##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2006o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM ___TO ___
  PHELPS DODGE CORPORATION
  New York
    
    13-1808503(State of Incorporation)
    
    (I.R.S. Employer Identification No.)
 
 
 
 þ o
  Large Accelerated Filer
    þ
    
    
    Accelerated Filer
    o
    
    
    Non-Accelerated Filer
    o
 o þ




---



##### 



PHELPS DODGE CORPORATION
 Quarterly Report on Form 10-Q
 For the Quarter Ended March 31, 2006
 Table of Contents
 PagePart I. Financial InformationItem 1. Financial Statements (unaudited)Consolidated Statement of Income
    
    
    1Consolidated Balance Sheet
    
    
    2Consolidated Statement of Cash Flows
    
    
    3Consolidated Statement of Shareholders Equity
    
    
    4Financial Data by Business Segment
    
    
    5Notes to Consolidated Financial Information
    
    
    6Review by Independent Registered Public Accounting Firm
    
    
    18Report of Independent Registered Public Accounting Firm
    
    
    18Item 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsResults of Operations
    
    
    19Results of Phelps Dodge Mining Company
    
    
    21Results of Phelps Dodge Industries
    
    
    33Discontinued Operations
    
    
    34Other Matters Relating to the Consolidated Statement of Income
    
    
    34Changes in Financial Condition; Capitalization
    
    
    35Item 3. Quantitative and Qualitative Disclosure About Market Risk
    
    
    40Item 4. Controls and Procedures
    
    
    40Part II. Other InformationItem 1. Legal Proceedings
    
    
    40Item 1A. Risk Factors
    
    
    41Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    41Item 6. Exhibits
    
    
    42Signatures
    
    
    42Index to Exhibits
    
    
    42Exhibit 11Exhibit 12Exhibit 15Exhibit 31Exhibit 32




---



##### Table of Contents



PHELPS DODGE CORPORATION AND SUBSIDIARIES
 
  
 Item 1. Financial Statements
  PHELPS DODGE CORPORATION
 
 CONSOLIDATED STATEMENT OF INCOME
  
 First Quarter2006
    
    
    2005Sales and other operating revenues
    
    $
    2,224.6
    
    
    
    1,886.5Operating costs and expensesCost of products sold (exclusive of items shown separately below)
    
    
    1,447.4
    
    
    
    1,181.3Depreciation, depletion and amortization
    
    
    107.0
    
    
    
    111.8Selling and general administrative expense
    
    
    48.9
    
    
    
    41.5Exploration and research expense
    
    
    29.9
    
    
    
    17.0Special items and provisions, net (see Note 4)
    
    
    17.2
    
    
    
    (0.9
    )1,650.4
    
    
    
    1,350.7Operating income
    
    
    574.2
    
    
    
    535.8Interest expense
    
    
    (15.8
    )
    
    
    (22.5
    )Capitalized interest
    
    
    10.4
    
    
    
    0.6Miscellaneous income and expense, net
    
    
    34.3
    
    
    
    15.5Income from continuing operations before taxes, minority interests in
consolidated subsidiaries and equity in net earnings (losses) of
affiliated companies
    
    
    603.1
    
    
    
    529.4Provision for taxes on income (see Note 9)
    
    
    (135.8
    )
    
    
    (126.1
    )Minority interests in consolidated subsidiaries
    
    
    (117.2
    )
    
    
    (26.6
    )Equity in net earnings (losses) of affiliated companies
    
    
    0.6
    
    
    
    0.7Income from continuing operations
    
    
    350.7
    
    
    
    377.4Discontinued operations:Income (loss) from discontinued operations, net of taxes of $4.4 and $5.1, respectively
(including loss on disposal of $28.8, net of tax benefit of $0.7 for 2006) (See Note 3)
    
    
    (16.9
    )
    
    
    9.3Net income
    
    
    333.8
    
    
    
    386.7Preferred stock dividends
    
    
    
    
    
    
    (3.4
    )Net income applicable to common shares
    
    $
    333.8
    
    
    
    383.3Weighted average number of common shares outstanding  basic*
    
    
    202.0
    
    
    
    191.5Basic earnings per common share:Income from continuing operations
    
    $
    1.73
    
    
    
    1.95Income (loss) from discontinued operations
    
    
    (0.08
    )
    
    
    0.05Basic earnings per common share
    
    $
    1.65
    
    
    
    2.00Weighted average number of common shares outstanding  diluted*
    
    
    203.4
    
    
    
    201.8Diluted earnings per common share:Income from continuing operations
    
    $
    1.72
    
    
    
    1.87Income (loss) from discontinued operations
    
    
    (0.08
    )
    
    
    0.05Diluted earnings per common share
    
    $
    1.64
    
    
    
    1.92




---



##### Table of Contents



PHELPS DODGE CORPORATION
 
 CONSOLIDATED BALANCE SHEET
  
 March 31,
    
    
    December 31,2006
    
    
    2005AssetsCurrent assets:Cash and cash equivalents
    
    $
    2,152.7
    
    
    
    1,916.7Restricted cash
    
    
    10.3
    
    
    
    20.8Accounts receivable, less allowance for doubtful
accounts (2006  $7.4; 2005  $6.9)
    
    
    1,206.6
    
    
    
    1,028.0Mill and leach stockpiles
    
    
    58.8
    
    
    
    36.6Inventories
    
    
    362.1
    
    
    
    329.5Supplies
    
    
    201.1
    
    
    
    199.7Prepaid expenses and other current assets
    
    
    119.1
    
    
    
    83.6Deferred income taxes
    
    
    82.0
    
    
    
    82.0Assets held for sale
    
    
    
    
    
    
    373.8Current assets
    
    
    4,192.7
    
    
    
    4,070.7Investments and long-term receivables
    
    
    197.4
    
    
    
    142.6Property, plant and equipment, net
    
    
    4,970.6
    
    
    
    4,830.9Long-term mill and leach stockpiles
    
    
    178.2
    
    
    
    133.3Deferred income taxes
    
    
    72.6
    
    
    
    99.6Goodwill
    
    
    12.5
    
    
    
    22.3Intangible assets, net
    
    
    7.4
    
    
    
    7.5Long-term assets held for sale
    
    
    
    
    
    
    431.4Trust assets
    
    
    563.5
    
    
    
    258.4Other assets and deferred charges
    
    
    360.4
    
    
    
    361.3$
    10,555.3
    
    
    
    10,358.0LiabilitiesCurrent liabilities:Short-term debt
    
    $
    27.1
    
    
    
    14.3Current portion of long-term debt
    
    
    2.5
    
    
    
    2.5Accounts payable and accrued expenses
    
    
    1,482.2
    
    
    
    1,445.7Accrued income taxes
    
    
    83.8
    
    
    
    23.6Liabilities related to assets held for sale
    
    
    
    
    
    
    123.2Current liabilities
    
    
    1,595.6
    
    
    
    1,609.3Long-term debt
    
    
    674.8
    
    
    
    677.7Deferred income taxes
    
    
    610.5
    
    
    
    558.0Long-term liabilities related to assets held for sale
    
    
    
    
    
    
    61.3Other liabilities and deferred credits
    
    
    1,071.0
    
    
    
    934.23,951.9
    
    
    
    3,840.5Commitments and contingencies (see Notes 6, 7 and 9)Minority interests in consolidated subsidiaries
    
    
    1,019.0
    
    
    
    915.9Shareholders equity*Common shares, par value $6.25; 600.0 shares authorized;
203.7 outstanding (2005  203.2) after deducting 16.3 shares
(2005  16.7) held in treasury, at cost
    
    
    1,273.0
    
    
    
    635.1Capital in excess of par value
    
    
    1,342.7
    
    
    
    1,998.8Retained earnings**
    
    
    3,067.2
    
    
    
    3,158.8Accumulated other comprehensive loss
    
    
    (98.5
    )
    
    
    (154.5
    )Other
    
    
    
    
    
    
    (36.6
    )5,584.4
    
    
    
    5,601.6$
    10,555.3
    
    
    
    10,358.0
 
 *
    
    Refer to Note 13 for discussion of 2006 first quarter stock split.**
    
    Includes cumulative effect adjustment of $19.8 million for the adoption of EITF Issue No. 04-6. Refer to Note 5 for further discussion.




