |      |  
|-------------------------------------------------- |  | ----------------- | ----- | ---- |  |  | ---- | -
|                                                   |  | Nine Months Ended
|                                                   |  | September 30,    
|                                                   |  |                  
|                                                   |  | 2002              |       | 2001
|                                                   |  |                   |       |     
|Special, pre-tax items                             |  | $                 | (21.4 | )    |  |  | (3.3 | )
|                                                  
|                                                  
|                                                  
|                                                  
|Segment operating earnings
excluding special items |  | $                 | 50.7  |      |  |  | 66.2 |  

Special items and provisions in operating income (loss) were as follows:

(Unaudited; $ in millions)

|                                             |  |               |       |      |  |  |   | 
|-------------------------------------------- |  | ------------- | ----- | ---- |  |  | - | 
|                                             |  | Third Quarter
|                                             |  |              
|                                             |  | 2002          |       | 2001
|                                             |  |               |       |     
|September 2002 restructuring
programs        |  | $             | (23.0 | )    |  |  |  | 
|                                            
|                                            
|                                            
|                                            
|Environmental provisions, net                |  |               | 0.3   |      |  |  |  | 
|                                            
|                                            
|                                            
|                                            
|Reassessment of prior restructuring
programs |  |               | 1.3   |      |  |  |  | 
|                                             |  |               |       |      |  |  |   | 
|Special, pre-tax items                       |  | $             | (21.4 | )    |  |  |  | 
|                                             |  |               |       |      |  |  |   | 

|                                             |  |                   |       |      |  |  |      |  
|-------------------------------------------- |  | ----------------- | ----- | ---- |  |  | ---- | -
|                                             |  | Nine Months Ended
|                                             |  | September 30,    
|                                             |  |                  
|                                             |  | 2002              |       | 2001
|                                             |  |                   |       |     
|September 2002 restructuring
programs        |  | $                 | (23.0 | )    |  |  |     |  
|                                            
|                                            
|                                            
|                                            
|Environmental provisions, net                |  |                   | 0.3   |      |  |  |     |  
|                                            
|                                            
|                                            
|                                            
|Reassessment of prior restructuring
programs |  |                   | 1.3   |      |  |  |     |  
|                                            
|                                            
|                                            
|                                            
|Hopkinsville facility write-down             |  |                   |      |      |  |  | (3.3 | )
|                                             |  |                   |       |      |  |  |      |  
|Special, pre-tax items                       |  | $                 | (21.4 | )    |  |  | (3.3 | )
|                                             |  |                   |       |      |  |  |      |  



---



##### Table of Contents



- 31 -




OTHER MATTERS RELATING TO THE STATEMENT OF CONSOLIDATED OPERATIONS

Depreciation, Depletion and Amortization
Expense

Depreciation, depletion and amortization expense was $105.2 million in the
third quarter and $316.9 million for the first nine months of 2002, compared
with $108.6 million and $346.4 million, respectively, in the corresponding 2001
periods. The decreases were primarily due to the temporary shutdowns and
production curtailments at PDMC (approximately $2 million in the 2002 third
quarter and $26 million for the first nine months of 2002) and the reduction of
goodwill amortization expense at PDI resulting from the adoption of SFAS No.
142 (approximately $2 million in the 2002 third quarter and $6 million for the
first nine months of 2002).

Exploration and Research Expense

Our net exploration and research expense was $10.7 million in the 2002
third quarter and $28.6 million for the nine months ended September 30, 2002, a
decrease of $3.6 million and $17.6 million from the corresponding periods in
2001. The decreases primarily resulted from lower exploration spending at most
of our locations (approximately $2 million in the third quarter and $11 million
for the first nine months of 2002) and the absence of exploration expenditures
at the Sossego joint venture in Brazil (approximately $2 million spent in the
2001 third quarter and $7 million spent for the nine months ended September 30,
2001), which was sold in October 2001.

Interest Expense

Interest expense decreased $17.3 million in the 2002 third quarter and
$24.2 million for the first nine months of 2002, compared with the 2001
corresponding periods. The decreases for the third quarter and first nine
months of 2002 primarily were attributable to reductions related to the payoff of long-term
debt, short-term debt and project financing (totaling approximately
$16 million and $55 million, respectively). Lower floating interest rates
also contributed to the reductions (approximately $1 million and $3 million,
respectively). The decrease for the first nine months of 2002 was partially
offset by a $33 million increase for the corporate debt issued in May 2001.