---



##### Table of Contents



PHELPS DODGE CORPORATION
 
 CONSOLIDATED STATEMENT OF CASH FLOWS
  
 Three Months EndedMarch 31,2006
    
    
    2005Operating activitiesNet income
    
    $
    333.8
    
    
    
    386.7Adjustments to reconcile net income to net cash
provided by operating activities:Unrealized losses on copper collars and copper put options
    
    
    392.6
    
    
    
    55.0Depreciation, depletion and amortization
    
    
    107.2
    
    
    
    129.4Deferred income tax provision
    
    
    28.2
    
    
    
    24.4Equity in net earnings (losses) of affiliated companies, net of dividends received
    
    
    (0.2
    )
    
    
    (0.1
    )Special items and provisions
    
    
    17.2
    
    
    
    (0.9
    )Minority interests in consolidated subsidiaries
    
    
    117.6
    
    
    
    27.0Loss on disposition of discontinued operations
    
    
    29.5
    
    
    
    Changes in current assets and liabilities:Accounts receivable
    
    
    (202.6
    )
    
    
    (137.0
    )Repayment of securitized accounts receivable
    
    
    
    
    
    
    (85.0
    )Mill and leach stockpiles
    
    
    (18.1
    )
    
    
    (1.8
    )Inventories
    
    
    (21.0
    )
    
    
    (17.3
    )Supplies
    
    
    (2.1
    )
    
    
    (8.0
    )Prepaid expenses and other current assets
    
    
    (34.3
    )
    
    
    (17.7
    )Interest payable
    
    
    8.2
    
    
    
    15.2Other accounts payable
    
    
    (42.5
    )
    
    
    (2.8
    )Accrued income taxes
    
    
    50.9
    
    
    
    38.0Realized losses on 2005 copper collars
    
    
    (187.2
    )
    
    
    Other accrued expenses
    
    
    (27.4
    )
    
    
    (85.1
    )Other operating, net
    
    
    (16.5
    )
    
    
    (3.9
    )Net cash provided by operating activities
    
    
    533.3
    
    
    
    316.1Investing activitiesCapital outlays
    
    
    (291.6
    )
    
    
    (68.2
    )Capitalized interest
    
    
    (10.8
    )
    
    
    (0.8
    )Investments in subsidiaries and other
    
    
    (0.1
    )
    
    
    (0.1
    )Proceeds from the sale of Columbian Chemicals
    
    
    520.0
    
    
    
    Proceeds from the sale of Magnet Wire North America assets
    
    
    135.8
    
    
    
    Proceeds from the sale of HPC
    
    
    43.5
    
    
    
    Proceeds from asset dispositions
    
    
    12.9
    
    
    
    1.2Restricted cash
    
    
    10.5
    
    
    
    Global environmental trust contribution
    
    
    (300.0
    )
    
    
    Other investing, net
    
    
    (2.4
    )
    
    
    (3.2
    )Net cash provided by (used in) investing activities
    
    
    117.8
    
    
    
    (71.1
    )Financing activitiesNet increase (decrease) in short-term debt
    
    
    11.2
    
    
    
    (48.0
    )Payment of debt
    
    
    (2.6
    )
    
    
    (1.0
    )Common dividends
    
    
    (445.2
    )
    
    
    (24.0
    )Preferred dividends
    
    
    
    
    
    
    (3.4
    )Issuance of shares, net
    
    
    13.4
    
    
    
    31.3Debt issue costs
    
    
    (1.4
    )
    
    
    Net cash used in financing activities
    
    
    (424.6
    )
    
    
    (45.1
    )Effect of exchange rate impact on cash and cash equivalents
    
    
    9.5
    
    
    
    (2.0
    )Increase in cash and cash equivalents
    
    
    236.0
    
    
    
    197.9Cash and cash equivalents at beginning of period
    
    
    1,916.7
    
    
    
    1,200.1Cash and cash equivalents at end of period
    
    $
    2,152.7
    
    
    
    1,398.0




---



##### Table of Contents



PHELPS DODGE CORPORATION
 
 CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
  
 AccumulatedCommon Shares
    
    
    Capital in
    
    
    
    
    
    
    OtherNumber
    
    
    At Par
    
    
    Excess of
    
    
    Retained
    
    
    Comprehensive
    
    
    
    
    
    
    Shareholdersof Shares
    
    
    Value
    
    
    Par Value
    
    
    Earnings
    
    
    Income (Loss)*
    
    
    Other
    
    
    EquityBalance at December 31, 2005
    
    
    101.6
    
    
    $
    635.1
    
    
    $
    1,998.8
    
    
    $
    3,158.8
    
    
    $
    (154.5
    )
    
    $
    (36.6
    )
    
    $
    5,601.6Cumulative effect adjustment**
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19.8
    
    
    
    
    
    
    
    
    
    
    
    19.8Transition adjustment***
    
    
    
    
    
    
    
    
    
    
    (36.6
    )
    
    
    
    
    
    
    
    
    
    
    36.6
    
    
    
    Stock options exercised including tax benefit
    
    
    0.3
    
    
    
    2.1
    
    
    
    13.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.5Restricted shares issued/cancelled, net
    
    
    0.2
    
    
    
    0.8
    
    
    
    3.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.0Common shares purchased
    
    
    
    
    
    
    (0.1
    )
    
    
    (1.0
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.1
    )Dividends on common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (445.2
    )
    
    
    
    
    
    
    
    
    
    
    (445.2
    )Comprehensive income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    333.8
    
    
    
    
    
    
    
    
    
    
    
    333.8Other comprehensive income (loss), net of tax:Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33.4
    
    
    
    
    
    
    
    33.4Net loss on derivative instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.0
    )
    
    
    
    
    
    
    (2.0
    )Other investment adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    0.2Unrealized gain on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.7
    
    
    
    
    
    
    
    15.7Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.7
    
    
    
    
    
    
    
    8.7Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56.0
    
    
    
    
    
    
    
    56.0Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    389.8Stock split****
    
    
    101.6
    
    
    
    635.1
    
    
    
    (635.1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at March 31, 2006
    
    
    203.7
    
    
    $
    1,273.0
    
    
    $
    1,342.7
    
    
    $
    3,067.2
    
    
    $
    (98.5
    )
    
    $
    
    
    
    $
    5,584.4
 
 *
    
    As of March 31, 2006, this balance comprised $138.5 million of cumulative translation adjustments and $17.5 million of cumulative minimum pension liability adjustments; partially offset by $53.7 million of
cumulative unrealized gains on securities and $3.8 million of cumulative unrealized gains on derivative instruments.**
    
    Refer to Note 5 for discussion of adoption of EITF Issue
No. 04-6.***
    
    Refer to Note 2 for discussion of adoption of SFAS No. 123-R.****
    
    Refer to Note 13 for discussion of the 2006 first quarter stock split.




---



##### Table of Contents



PHELPS DODGE CORPORATION
 
 FINANCIAL DATA BY BUSINESS SEGMENT
  
 U.S. Mines
    
    
    South American MinesChino/
    
    
    
    
    
    
    Candelaria/
    
    
    
    
    
    
    
    
    
    
    PrimaryMorenci
    
    
    Bagdad
    
    
    Sierrita
    
    
    Cobre
    
    
    Tyrone
    
    
    Ojos del Salado
    
    
    Cerro Verde
    
    
    El Abra
    
    
    MolybdenumFirst Quarter 2006Sales and other operating revenues:Unaffiliated customers
    
    $
    
    
    
    
    
    
    
    
    1.8
    
    
    
    4.7
    
    
    
    
    
    
    
    228.5
    
    
    
    30.0
    
    
    
    164.7
    
    
    
    420.3Intersegment
    
    
    176.1
    
    
    
    108.1
    
    
    
    184.2
    
    
    
    63.6
    
    
    
    17.4
    
    
    
    21.5
    
    
    
    64.8
    
    
    
    136.5
    
    
    
    Depreciation, depletion and
amortization
    
    
    14.2
    
    
    
    5.6
    
    
    
    3.9
    
    
    
    6.7
    
    
    
    3.0
    
    
    
    10.7
    
    
    
    7.1
    
    
    
    30.2
    
    
    
    10.7Operating income (loss) before
specialitems and provisions
    
    
    36.4
    
    
    
    33.9
    
    
    
    101.7
    
    
    
    (4.3
    )
    
    
    (7.8
    )
    
    
    145.0
    
    
    
    69.9
    
    
    
    178.8
    
    
    
    105.9Special items and provisions, net
    
    
    
    
    
    
    2.2
    
    
    
    (1.3
    )
    
    
    (3.9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Operating income (loss)
    
    
    36.4
    
    
    
    36.1
    
    
    
    100.4
    
    
    
    (8.2
    )
    
    
    (7.8
    )
    
    
    145.0
    
    
    
    69.9
    
    
    
    178.8
    
    
    
    105.8Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.7
    
    
    
    
    
    
    
    0.9
    
    
    
    2.0
    
    
    
    2.1
    
    
    
    0.3Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    6.8
    
    
    
    0.4
    
    
    
    Provision for taxes on income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (45.2
    )
    
    
    2.9
    
    
    
    (59.6
    )
    
    
    Minority interests in
consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16.9
    )
    
    
    (38.2
    )
    
    
    (60.0
    )
    
    
    Equity in net earnings (losses)
of affiliated companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income from discontinued
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity basis investments at
March 31
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    Assets at March 31
    
    
    998.2
    
    
    