Miscellaneous Income and Expense, Net

Miscellaneous income and expense, net, decreased $2.3 million in the third
quarter and $15.2 million for the first nine months of 2002, compared with the
2001 corresponding periods. The decrease for the 2002 third quarter resulted
primarily from lower interest income ($2.5 million), foreign currency exchange
losses ($1.2 million) and higher shutdown expenses ($0.8 million), partially
offset by lower benefit plan investment mark-to-market adjustments ($2.1
million). The decrease for the nine months ended September 30, 2002, was
primarily due to lower interest income ($4.6 million), foreign currency
exchange losses ($3.3 million), higher shutdown expenses ($1.5 million) and the
absence of interest on a tax settlement and insurance settlements ($5.8
million) (refer to Note 2 to the consolidated financial information for further
discussion of these special items).

Benefit for Taxes on Income

The Companys income tax benefit for the 2002 third quarter comprised the
following items: (i) an additional $28.1 million special tax benefit associated
with 2001 net operating losses that, based on new tax legislation, may be
carried back to recover prior years taxes; (ii) a $5.0 million benefit
recognized for the 2002 third quarter net operating losses that, based on the
March enactment of the Job Creation and Worker Assistance Act of 2002, may also
be carried back to recover prior years taxes; and (iii) a $2.0 million expense
for taxes on earnings at international operations. The Companys income tax
benefit for the nine months ended September 30, 2002, comprised the following
items: (i) a $66.6 million tax benefit associated with the carryback of 2001
net operating losses that, based on new tax legislation, may be carried back to
recover prior years taxes; (ii) a $39.8 million benefit recognized for the
first nine months of 2002 net operating losses, based on new tax legislation;
(iii) a $17.8 million expense for taxes on earnings at international
operations; and (iv) a $13.0 million benefit for release of deferred taxes
previously provided.

The Company completed its 2001 federal income tax return in August 2002
and filed for a $59 million refund, which was received in the 2002 third
quarter, resulting from carrying back the 2001 net operating loss in accordance
with the March enactment of the Job Creation and Worker Assistance Act of 2002.



---



##### Table of Contents



- 32 -




CHANGES IN FINANCIAL CONDITION

Working Capital

During the first nine months of 2002, net working capital balances
(excluding cash and cash equivalents and debt) decreased $25.9 million. This
decrease resulted primarily from:



| |  |  | a $74.1 million decrease in inventories and supplies primarily
due to a $66.9 million decrease in copper, gold and molybdenum
inventories at mining operations; and                                              
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | a $45.6 million decrease in accounts payable and accrued
expenses primarily due to production curtailments, staff reductions
and timing of payments partially offset by higher accrued interest of
$16.8 million.

Debt

At September 30, 2002, our total debt was $2,194.7 million, compared with
$2,851.0 million at year-end 2001. Our ratio of debt to total capitalization
was 40.9 percent at September 30, 2002, versus 50.8 percent at December 31,
2001. The decrease in debt reflects the $150 million principal payment on our
10.125 percent notes on April 1, 2002, and the purchase of $481 million of
long-term debt on the open market in July 2002.

As of September 30, 2002, the Company had no borrowings under its $1
billion revolving credit facility that is available, provided compliance with
the covenant requirements, until its scheduled maturity on May 10, 2005.

Capital Expenditures and Investments

Capital expenditures and investments during the first nine months of 2002
were $65.3 million for PDMC, $19.1 million for PDI and $4.1 million for other
Corporate-related activities. Capital expenditures and investments in the
corresponding 2001 period were $161.8 million for PDMC, $75.8 million for PDI
(including $44.8 million for the contractually obligated acquisition of the
remaining 40 percent share of the Companys wire and cable manufacturing
operation in Brazil) and $12 million for other Corporate-related activities.
We expect capital expenditures and investments for the year 2002 to approximate
$150 million, comprising approximately $100 million for PDMC, approximately $40
million for PDI, and approximately $10 million for Corporate and other. These
capital expenditures and investments are expected to be funded primarily from
operating cash flow and cash reserves.