    441.3
    
    
    
    322.5
    
    
    
    448.9
    
    
    
    111.3
    
    
    
    999.8
    
    
    
    1,154.6
    
    
    
    1,154.7
    
    
    
    914.1Expenditures for segment assets
    
    
    36.5
    
    
    
    8.9
    
    
    
    8.3
    
    
    
    2.6
    
    
    
    4.9
    
    
    
    3.9
    
    
    
    162.6
    
    
    
    9.4
    
    
    
    7.6First Quarter 2005*Sales and other operating revenues:Unaffiliated customers
    
    $
    
    
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    121.9
    
    
    
    16.5
    
    
    
    72.2
    
    
    
    476.8Intersegment
    
    
    227.0
    
    
    
    156.5
    
    
    
    207.9
    
    
    
    85.7
    
    
    
    30.1
    
    
    
    32.0
    
    
    
    51.6
    
    
    
    80.6
    
    
    
    Depreciation, depletion and
amortization
    
    
    15.1
    
    
    
    7.8
    
    
    
    3.9
    
    
    
    5.3
    
    
    
    4.0
    
    
    
    9.9
    
    
    
    5.9
    
    
    
    33.4
    
    
    
    8.9Operating income (loss) before
specialitems and provisions
    
    
    86.2
    
    
    
    84.4
    
    
    
    134.5
    
    
    
    17.7
    
    
    
    1.3
    
    
    
    75.4
    
    
    
    36.0
    
    
    
    44.5
    
    
    
    86.6Special items and provisions, net
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    (0.6
    )
    
    
    (4.2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    85.9
    
    
    
    84.4
    
    
    
    134.5
    
    
    
    17.1
    
    
    
    (2.9
    )
    
    
    75.4
    
    
    
    36.0
    
    
    
    44.5
    
    
    
    86.6Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.6
    
    
    
    
    
    
    
    0.8
    
    
    
    0.8
    
    
    
    
    
    
    
    0.1Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    (2.3
    )
    
    
    Provision for taxes on income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18.3
    )
    
    
    (6.8
    )
    
    
    (14.6
    )
    
    
    Minority interests in
consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6.6
    )
    
    
    (5.7
    )
    
    
    (13.3
    )
    
    
    Equity in net earnings (losses)
of affiliated companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income from discontinued
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity basis investments at
March 31
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    Assets at March 31
    
    
    921.7
    
    
    
    437.3
    
    
    
    318.6
    
    
    
    482.9
    
    
    
    225.4
    
    
    
    953.8
    
    
    
    560.1
    
    
    
    964.5
    
    
    
    876.3Expenditures for segment assets
    
    
    (3.9
    )
    
    
    5.1
    
    
    
    2.9
    
    
    
    4.8
    
    
    
    0.5
    
    
    
    3.9
    
    
    
    29.7
    
    
    
    2.0
    
    
    
    1.7
 PDMC
    
    
    
    
    
    
    
    
    
    
    Corporate,Manufac-
    
    
    
    
    
    
    PDMC
    
    
    Other &
    
    
    PDMC
    
    
    PDI 
    
    
    Other &
    
    
    Discontinuedturing
    
    
    Sales
    
    
    Segments
    
    
    Eliminations
    
    
    Subtotal
    
    
    Wire & Cable
    
    
    Eliminations
    
    
    Operations
    
    
    TotalsFirst Quarter 2006Sales and other operating revenues:Unaffiliated customers
    
    $
    1,194.8
    
    
    
    (148.0
    )
    
    
    1,896.8
    
    
    
    6.7
    
    
    
    1,903.5
    
    
    
    321.1
    
    
    
    
    
    
    
    
    
    
    
    2,224.6Intersegment
    
    
    40.6
    
    
    
    54.1
    
    
    
    866.9
    
    
    
    (812.3
    )
    
    
    54.6
    
    
    
    0.1
    
    
    
    (54.7
    )
    
    
    
    
    
    
    Depreciation, depletion and
amortization
    
    
    5.3
    
    
    
    
    
    
    
    97.4
    
    
    
    2.8
    
    
    
    100.2
    
    
    
    4.8
    
    
    
    2.0
    
    
    
    
    
    
    
    107.0Operating income (loss) before
specialitems and provisions
    
    
    5.7
    
    
    
    1.8
    
    
    
    667.0
    
    
    
    (52.8
    )
    
    
    614.2
    
    
    
    14.0
    
    
    
    (36.8
    )
    
    
    
    
    
    
    591.4Special items and provisions, net
    
    
    (0.1
    )
    
    
    
    
    
    
    (3.2
    )
    
    
    (4.4
    )
    
    
    (7.6
    )
    
    
    (8.7
    )
    
    
    (0.9
    )
    
    
    
    
    
    
    (17.2
    )Operating income (loss)
    
    
    5.6
    
    
    
    1.8
    
    
    
    663.8
    
    
    
    (57.2
    )
    
    
    606.6
    
    
    
    5.3
    
    
    
    (37.7
    )
    
    
    
    
    
    
    574.2Interest income
    
    
    
    
    
    
    
    
    
    
    6.0
    
    
    
    0.5
    
    
    
    6.5
    
    
    
    0.4
    
    
    
    17.5
    
    
    
    
    
    
    
    24.4Interest expense, net
    
    
    (1.1
    )
    
    
    (0.1
    )
    
    
    6.1
    
    
    
    1.1
    
    
    
    7.2
    
    
    
    (1.7
    )
    
    
    (10.9
    )
    
    
    
    
    
    
    (5.4
    )Provision for taxes on income
    
    
    
    
    
    
    
    
    
    
    (101.9
    )
    
    
    
    
    
    
    (101.9
    )
    
    
    
    
    
    
    (33.9
    )
    
    
    
    
    
    
    (135.8
    )Minority interests in
consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    (115.1
    )
    
    
    
    
    
    
    (115.1
    )
    
    
    (2.1
    )
    
    
    
    
    
    
    
    
    
    
    (117.2
    )Equity in net earnings (losses)
of affiliated companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.2
    )
    
    
    (0.2
    )
    
    
    0.3
    
    
    
    0.5
    
    
    
    
    
    
    
    0.6Income from discontinued
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16.9
    )
    
    
    (16.9
    )Equity basis investments at
March 31
    
    
    
    
    
    
    
    
    
    
    0.8
    
    
    
    1.1
    
    
    
    1.9
    
    
    
    6.8
    
    
    
    23.5
    
    
    
    
    
    
    
    32.2Assets at March 31
    
    
    746.0
    
    
    
    78.6
    
    
    
    7,370.0
    
    
    
    61.4
    
    
    
    7,431.4
    
    
    
    554.8
    
    
    
    2,569.1
    
    
    
    
    
    
    
    10,555.3Expenditures for segment assets
    
    
    4.0
    
    
    
    
    
    
    
    248.7
    
    
    
    24.0
    
    
    
    272.7
    
    
    
    2.7
    
    
    
    6.9
    
    
    
    9.4
    
    
    
    291.7First Quarter 2005*Sales and other operating revenues:Unaffiliated customers
    
    $
    675.0
    
    
    
    249.9
    
    
    
    1,612.7
    
    
    
    5.4
    
    
    
    1,618.1
    
    
    
    268.4
    
    
    
    
    
    
    
    
    
    
    
    1,886.5Intersegment
    
    
    57.9
    
    
    
    53.8
    
    
    
    983.1
    
    
    
    (927.9
    )
    
    
    55.2
    
    
    
    0.2
    
    
    
    (55.4
    )
    
    
    
    
    
    
    Depreciation, depletion and
amortization
    
    
    5.6
    
    
    
    
    
    
    
    99.8
    
    
    
    2.2
    
    
    
    102.0
    
    
    
    8.1
    
    
    
    1.7
    
    
    
    
    
    
    
    111.8Operating income (loss) before
specialitems and provisions
    
    
    4.2
    
    
    
    (3.8
    )
    
    
    567.0
    
    
    
    (10.7
    )
    
    
    556.3
    
    
    
    11.6
    
    
    
    (33.0
    )
    
    
    
    
    
    
    534.9Special items and provisions, net
    
    
    
    
    
    
    
    
    
    
    (5.1
    )
    
    
    (0.8
    )
    
    
    (5.9
    )
    
    
    0.4
    
    
    
    6.4
    
    
    
    
    
    
    
    0.9Operating income (loss)
    
    
    4.2
    
    
    
    (3.8
    )
    
    
    561.9
    
    
    
    (11.5
    )
    
    
    550.4
    
    
    
    12.0
    
    
    
    (26.6
    )
    
    
    
    
    
    
    535.8Interest income
    
    
    
    
    
    
    
    
    
    
    2.3
    
    
    
    0.1
    
    
    
    2.4
    
    
    
    0.2
    
    
    
    3.5
    
    
    
    
    
    
    