Equity Offering

In June 2002, the Company issued 10 million common shares and 2 million
mandatory convertible preferred shares in a block trade with J.P. Morgan. Net
proceeds from this trade were approximately $592 million. Proceeds were
earmarked primarily for debt repurchase. In July 2002, $480.7 million of
long-term debt was purchased on the open market for $511.2 million, which
resulted in a 2002 third quarter pre-tax extraordinary loss of $31.3 million
($26.6 million after-tax) including issuance costs and other book adjustments
($0.8 million). This buy-back is expected to reduce annual interest cost by
approximately $40 million before taxes.

The convertible preferred shares have an annual dividend of $6.75 per
share, a 20 percent conversion premium (for an equivalent conversion price of
$48 per common share), and will mandatorily convert into Phelps Dodge common
shares on August 15, 2005.

Dividends

Due to economic conditions and continuing unsatisfactory copper prices,
the Company eliminated the dividend on its common shares in the fourth quarter
of 2001. Accordingly, there were no dividends declared or paid on common
shares in the first nine months of 2002.

On September 4, 2002, Phelps Dodge declared a quarterly dividend of
$1.6875 per mandatory convertible preferred share, to be paid on November 15,
2002.

Contractual Obligations

The following tables summarize Phelps Dodges contractual obligations at
September 30, 2002, and the effect such obligations are expected to have on its
liquidity and cash flow in future periods for short-term debt, long-term debt
(including capital lease obligations) and take-or-pay contracts. The following
table, as of September 30, 2002, reflects an update of only the major changes
to the similar table presented in the Companys Form 10-K at December 31, 2001:

Table of Contents- 33 -Debt and Take-or-Pay Contracts as of September 30, 2002:(Unaudited; $ in millions)

|                      |  |       |         |        |  |           |       |  |  |  |       | 
|--------------------- |  | ----- | ------- | ------ |  | --------- | ----- |  |  |  | ----- | 
|                      |  |       |         |        |  | Less Than |       |  |  | 
|                      |  | Total |         | 1 Year |  | 1-3 Years
|                      |  |       |         |        |  |          
|Short-term debt       |  | $     | 36.7    |        |  |           | 36.7  |  |  |  |      | 
|                     
|                     
|                     
|                     
|Long-term debt        |  |       | 2,158.0 |        |  |           | 136.4 |  |  |  | 350.0 | 
|                     
|                     
|                     
|                     
|Take-or-pay contracts |  |       | 606.5   |        |  |           | 175.3 |  |  |  | 205.2 | 

|                      |  |           |       |         |  |       |         | 
|--------------------- |  | --------- | ----- | ------- |  | ----- | ------- | 
|                      |  |           |       |         |  | After
|                      |  | 4-5 Years |       | 5 Years
|                      |  |           |       |        
|Short-term debt       |  | $         |      |         |  |       |        | 
|                     
|                     
|                     
|                     
|Long-term debt        |  |           | 599.6 |         |  |       | 1,072.0 | 
|                     
|                     
|                     
|                     
|Take-or-pay contracts |  |           | 125.2 |         |  |       | 100.8   | 

Other Items that May Affect Liquidity

New Mexico and Colorados mined land reclamation laws require financial
assurance covering reclamation cost. In contrast, Arizonas Mine Land
Reclamation Act permits a company to satisfy financial assurance requirements
by demonstrating it has financial strength to fund reclamation costs identified
in an approved reclamation plan. An investment grade bond rating is one of the
financial strength tests under the Arizona Act. Phelps Dodge presently has a
credit rating one level above non-investment grade; however, it remains on
Negative Outlook. If a downgrade occurs, the Company will need to provide
financial assurance of approximately $70 million in Arizona.

The cost of surety bonds (the traditional source of financial assurance)
has increased significantly during the past year. Also, many surety companies
are now requiring an increased level of collateral supporting the bonds. If
surety bonds are unavailable, the Company could be required to post other
collateral or possibly cash or cash equivalents directly in support of
financial assurance obligations.