    6.1Interest expense, net
    
    
    (0.8
    )
    
    
    (0.3
    )
    
    
    (3.1
    )
    
    
    0.8
    
    
    
    (2.3
    )
    
    
    (2.0
    )
    
    
    (17.6
    )
    
    
    
    
    
    
    (21.9
    )Provision for taxes on income
    
    
    
    
    
    
    
    
    
    
    (39.7
    )
    
    
    
    
    
    
    (39.7
    )
    
    
    
    
    
    
    (86.4
    )
    
    
    
    
    
    
    (126.1
    )Minority interests in
consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    (25.6
    )
    
    
    
    
    
    
    (25.6
    )
    
    
    (1.0
    )
    
    
    
    
    
    
    
    
    
    
    (26.6
    )Equity in net earnings (losses)
of affiliated companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.5
    )
    
    
    (0.5
    )
    
    
    0.7
    
    
    
    0.5
    
    
    
    
    
    
    
    0.7Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.3
    
    
    
    9.3Equity basis investments at March 31
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    1.0
    
    
    
    1.5
    
    
    
    6.5
    
    
    
    24.2
    
    
    
    
    
    
    
    32.2Assets at March 31
    
    
    503.4
    
    
    
    23.9
    
    
    
    6,267.9
    
    
    
    0.6
    
    
    
    6,268.5
    
    
    
    641.1
    
    
    
    1,448.0
    
    
    
    665.6
    
    
    
    9,023.2Expenditures for segment assets
    
    
    4.9
    
    
    
    
    
    
    
    51.6
    
    
    
    8.7
    
    
    
    60.3
    
    
    
    2.9
    
    
    
    0.5
    
    
    
    4.6
    
    
    
    68.3
 
 *
    
    In the 2005 fourth quarter, the Company reassessed its reportable segments considering the increase in copper and molybdenum prices. Based upon our assessment, we are no longer separately disclosing
Miami/Bisbee as an individual reportable segment. Segment information for 2005 has been revised to conform to the 2006 presentation.




---



##### Table of Contents



6 
 NOTES
TO CONSOLIDATED FINANCIAL INFORMATION
 1. General Information
       2. Share-Based Compensation




---



##### Table of Contents



7  (Unaudited; $ in millions except per share amounts)Net income as reported
    
    $
    386.7Deduct:Total compensation cost assuming fair value
method for stock options, net of tax
    
    
    (0.9
    )Pro forma net income
    
    $
    385.8Basic earnings per common share:*As reported
    
    $
    2.00Pro forma
    
    $
    2.00Diluted earnings per common share:*As reported
    
    $
    1.92Pro forma
    
    $
    1.91
 
 *
    
    Earnings per common share for the 2005 first quarter have been adjusted to reflect the March
10, 2006, stock split. (Refer to Note 13, Shareholders Equity, for further discussion.)  (Unaudited)First Quarter2006
    
    
    2005Expected dividend yield
    
    
    0.95
    %
    
    
    1.04
    %Expected stock price volatility
    
    
    37.34
    %
    
    
    39.83
    %Risk-free interest rate
    
    
    4.48
    %
    
    
    3.76
    %Expected life of options
    
    5 years
    
    5 years
       (Unaudited)Weighted-AverageExerciseShares
    
    
    PriceOutstanding at December 31, 2005*
    
    
    1,111,174
    
    
    $
    29.82Granted
    
    
    143,000
    
    
    
    79.00Exercised
    
    
    (334,236
    )
    
    
    30.50Forfeited or expired
    
    
    (20,875
    )
    
    
    36.17Outstanding at March 31, 2006
    
    
    889,063
    
    
    
    37.24Exercisable at March 31, 2006
    
    
    534,032
    
    
    
    22.87
 
 *
    
    Outstanding shares and the weighted-average exercise price at December 31, 2005, have been
adjusted to reflect the March 10, 2006, stock split. (Refer to Note 13, Shareholders Equity,
for further discussion.)   (Unaudited)Weighted-AverageExerciseShares
    
    
    PricePD Plans2003 Plan
    
    
    40,780
    
    
    $
    43.011998 Plan
    
    
    464,690
    
    
    
    20.811993 Plan
    
    
    12,000
    
    
    
    32.691989 Directors Stock Option Plan
    
    
    16,072
    
    
    
    24.14Cyprus Amax Plans
    
    
    490
    
    
    
    22.23534,032
    
    
    
    22.87




---



##### Table of Contents



8  (Unaudited)Weighted-AverageGrant-DateFair ValueShares
    
    
    PriceOutstanding at December 31, 2005*
    
    
    1,548,734
    
    
    $
    36.62Granted
    
    
    242,190
    
    
    
    78.89Released
    
    
    (48,807
    )
    
    
    33.68Forfeited or expired
    
    
    (106,756
    )
    
    
    36.841,635,361
    
    
    
    42.95
 
 *
    
    Outstanding shares and the weighted-average grant-date fair value price at December 31, 2005,
have been adjusted to reflect the March 10, 2006, stock split. (Refer to Note 13,
Shareholders Equity for further discussion.)    3. Acquisitions and Divestitures
 Columbian Chemicals Company
    (Unaudited; $ in millions)First Quarter2006
    
    
    2005Sales and other operating revenues
    
    $
    179.8
    
    
    
    180.0Income from discontinued operations
before loss on disposal
    
    $
    17.0
    
    
    
    14.4Loss on disposal
    
    
    (29.5
    )
    
    
    Provision for taxes on income
    
    
    (4.4
    )
    
    
    (5.1
    )Income (loss) from discontinued operations
    
    $
    (16.9
    )
    
    
    9.3
  Magnet Wire North America




---



##### Table of Contents



9 High
Performance Conductors of SC & GA, Inc.
    4. Special Items and Provisions
 
  (Unaudited; $ in millions except per share amounts)Consolidated Statement of Income
    
    
    
    
    
    
    
    
    
    $/ShareLine Item
    
    Pre-tax
    
    
    After-tax
    
    
    After-taxSpecial items and provisions, net:PDMC Environmental provisions, net
    
    $
    (7.4
    )
    
    
    (5.6
    )
    
    
    (0.03
    )Historical legal matters
    
    
    (0.2
    )
    
    
    (0.2
    )
    
    
    (7.6
    )
    
    
    (5.8
    )
    
    
    (0.03
    )PDI Sale of North American magnet wire assets:Gain (loss) on disposal
    
    
    0.2
    
    
    
    (1.1
    )
    
    
    Transaction and employee-related costs
    
    
    (4.7
    )
    
    
    (3.6
    )
    
    
    (0.02
    )Sale of HPC:Loss on disposal
    
    
    (1.5
    )
    
    
    (2.2
    )
    
    
    (0.01
    )Transaction and employee-related costs
    
    
    (2.7
    )
    
    
    (2.7
    )
    
    
    (0.02
    )(8.7
    )
    
    
    (9.6
    )
    
    
    (0.05
    )Corporate and Other Environmental provisions, net
    
    
    (1.4
    )
    
    
    (1.1
    )
    
    
    Sale of non-core real estate
    
    
    0.5
    
    
    
    0.4
    
    
    
    (0.9
    )
    
    
    (0.7
    )
    
    
    (17.2
    )
    
    
    (16.1
    )
    
    
    (0.08
    )Discontinued operations:Loss on disposal of
Columbian Chemicals
    
    
    (14.8
    )
    
    
    (14.1
    )
    
    
    (0.07
    )Transaction and employee-related
costs
    
    
    (14.7
    )
    
    
    (14.7
    )
    
    
    (0.07
    )(29.5
    )
    
    
    (28.8
    )
    
    
    (0.14
    )$
    (46.7
    )
    
    
    (44.9
    )
    
    
    (0.22
    )




---



##### Table of Contents



10     (Unaudited; $ in millions except per share amounts)Consolidated Statement of Income
    
    
    
    
    
    
    
    
    
    $/ShareLine Item
    
    Pre-tax
    
    
    After-tax
    
    
    After-tax*Special items and provisions, net:PDMC Environmental provisions, net
    
    $
    (5.3
    )
    
    
    (4.0
    )
    
    
    (0.02
    )Environmental insurance
recoveries, net
    
    
    (0.6
    )
    
    
    (0.5
    )
    
    
    (5.9
    )
    
    
    (4.5
    )
    
    
    (0.02
    )PDI Restructuring programs/closures
    
    
    0.4
    
    
    
    0.8
    
    
    
    Corporate and Other Environmental provisions, net
    
    
    1.0
    
    
    
    0.7
    
    
    
    0.01Environmental insurance
recoveries, net
    
    
    0.6
    
    
    
    0.5
    
    
    
    Historical legal matters
    
    
    4.8
    
    
    
    4.5
    
    
    
    0.026.4
    
    
    
    5.7
    
    
    
    0.030.9
    
    
    
    2.0
    
    
    
    0.01Provisions for taxes on income:Foreign dividend taxes
    
    
    
    
    
    
    (1.9
    )
    
    
    (0.01
    )$
    0.9
    
    
    
    0.1
    
    
    
    
 
 *
    
    After-tax per common share amounts have been adjusted to reflect the March 10, 2006, stock
split. (Refer to Note 13, Shareholders Equity, for further discussion.)    5. New Accounting Pronouncements
 de minimis




---



##### Table of Contents



11      6. Environmental, and Reclamation and Closure Matters
   (Unaudited; $ in millions)Balance, beginning of period
    
    $
    367.9Additions to reserves*
    
    
    10.1Reductions in reserve estimates
    
    
    Spending against reserves
    
    
    (14.8
    )Balance, end of period
    
    $
    363.2
 
 *
    
    Amount includes $1.3 million associated with a settlement with a potentially responsible party.




---



##### Table of Contents



12    Asset Retirement Obligations(Unaudited; $ in millions)Balance, beginning of period
    
    $
    398.4New liabilities during the period
    
    
    1.1Accretion expense
    
    
    6.6Payments
    
    
    (10.0
    )Revisions in estimated cash flows
    
    
    (1.8
    )Balance, end of period
    
    $
    394.3
 Asset Retirement Costs(Unaudited; $ in millions)Gross balance, beginning of period
    
    $
    199.2New assets during the period
    
    
    1.1Revisions in estimated cash flows
    
    
    (1.8
    )Gross balance, end of period
    
    
    198.5Less accumulated depreciation, depletion and amortization
    
    
    90.2Balance, end of period
    
    $
    108.3
   7. Contingencies
 Significant New Mexico Environmental and Reclamation Programs




---



##### Table of Contents



13




---



##### Table of Contents



14  Significant Changes in International Closure and Reclamation Programs
 Sociedad Minera Cerro Verde S.A.A.
   Other
  8. Earnings Per Share
  (Unaudited; $ in millions except per share amounts)First Quarter2006
    
    
    2005Basic Earnings Per Common Share ComputationNumerator:Income from continuing operations
    
    $
    350.7
    
    
    
    377.4Income (loss) from discontinued operations
    
    
    (16.9
    )
    
    
    9.3Net income
    
    
    333.8
    
    
    
    386.7Preferred stock dividends
    
    
    
    
    
    
    (3.4
    )Net income applicable to common shares
    
    $
    333.8
    
    
    
    383.3Denominator:Weighted average common shares outstanding*
    
    
    202.0
    
    
    
    191.5Basic earnings per common share:*Income from continuing operations
    
    $
    1.73
    
    
    
    1.95Income (loss) from discontinued operations
    
    
    (0.08
    )
    
    
    0.05Basic earnings per common share
    
    $
    1.65
    
    
    
    2.00Diluted Earnings Per Common Share ComputationNumerator:Income from continuing operations before cumulative
effect of accounting change
    
    $
    350.7
    
    
    
    377.4Income (loss) from discontinued operations
    
    
    (16.9
    )
    
    
    9.3Net income
    
    
    333.8
    
    
    
    386.7Preferred stock dividends
    
    
    
    
    
    
    Net income applicable to common shares
    
    $
    333.8
    
    
    
    386.7Denominator:Weighted average common shares outstanding*
    
    
    202.0
    
    
    
    191.5Weighted average employee stock options*
    
    
    0.4
    
    
    
    1.2Weighted average restricted stock issued to employees*
    
    
    1.0
    
    
    
    0.8Weighted average mandatory convertible
preferred shares*
    
    
    
    
    
    
    8.3Total weighted average common shares outstanding*
    
    
    203.4
    
    
    
    201.8Diluted earnings per common share:*Income from continuing operations
    
    $
    1.72
    
    
    
    1.87Income (loss) from discontinued operations
    
    
    (0.08
    )
    
    
    0.05Diluted earnings per common share
    
    $
    1.64
    
    
    
    1.92
 
 *
    
    Weighted average shares outstanding and earnings per common share for the 2005 first quarter
have been adjusted to reflect the March 10, 2006, stock split. (Refer to Note 13,
Shareholders Equity, for further discussion.) 9. Provision for Taxes on Income




---



##### Table of Contents



15     10. Accounting for Derivative Instruments and Hedging Activities
    (Unaudited)2006
    
    
    2007Copper Collars:Pounds of zero-premium copper collars
purchased (in millions)
    
    
    564
    
    
    
    486Average LME put strike price (floor) per pound
    
    $
    0.954
    
    
    
    0.950Annual average LME call strike
price (ceiling) per pound
    
    $
    1.632
    
    
    
    2.002Associated pre-tax gains (charges) for the
2006 first quarter (A):Intrinsic value component (in millions)
    
    $
    (252
    )
    
    
    (110
    )Time value component (in millions)
    
    $
    13
    
    
    
    (41
    )Copper Put Options:Pounds of copper put options purchased (in millions)
    
    
    564
    
    
    
    730Average LME put strike price per pound
    
    $
    0.950
    
    
    
    0.950Premium cost per pound
    
    $
    0.020
    
    
    
    0.023Associated pre-tax charges for the
2006 first quarter (A):Intrinsic value component (in millions)
    
    $
    
    
    
    
    Time value component (in millions)
    
    $
    
    
    
    
    (3
    )
 
 (A)
    
    The 2006 unrealized pre-tax charges resulted from the 2006 LME price average of $2.375 per
pound exceeding the $1.632 per pound ceiling of our 2006 zero-premium copper collars. The
cumulative pre-tax charges for our 2006 copper collars and copper put options, including
amounts recognized in 2005, were approximately $414 million, reflecting intrinsic value
charges and put option premiums. The 2007 unrealized pre-tax charges resulted from the 2007
LME price average of $2.251 per pound exceeding the $2.002 per pound ceiling of our 2007
zero-premium copper collars and a significant increase in the time value component of the
options mark-to-market value at March 31, 2006. The cumulative pre-tax charges for our 2007
copper collars and copper put options, including amounts recognized in 2005, were
approximately $203 million, consisting of approximately $110 million for the intrinsic value
component, approximately $75 million for the time value component, with the remainder for put
option premiums.




---



##### Table of Contents



16  11. Pension and Post Retirement Benefits
  Pension Benefits(Unaudited; $ in millions)First Quarter2006
    
    
    2005Service cost  benefits earned during the period
    
    $
    5.6
    
    
    
    7.0Interest cost on benefit obligation
    
    
    17.5
    
    
    
    18.7Expected return on plan assets
    
    
    (25.9
    )
    
    
    (21.6
    )Amortization of prior service cost
    
    
    0.6
    
    
    
    0.8Amortization of actuarial loss
    
    
    4.5
    
    
    
    3.6Special retirement benefits
    
    
    0.5
    
    
    
    Net periodic benefit cost
    
    $
    2.8
    
    
    
    8.5
 Postretirement Benefits(Unaudited; $ in millions)First Quarter2006
    
    
    2005Service cost  benefits earned during the period
    
    $
    0.3
    
    
    
    1.1Interest cost on benefit obligation
    
    
    3.6
    
    
    
    4.8Expected return on plan assets
    
    
    (1.8
    )
    
    
    Amortization of prior service cost
    
    
    (0.6
    )
    
    
    Recognized net actuarial loss
    
    
    (0.2
    )
    
    
    Special retirement benefits
    
    
    (0.3
    )
    
    
    Net periodic benefit cost
    
    $
    1.0
    
    
    
    5.9
     12. Debt and Other Financing




---



##### Table of Contents



17 13. Shareholders Equity
 Stock Split




---



##### Table of Contents



18 
 REVIEW BY INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
   
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




---



##### Table of Contents



19 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  
 RESULTS OF OPERATIONS
 Consolidated Financial Results
   (Unaudited; $ in millions except per share amounts)First Quarter2006
    
    
    2005Sales and other operating revenues
    
    $
    2,224.6
    
    
    
    1,886.5Operating income
    
    $
    574.2
    
    
    
    535.8Minority interests in consolidated subsidiaries
    
    $
    (117.2
    )
    
    
    (26.6
    )Income from continuing operations
    
    $
    350.7
    
    
    
    377.4Income (loss) from discontinued operations
    
    $
    (16.9
    )
    
    
    9.3Net income
    
    $
    333.8
    
    
    
    386.7Basic earnings per common share:*Income from continuing operations
    
    $
    1.73
    
    
    
    1.95Income (loss) from discontinued operations
    
    
    (0.08
    )
    
    
    0.05Basic earnings per common share
    
    $
    1.65
    
    
    
    2.00Diluted earnings per common share:*Income from continuing operations
    
    $
    1.72
    
    
    
    1.87Income (loss) from discontinued operations
    
    
    (0.08
    )
    
    
    0.05Diluted earnings per common share
    
    $
    1.64
    
    
    
    1.92
 
 *
    
    Earnings per common share for the 2005 first quarter have been adjusted to reflect the March
10, 2006, stock split. (Refer to Note 13, Shareholders Equity, to our unaudited March 31,
2006, Consolidated Financial Information for further discussion.)