Other Matters

During an ordinary course review of the Companys public filings, the
staff of the Securities and Exchange Commission (SEC) has recently
commented on several matters reflected in those filings. The matters
commented upon include aspects of the Companys calculation of its proven
and probable reserves of copper and molybdenum at its operating,
curtailed and development properties. In this comment process, the SEC
staff has, among other things, indicated that it may require that the
Company use as its metals pricing assumption for these purposes the
average COMEX price for copper over the prior three years (approximately
76 cents per pound) and the three-year historical average price for
molybdenum as published in Metals Week(approximately $2.50 per pound for
oxide). In determining its proven and probable reserves, the Company has
used metals price assumptions that are higher and that it believes are
generally consistent with average historical prices over recent full
economic and pricing cycles. The Company is currently discussing these
issues with the SEC staff and evaluating the potential effects of using
the lower price assumptions in its reserve determinations.

Depending on the outcome of the ongoing discussions with the SEC staff, a
portion of the Companys proven and probable reserves of copper and
molybdenum may be reclassified to mineralized material. Any such
reclassification of reserves at an operating property would increase
depreciation and amortization charges, including possibly for prior
periods, but the Company does not expect any such increases to be
material. Further, there would be no effect on the Companys mine plans,
production levels or expected operating cash flows.

The SEC staff has also commented upon the Companys impairment analyses
of its curtailed properties under SFAS Nos. 121 and 144. Such analyses
involve numerous judgments and estimates and the Company is currently
evaluating these comments and discussing them with the SEC staff. In
addition, management is now conducting its customary impairment review of
all its curtailed properties based upon all information currently
available. In light of these ongoing reviews and discussions, additional
impairment charges, which could be material in amount, may be recognized,
including possibly in prior periods.

Any additional impairment charges may materially reduce net income in the
periods in which they are recognized, and it is possible that they may
materially reduce the Companys shareholders equity. They would have no
effect on the Companys mine plans, production levels or expected
operating cash flows.

The SEC staff has also commented on certain of the Companys estimates
for recognizing depreciation and amortization expenses at certain of its
mining properties. Further, the SEC staff has commented on the Companys
basis for recognition of closure costs at temporarily closed mining
operations and upon the Companys estimates for two contingent matters.
The Company continues to evaluate these comments and discuss these issues
with the SEC staff. It is possible that additional charges, which could
be material in amount, may be recognized in prior periods. There



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would
be no effect on the Companys expected operating cash flows arising from
any such changes.

The Company is continuing to discuss all of these issues with the staff
of the SEC, and no final determinations will be made until the conclusion
of those discussions.

Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and
Hedging Activities, (as amended by SFAS No. 137) and SFAS No. 138, Accounting
for Certain Derivative Instruments and Certain Hedging Activities. These
Statements require recognition of all derivatives as either assets or
liabilities on the balance sheet and measurement of those instruments at fair
value. Changes in the fair value of derivatives are recorded each period in
current earnings or other comprehensive income (OCI). Appropriate accounting
for changes in the fair value of derivatives held is dependent on whether the
derivative transaction qualifies as an accounting hedge and on the
classification of the hedge transaction. The implementation resulted in a
cumulative effect charge of $2.0 million (before and after taxes), or 3 cents
per share, and a cumulative reduction to OCI of $7.1 million (before and after
taxes).

Effective January 1, 2002, the Company adopted SFAS No. 142, Goodwill and
Other Intangible Assets. Under SFAS No. 142, goodwill and intangible assets
that have indefinite useful lives will not be amortized but rather will be
tested at least annually for impairment. Intangible assets that have finite
useful lives will continue to be amortized over their useful lives. As of
December 31, 2001, the Company had goodwill of $115.2 million less accumulated
amortization of $26.7 million associated with the specialty chemicals segment
and goodwill of $70.8 million less accumulated amortization of $16.2 million
associated with the wire and cable segment, for a total of $143.1 million, net.
Upon completion of the transitional impairment tests, the net book value of
three of the Companys international wire and cable reporting units was
determined to be less than the related carrying amount. The resulting
impairment loss recognized upon adoption of SFAS No. 142 was $33.0 million,
pre-tax ($22.9 million, after-tax), and has been recognized as a cumulative
effect of a change in accounting principle. The pro forma effect of not
amortizing goodwill on the third quarter and nine months ended September 30,
2001, would have reduced goodwill amortization expense by $1.9 million and $5.7
million, respectively, reduced net loss by $1.5 million and $4.7 million,
respectively, and reduced loss per share by 2 cents and 6 cents, respectively.

In August 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
This Statement supersedes SFAS No. 121 and the accounting and reporting
provisions of Accounting Principles Board (APB) Opinion No. 30, and also amends
Accounting Research Bulletin (ARB) No. 51. This Statement requires that one
accounting model be used for long-lived assets to be disposed of by sale,
whether previously held and used or newly acquired, and will broaden the
presentation of discontinued operations to include more disposal transactions.
This Statement was adopted by the Company on January 1, 2002, with no
significant effect on our financial reporting or disclosures, and was utilized
in the determination of our wire and cable segments asset impairment charge in
the 2002 third quarter.

In June 2001, FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. With the adoption of this Statement, retirement obligations will
be recognized when they are incurred and displayed as liabilities and the
initial measurement will be at fair value. In addition, the asset retirement
cost will be capitalized as part of the assets carrying value and subsequently
allocated to expense over the assets useful life. This Statement is required
to be adopted by the Company on or before January 1, 2003. We are in the
process of determining the effect SFAS No. 143 will have on our financial
reporting and disclosures and are developing procedures to effect its
implementation. At this time, we cannot estimate its impact.

In April 2002, FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. Under SFAS No. 4, all gains and losses from extinguishment of
debt were required to be aggregated and, if material, classified as an
extraordinary item, net of related income tax effect. This Statement
eliminates SFAS No. 4 and, thus, the exception to applying APB No. 30 to all
gains and losses related to extinguishments of debt. As a result, gains and
losses from extinguishment of debt should be classified as extraordinary items
only if they meet the criteria in APB No. 30. Applying the provisions of APB
No. 30 will distinguish transactions that are part of an entitys recurring
operations from those that are unusual or infrequent or that meet the criteria
for classification as an extraordinary item. Under SFAS No. 13, the required
accounting treatment of certain lease modifications that have economic effects
similar to sale-leaseback transactions was inconsistent with the required
accounting treatment for sale-leaseback transactions. This Statement amends
SFAS No. 13 to require that those lease modifications be accounted for in the
same manner as



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sale-leaseback transactions. This Statement is required to be
adopted by the Company on or before January 1, 2003.

In June 2002, FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. This Statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring). The
principal difference between this Statement and EITF 94-3 relates to its
requirements for recognition of a liability for a cost associated with an exit
or disposal activity. This Statement requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability
is incurred. Under EITF 94-3, a liability was recognized at the date of an
entitys commitment to an exit plan. This Statement is effective for exit or
disposal activities that are initiated after December 31, 2002.




Item 3. Quantitative and Qualitative Disclosure About Market Risk

There have been no material changes in the Companys market risk during
the quarter ended September 30, 2002. For additional information on market
risk, refer to pages 31 and 41 through 44 of our report on Form 10-K for the
year ended December 31, 2001.




Item 4. Controls and Procedures

The Company maintains a system of disclosure controls and procedures that
is designed to ensure information required to be disclosed by the Company is
accumulated and communicated to management in a timely manner. Management has
reviewed this system of disclosure controls and procedures within 90 days of
the date hereof, and has concluded that the current system of controls and
procedures is effective.

The Company maintains a system of internal controls and procedures for
financial reporting. Since the date of managements most recent evaluation,
there were no significant changes in internal controls or in other factors that
could significantly affect internal controls.




Part II. Other Information




Item 1. Legal Proceedings

I.     On September 30, 2002, Columbian Chemicals Company, a subsidiary of
the Company, received an administrative complaint from the Environmental
Protection Agency (EPA) for alleged violations of the Clean Air Act at its El
Dorado, Arkansas, carbon black plant. Columbian Chemicals Company is
investigating and will respond as appropriate to the EPA.

II.     On September 30, 2002, the EPA issued an administrative complaint for
alleged violations of the Clean Water Act at the inactive Christmas Mine owned
by the Companys subsidiary, Cyprus Amax Minerals Company. The Company is
investigating and will respond as appropriate to the EPA.