---



##### Table of Contents



20  Special Items and Provisions
 
  (Unaudited; $ in millions)First Quarter2006
    
    
    2005Net income
    
    $
    333.8
    
    
    
    386.7Special items and provisions, net of taxes
    
    
    (44.9
    )
    
    
    0.1Earnings excluding special items
and provisions (after taxes)
    
    $
    378.7
    
    
    
    386.6




---



##### Table of Contents



21   (Unaudited; $ in millions except per share amounts)2006 First Quarter
    
    
    2005 First Quarter$/Share
    
    
    
    
    
    
    
    
    
    
    $/ShareConsolidated Statement of Income Line Item
    
    Pre-tax
    
    
    After-tax
    
    
    After-tax
    
    
    Pre-tax
    
    
    After-tax
    
    
    After-tax*Special items and provisions, net:PDMC (see Business Segment disclosure)
    
    $
    (7.6
    )
    
    
    (5.8
    )
    
    
    (0.03
    )
    
    
    (5.9
    )
    
    
    (4.5
    )
    
    
    (0.02
    )PDI (see Business Segment disclosure)
    
    
    (8.7
    )
    
    
    (9.6
    )
    
    
    (0.05
    )
    
    
    0.4
    
    
    
    0.8
    
    
    
    Corporate and Other Environmental provisions, net
    
    
    (1.4
    )
    
    
    (1.1
    )
    
    
    
    
    
    
    1.0
    
    
    
    0.7
    
    
    
    0.01Environmental insurance recoveries, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.6
    
    
    
    0.5
    
    
    
    Sale of non-core real estate
    
    
    0.5
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Historical legal matters
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.8
    
    
    
    4.5
    
    
    
    0.02(0.9
    )
    
    
    (0.7
    )
    
    
    
    
    
    
    6.4
    
    
    
    5.7
    
    
    
    0.03(17.2
    )
    
    
    (16.1
    )
    
    
    (0.08
    )
    
    
    0.9
    
    
    
    2.0
    
    
    
    0.01Provision for taxes on income:Foreign dividend taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.9
    )
    
    
    (0.01
    )Discontinued operations:Loss on disposal of Columbian Chemicals
    
    
    (14.8
    )
    
    
    (14.1
    )
    
    
    (0.07
    )
    
    
    
    
    
    
    
    
    
    
    Transaction and employee-related costs
    
    
    (14.7
    )
    
    
    (14.7
    )
    
    
    (0.07
    )
    
    
    
    
    
    
    
    
    
    
    (29.5
    )
    
    
    (28.8
    )
    
    
    (0.14
    )
    
    
    
    
    
    
    
    
    
    
    $
    (46.7
    )
    
    
    (44.9
    )
    
    
    (0.22
    )
    
    
    0.9
    
    
    
    0.1
    
    
    
    
 
 *
    
    After-tax per common share amounts have been adjusted to reflect the March 10, 2006, stock
split. (Refer to Note 13, Shareholders Equity, to our unaudited March 31, 2006, Consolidated
Financial Information for further discussion.) Business Divisions
      
 RESULTS OF PHELPS DODGE MINING COMPANY




---



##### Table of Contents



22       (Unaudited; $ in millions except per pound amounts)First Quarter2006
    
    
    2005Sales and other operating revenues
to unaffiliated customers
    
    $
    1,903.5
    
    
    
    1,618.1Operating income
    
    $
    606.6
    
    
    
    550.4Operating income before special
items and provisions, net
    
    $
    614.2
    
    
    
    556.3Minority interests in consolidated subsidiaries (A)
    
    $
    (115.1
    )
    
    
    (25.6
    )Copper production (thousand short tons):Total copper production
    
    
    318.3
    
    
    
    325.0Less undivided interest (B)
    
    
    14.1
    
    
    
    13.8Copper production on a consolidated basis
    
    
    304.2
    
    
    
    311.2Less minority participants shares (A)
    
    
    53.0
    
    
    
    43.5Copper production on a pro rata basis
    
    
    251.2
    
    
    
    267.7Copper sales (thousand short tons):Total copper sales from own mines
    
    
    318.6
    
    
    
    325.0Less undivided interest (B)
    
    
    14.1
    
    
    
    13.8Copper sales from own mines on a
consolidated basis
    
    
    304.5
    
    
    
    311.2Less minority participants shares (A)
    
    
    50.5
    
    
    
    43.8Copper sales from own mines on a
pro rata basis
    
    
    254.0
    
    
    
    267.4Purchased copper
    
    
    97.1
    
    
    
    92.6Total copper sales on a consolidated basis
    
    
    401.6
    
    
    
    403.8LME average spot copper price
per pound  cathodes
    
    $
    2.241
    
    
    
    1.482COMEX average spot copper price
per pound  cathodes
    
    $
    2.253
    
    
    
    1.468Molybdenum production (million pounds)
    
    
    17.2
    
    
    
    14.7Molybdenum sales (million pounds):Net Phelps Dodge share from own mines
    
    
    16.9
    
    
    
    14.9Purchased molybdenum
    
    
    2.2
    
    
    
    3.7Total molybdenum sales
    
    
    19.1
    
    
    
    18.6Metals Week:Molybdenum Dealer Oxide mean
price per pound
    
    $
    22.91
    
    
    
    31.31M-1 price per pound
    
    $
    24.15
    
    
    
    30.40
 
 (A)
    
    Minority participant interests include (i) a 20 percent partnership interest in Candelaria in
Chile owned by SMMA Candelaria, Inc., Sumitomo Metal Mining Co., Ltd. and Sumitomo
Corporation, (ii) a 49 percent partnership interest in the El Abra copper mining operation in
Chile held by Corporación Nacional del Cobre de Chile, (iii) a 17.5 percent equity interest
through May 31, 2005, and a 46.4 percent equity interest beginning June 1, 2005, in the Cerro
Verde copper mining operation in Peru held by SMM Cerro Verde Netherlands B.V. and Compañía de
Minas Buenaventura S.A.A., and (iv) a 20 percent equity interest beginning December 23, 2005,
in the Ojos del Salado copper mining operation in Chile held by SMMA Candelaria, Inc.(B)
    
    Represents a 15 percent undivided interest in Morenci, Arizona, copper mining complex held by
Sumitomo Metal Mining Arizona, Inc.




---



##### Table of Contents



23 (thousand short tons)First Quarter2006
    
    
    2005Minority
participants shares of copper production:Candelaria
    
    
    10.2
    
    
    
    10.3Cerro Verde
    
    
    11.6
    
    
    
    4.2El Abra
    
    
    29.7
    
    
    
    29.0Ojos del Salado
    
    
    1.5
    
    
    
    53.0
    
    
    
    43.5
 Total PDMC Division  Sales
   Total PDMC Division  Operating Income




---



##### Table of Contents



24 i.e.
   (Unaudited)2006
    
    
    2007Copper Collars:Pounds of zero-premium copper collars
purchased (in millions)
    
    
    564
    
    
    
    486Average LME put strike price (floor) per pound
    
    $
    0.954
    
    
    
    0.950Annual average LME call strike
price (ceiling) per pound
    
    $
    1.632
    
    
    
    2.002Associated pre-tax gains (charges) for the
2006 first quarter (A):Intrinsic value component (in millions)
    
    $
    (252
    )
    
    
    (110
    )Time value component (in millions)
    
    $
    13
    
    
    
    (41
    )Copper Put Options:Pounds of copper put options purchased (in millions)
    
    
    564
    
    
    
    730Average LME put strike price per pound
    
    $
    0.950
    
    
    
    0.950Premium cost per pound
    
    $
    0.020
    
    
    
    0.023Associated pre-tax charges for the
2006 first quarter (A):Intrinsic value component (in millions)
    
    $
    
    
    
    
    Time value component (in millions)
    
    $
    
    
    
    
    (3
    )
 
 (A)
    
    The 2006 unrealized pre-tax charges resulted from the 2006 LME price average of $2.375 per
pound exceeding the $1.632 per pound ceiling of our 2006 zero-premium copper collars. The
cumulative pre-tax charges for our 2006 copper collars and copper put options, including
amounts recognized in 2005, were approximately $414 million, reflecting intrinsic value
charges and put option premiums. The 2007 unrealized pre-tax charges resulted from the 2007
LME price average of $2.251 per pound exceeding the $2.002 per pound ceiling of our 2007
zero-premium copper collars and a significant increase in the time value component of the
options mark-to-market value at March 31, 2006. The cumulative pre-tax charges for our 2007
copper collars and copper put options, including amounts recognized in 2005, were
approximately $203 million, consisting of approximately $110 million for the intrinsic value
component, approximately $75 million for the time value component, with the remainder for put
option premiums.  
  (Unaudited; $ in millions)First Quarter2006
    