III.     On October 21, 2002, our New Mexico operations received a notice of
violation from the New Mexico Mining and Minerals Division for failing to have closeout plans in place by October 1, as required by the New Mexico
Mining Act. The notices require the operations to have closeout plans in place
by April 30, 2003 (Chino), September 30, 2003 (Tyrone) and June 30, 2003
(Cobre). Because the deadline was not met, the three operations may also be
subject to further administrative action, including civil penalties. Reference
is made to the Notes to Consolidated Financial Information, Note 6,
Contingencies for a more detailed description of the closure/closeout plan
process in New Mexico.

IV.     Reference is made to the sixth paragraph of Part II, Item 1, Legal
Proceedings, of the Companys Form 10-Q for the quarter ended June 30, 2002.

On August 15, 2002, the Companys subsidiary, Cyprus Amax Minerals Company
(Cyprus), paid to Plateau Mining Corporation approximately $47 million
(including approximately $11 million in interest) in satisfaction of the July
18, 2002, arbitration award. This payment was made without prejudicing the
rights of Cyprus to seek indemnification for this payment from RAG American
Coal Company under the provisions of other agreements entered into by Cyprus
and RAG.

V.     On November 7, 2002, the United Kingdom Environment Agency issued an
enforcement notice to Columbian Chemicals Companys Sevalco plant in the United
Kingdom. The notice follows the discovery of irregularities in Sevalcos
effluent discharge reports, and requires the plant to implement procedures to



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ensure that discharges satisfy permit limits and are properly reported.
Columbian Chemicals Company is cooperating with the Environment Agency while
the Agency continues its investigation of this matter.




Item 6. Exhibits and Reports on Form 8-K



| | (a) |  | Any exhibits required to be filed by the Company are listed in
the Index to Exhibits.                                                                                                                              
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | A report on Form 8-K was filed on August 13, 2002, to disclose
the CEO and CFO certifications related to the Companys Form 10-Q
filed on August 13, 2002, and pursuant to the Commissions Order of
June 27, 2002.




Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Corporation has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

PHELPS DODGE CORPORATION

---

(Corporation or Registrant)


|                        |  |                                                                                 |  |                        | 
|----------------------- |  | ------------------------------------------------------------------------------- |  | ---------------------- | 
|Date: November 12, 2002 |  | By:                                                                             |  | /s/ Stanton K. Rideout
|                        |  | Stanton K. Rideout
Vice President and Controller
(Principal Accounting Officer)




Certifications

I, J. Steven Whisler, Chairman, President and Chief Executive Officer, certify
that:



|l. |  | I have reviewed this quarterly report on Form 10-Q of Phelps Dodge
Corporation;                                                                                                                                                                                                                                               
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                        



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date                                                                                                                                                                                                



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| |    |  | within 90 days prior to the filing date of this quarterly report (the
Evaluation Date); and                                                                          
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have identified
for the registrants auditors any material weaknesses in internal
controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

November 12, 2002

|                                                                                       |  | 
|-------------------------------------------------------------------------------------- |  | 
|/s/ J. Steven WhislerJ. Steven Whisler
Chairman, President and Chief Executive Officer |  | 

I, Ramiro G. Peru, Senior Vice President and Chief Financial Officer, certify
that:



|l. |  | I have reviewed this quarterly report on Form 10-Q of Phelps Dodge
Corporation;                                                                                                                                                                                                                                               
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                        



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have identified
for the registrants auditors any material weaknesses in internal
controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether there
|-- |  | ------------------------------------------------------------------------------------------------------



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##### Table of Contents



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| |  | were significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

November 12, 2002

|                                                                                   |  | 
|---------------------------------------------------------------------------------- |  | 
|/s/ Ramiro G. PeruRamiro G. Peru
Senior Vice President and Chief Financial Officer |  | 




Index to Exhibits

|      |  |                                                                                                                         
|----- |  | ------------------------------------------------------------------------------------------------------------------------
|10.12 |  | Amended Form of Restricted Stock Letter Agreement under the 1998 Plan,
effective as of July 8, 2002 (SEC File No. 1-82).
|     
|10.15 |  | Waiver and Release Agreement, effective July 8, 2002, between the
Company and Manuel J. Iraola (SEC File No. 1-82).     
|     
|11    |  | Computation of per share earnings.                                                                                      
|     
|12    |  | Computation of ratios of total debt to total capitalization.                                                            
|     
|15    |  | Letter from PricewaterhouseCoopers LLP with respect to unaudited interim
financial information.