    
    2005Environmental provisions, net
    
    $
    (7.4
    )
    
    
    (5.3
    )Environmental insurance recoveries, net
    
    
    
    
    
    
    (0.6
    )Historical legal matters
    
    
    (0.2
    )
    
    
    $
    (7.6
    )
    
    
    (5.9
    )




---



##### Table of Contents



25 PDMC RESULTS BY REPORTABLE SEGMENTS
 
  U.S. MinesMorenci
    
    
    Bagdad
    
    
    Sierrita
    
    
    Chino/Cobre
    
    
    Tyrone
    
    
    SubtotalFirst Quarter 2006Copper production (thousand short tons):Total production
    
    
    93.9
    
    
    
    19.0
    
    
    
    21.7
    
    
    
    26.8
    
    
    
    7.9
    
    
    
    169.3Less undivided interest
    
    
    14.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14.1Copper production on a consolidated basis
    
    
    79.8
    
    
    
    19.0
    
    
    
    21.7
    
    
    
    26.8
    
    
    
    7.9
    
    
    
    155.2Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a pro rata basis
    
    
    79.8
    
    
    
    19.0
    
    
    
    21.7
    
    
    
    26.8
    
    
    
    7.9
    
    
    
    155.2Copper sales (thousand short tons):Total copper sales from own mines
    
    
    93.9
    
    
    
    21.7
    
    
    
    24.2
    
    
    
    26.8
    
    
    
    7.9
    
    
    
    174.5Less undivided interest
    
    
    14.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14.1Copper sales from own mines on a consolidated basis
    
    
    79.8
    
    
    
    21.7
    
    
    
    24.2
    
    
    
    26.8
    
    
    
    7.9
    
    
    
    160.4Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a pro rata basis
    
    
    79.8
    
    
    
    21.7
    
    
    
    24.2
    
    
    
    26.8
    
    
    
    7.9
    
    
    
    160.4Total purchased copper
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total copper sales on a consolidated basis
    
    
    79.8
    
    
    
    21.7
    
    
    
    24.2
    
    
    
    26.8
    
    
    
    7.9
    
    
    
    160.4($ in millions)Operating income (loss)
    
    $
    36.4
    
    
    
    36.1
    
    
    
    100.4
    
    
    
    (8.2
    )
    
    
    (7.8
    )
    
    
    156.9Special items and provisions, net
    
    
    
    
    
    
    2.2
    
    
    
    (1.3
    )
    
    
    (3.9
    )
    
    
    
    
    
    
    (3.0
    )Operating income (loss) before special items and provisions, net
    
    $
    36.4
    
    
    
    33.9
    
    
    
    101.7
    
    
    
    (4.3
    )
    
    
    (7.8
    )
    
    
    159.9First Quarter 2005Copper production (thousand short tons):Total production
    
    
    92.1
    
    
    
    27.9
    
    
    
    21.5
    
    
    
    28.7
    
    
    
    10.4
    
    
    
    180.6Less undivided interest
    
    
    13.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13.8Copper production on a consolidated basis
    
    
    78.3
    
    
    
    27.9
    
    
    
    21.5
    
    
    
    28.7
    
    
    
    10.4
    
    
    
    166.8Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a pro rata basis
    
    
    78.3
    
    
    
    27.9
    
    
    
    21.5
    
    
    
    28.7
    
    
    
    10.4
    
    
    
    166.8Copper sales (thousand short tons):Total copper sales from own mines
    
    
    92.1
    
    
    
    29.1
    
    
    
    22.6
    
    
    
    28.7
    
    
    
    10.4
    
    
    
    182.9Less undivided interest
    
    
    13.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13.8Copper sales from own mines on a consolidated basis
    
    
    78.3
    
    
    
    29.1
    
    
    
    22.6
    
    
    
    28.7
    
    
    
    10.4
    
    
    
    169.1Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a pro rata basis
    
    
    78.3
    
    
    
    29.1
    
    
    
    22.6
    
    
    
    28.7
    
    
    
    10.4
    
    
    
    169.1Total purchased copper
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total copper sales on a consolidated basis
    
    
    78.3
    
    
    
    29.1
    
    
    
    22.6
    
    
    
    28.7
    
    
    
    10.4
    
    
    
    169.1($ in millions)Operating income (loss)
    
    $
    85.9
    
    
    
    84.4
    
    
    
    134.5
    
    
    
    17.1
    
    
    
    (2.9
    )
    
    
    319.0Special items and provisions, net
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    (0.6
    )
    
    
    (4.2
    )
    
    
    (5.1
    )Operating income (loss) before special items and provisions, net
    
    $
    86.2
    
    
    
    84.4
    
    
    
    134.5
    
    
    
    17.7
    
    
    
    1.3
    
    
    
    324.1




---



##### Table of Contents



26 PDMC RESULTS BY REPORTABLE SEGMENTS
 
 South American MinesCandelaria/Ojos delSalado
    
    
    Cerro Verde
    
    
    El Abra
    
    
    SubtotalFirst Quarter 2006Copper production (thousand short tons):Total production
    
    
    58.5
    
    
    
    25.1
    
    
    
    60.6
    
    
    
    144.2Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a consolidated basis
    
    
    58.5
    
    
    
    25.1
    
    
    
    60.6
    
    
    
    144.2Less minority participants shares
    
    
    11.7
    
    
    
    11.6
    
    
    
    29.7
    
    
    
    53.0Copper production on a pro rata basis
    
    
    46.8
    
    
    
    13.5
    
    
    
    30.9
    
    
    
    91.2Copper sales (thousand short tons):Total copper sales from own mines
    
    
    56.8
    
    
    
    19.2
    
    
    
    61.7
    
    
    
    137.7Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a consolidated basis
    
    
    56.8
    
    
    
    19.2
    
    
    
    61.7
    
    
    
    137.7Less minority participants shares
    
    
    11.4
    
    
    
    8.9
    
    
    
    30.2
    
    
    
    50.5Copper sales from own mines on a pro rata basis
    
    
    45.4
    
    
    
    10.3
    
    
    
    31.5
    
    
    
    87.2Total purchased copper
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total copper sales on a consolidated basis
    
    
    56.8
    
    
    
    19.2
    
    
    
    61.7
    
    
    
    137.7($ in millions)Operating income (loss)
    
    $
    145.0
    
    
    
    69.9
    
    
    
    178.8
    
    
    
    393.7Special items and provisions, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss) before special items and provisions, net
    
    $
    145.0
    
    
    
    69.9
    
    
    
    178.8
    
    
    
    393.7First Quarter 2005Copper production (thousand short tons):Total production
    
    
    57.3
    
    
    
    23.9
    
    
    
    59.1
    
    
    
    140.3Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a consolidated basis
    
    
    57.3
    
    
    
    23.9
    
    
    
    59.1
    
    
    
    140.3Less minority participants shares
    
    
    10.3
    
    
    
    4.2
    
    
    
    29.0
    
    
    
    43.5Copper production on a pro rata basis
    
    
    47.0
    
    
    
    19.7
    
    
    
    30.1
    
    
    
    96.8Copper sales (thousand short tons):Total copper sales from own mines
    
    
    52.8
    
    
    
    22.3
    
    
    
    62.2
    
    
    
    137.3Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a consolidated basis
    
    
    52.8
    
    
    
    22.3
    
    
    
    62.2
    
    
    
    137.3Less minority participants shares
    
    
    9.4
    
    
    
    3.9
    
    
    
    30.5
    
    
    
    43.8Copper sales from own mines on a pro rata basis
    
    
    43.4
    
    
    
    18.4
    
    
    
    31.7
    
    
    
    93.5Total purchased copper
    
    
    3.2
    
    
    
    
    
    
    
    
    
    
    
    3.2Total copper sales on a consolidated basis
    
    
    56.0
    
    
    
    22.3
    
    
    
    62.2
    
    
    
    140.5($ in millions)Operating income (loss)
    
    $
    75.4
    
    
    
    36.0
    
    
    
    44.5
    
    
    
    155.9Special items and provisions, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss) before special items and provisions, net
    
    $
    75.4
    
    
    
    36.0
    
    
    
    44.5
    
    
    
    155.9




---



##### Table of Contents



27 PDMC RESULTS BY REPORTABLE SEGMENTS
 
 Primary
    
    
    
    
    
    
    
    
    
    
    PDMCMolybdenum
    
    
    Manufacturing
    
    
    Sales
    
    
    Segments
    
    
    Other
    
    
    Total PDMCFirst Quarter 2006Copper production (thousand short tons):Total production
    
    
    
    
    
    
    1.4
    
    
    
    
    
    
    
    314.9
    
    
    
    3.4
    
    
    
    318.3Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14.1
    
    
    
    
    
    
    
    14.1Copper production on a consolidated basis
    
    
    
    
    
    
    1.4
    
    
    
    
    
    
    
    300.8
    
    
    
    3.4
    
    
    
    304.2Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53.0
    
    
    
    
    
    
    
    53.0Copper production on a pro rata basis
    
    
    
    
    
    
    1.4
    
    
    
    
    
    
    
    247.8
    
    
    
    3.4
    
    
    
    251.2Copper sales (thousand short tons):Total copper sales from own mines
    
    
    
    
    
    
    1.4
    
    
    
    
    
    
    
    313.6
    
    
    
    5.0
    
    
    
    318.6Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14.1
    
    
    
    
    
    
    
    14.1Copper sales from own mines on a consolidated basis
    
    
    
    
    
    
    1.4
    
    
    
    
    
    
    
    299.5
    
    
    
    5.0
    
    
    
    304.5Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50.5
    
    
    
    
    
    
    
    50.5Copper sales from own mines on a pro rata basis
    
    
    
    
    
    
    1.4
    
    
    
    
    
    
    
    249.0
    
    
    
    5.0
    
    
    
    254.0Total purchased copper
    
    
    
    
    
    
    96.5
    
    
    
    0.6
    
    
    
    97.1
    
    
    
    
    
    
    
    97.1Total copper sales on a consolidated basis
    
    
    
    
    
    
    97.9
    
    
    
    0.6
    
    
    
    396.6
    
    
    
    5.0
    
    
    
    401.6Molybdenum production (thousand pounds):Primary  Henderson
    
    
    9,355
    
    
    
    
    
    
    
    
    
    
    
    9,355
    
    
    
    
    
    
    
    9,355By-product
    
    
    7,821
    
    
    
    
    
    
    
    
    
    
    
    7,821
    
    
    
    
    
    
    
    7,821Total molybdenum production
    
    
    17,176
    
    
    
    
    
    
    
    
    
    
    
    17,176
    
    
    
    
    
    
    
    17,176Molybdenum sales (thousand pounds):Net Phelps Dodge share from own mines
    
    
    16,903
    
    
    
    
    
    
    
    
    
    
    
    16,903
    
    
    
    
    
    
    
    16,903Purchased molybdenum
    
    
    2,195
    
    
    
    
    
    
    
    
    
    
    
    2,195
    
    
    
    
    
    
    
    2,195Total molybdenum sales
    
    
    19,098
    
    
    
    
    
    
    
    
    
    
    
    19,098
    
    
    
    
    
    
    
    19,098($ in millions)Operating income (loss)
    
    $
    105.8
    
    
    
    5.6
    
    
    
    1.8
    
    
    
    663.8
    
    
    
    (57.2
    )
    
    
    606.6Special items and provisions, net
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    (3.2
    )
    
    
    (4.4
    )
    
    
    (7.6
    )Operating income (loss) before special items and provisions, net
    
    $
    105.9
    
    
    
    5.7
    
    
    
    1.8
    
    
    
    667.0
    
    
    
    (52.8
    )
    
    
    614.2First Quarter 2005Copper production (thousand short tons):Total production
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    321.8
    
    
    
    3.2
    
    
    
    325.0Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13.8
    
    
    
    
    
    
    
    13.8Copper production on a consolidated basis
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    308.0
    
    
    
    3.2
    
    
    
    311.2Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43.5
    
    
    
    
    
    
    
    43.5Copper production on a pro rata basis
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    264.5
    
    
    
    3.2
    
    
    
    267.7Copper sales (thousand short tons):Total copper sales from own mines
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    321.1
    
    
    
    3.9
    
    
    
    325.0Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13.8
    
    
    
    
    
    
    
    13.8Copper sales from own mines on a consolidated basis
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    307.3
    
    
    
    3.9
    
    
    
    311.2Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43.8
    
    
    
    
    
    
    
    43.8Copper sales from own mines on a pro rata basis
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    263.5
    
    
    
    3.9
    
    
    
    267.4Total purchased copper
    
    
    
    
    
    
    82.4
    
    
    
    7.0
    
    
    
    92.6
    
    
    
    
    
    
    
    92.6Total copper sales on a consolidated basis
    
    
    
    
    
    
    83.3
    
    
    
    7.0
    
    
    
    399.9
    
    
    
    3.9
    
    
    
    403.8Molybdenum production (thousand pounds):Primary  Henderson
    
    
    7,853
    
    
    
    
    
    
    
    
    
    
    
    7,853
    
    
    
    
    
    
    
    7,853By-product
    
    
    6,862
    
    
    
    
    
    
    
    
    
    
    
    6,862
    
    
    
    
    
    
    
    6,862Total molybdenum production
    
    
    14,715
    
    
    
    
    
    
    
    
    
    
    
    14,715
    
    
    
    
    
    
    
    14,715Molybdenum sales (thousand pounds):Net Phelps Dodge share from own mines
    
    
    14,933
    
    
    
    
    
    
    
    
    
    
    
    14,933
    
    
    
    
    
    
    
    14,933Purchased molybdenum
    
    
    3,662
    
    
    
    
    
    
    
    
    
    
    
    3,662
    
    
    
    
    
    
    
    3,662Total molybdenum sales
    
    
    18,595
    
    
    
    
    
    
    
    
    
    
    
    18,595
    
    
    
    
    
    
    
    18,595($ in millions)Operating income (loss)
    
    $
    86.6
    
    
    
    4.2
    
    
    
    (3.8
    )
    
    
    561.9
    
    
    
    (11.5
    )
    
    
    550.4Special items and provisions, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5.1
    )
    
    
    (0.8
    )
    
    
    (5.9
    )Operating income (loss) before special items and provisions, net
    
    $
    86.6
    
    
    
    4.2
    
    
    
    (3.8
    )
    
    
    567.0
    
    
    
    (10.7
    )
    
    
    556.3




---



##### Table of Contents



28 Sales of Copper (U.S. and South America) and Molybdenum
  (Unaudited; $ in millions)First Quarter2006
    
    
    2005U.S. Mining Operations*Unaffiliated customers
    
    $
    1,060.0
    
    
    
    930.7Intersegment elimination
    
    
    (222.8
    )
    
    
    (164.2
    )837.2
    
    
    
    766.5South American Mines**Unaffiliated customers
    
    
    423.2
    
    
    
    210.6Intersegment
    
    
    222.8
    
    
    
    164.2646.0
    
    
    
    374.8Primary MolybdenumUnaffiliated customers
    
    
    420.3
    
    
    
    476.8Intersegment
    
    
    
    
    
    
    420.3
    
    
    
    476.8Total PDMCUnaffiliated customers
    
    $
    1,903.5
    
    
    
    1,618.1
 
 *
    
    U.S. Mining Operations comprised the following reportable segments: Morenci, Bagdad,
Sierrita, Chino/Cobre, Tyrone, Manufacturing and Sales, along with other mining activities.**
    
    South American Mines comprised the following segments: Candelaria/Ojos del Salado, Cerro
Verde and El Abra. U.S. Mining Operations  Sales
  South American Mines Segment  Sales
  Primary Molybdenum Segment  Sales
  Operating Income for Copper (U.S. and South America) and Molybdenum
 
  (Unaudited; $ in millions)First Quarter2006
    
    
    2005Segment operating income:U.S. Mining Operations*
    
    $
    107.1
    
    
    
    307.9South American Mines**
    
    
    393.7
    
    
    
    155.9Primary Molybdenum
    
    
    105.8
    
    
    
    86.6$
    606.6
    
    
    
    550.4Special, pre-tax items and provisions:U.S. Mining Operations*
    
    $
    (7.5
    )
    
    
    (5.9
    )South American Mines**
    
    
    
    
    
    
    Primary Molybdenum
    
    
    (0.1
    )
    
    
    $
    (7.6
    )
    
    
    (5.9
    )Segment operating income excluding
special items and provisions:U.S. Mining Operations*
    
    $
    114.6
    
    
    
    313.8South American Mines**
    
    
    393.7
    
    
    
    155.9Primary Molybdenum
    
    
    105.9
    
    
    
    86.6$
    614.2
    
    
    
    556.3
 
 *
    
    U.S. Mining Operations comprised the following reportable segments: Morenci, Bagdad,
Sierrita, Chino/Cobre, Tyrone, Manufacturing and Sales, along with other mining activities.**
    
    South American Mines comprised the following segments: Candelaria/Ojos del Salado, Cerro
Verde and El Abra.




---



##### Table of Contents



29 U.S. Mining Operations  Operating Income
  Morenci Segment  Operating Income
    Bagdad Segment  Operating Income
   Sierrita Segment  Operating Income
   Chino/Cobre Segment  Operating Income (Loss)
   Tyrone Segment  Operating Loss




---



##### Table of Contents



30 Manufacturing Segment  Operating Income
   Sales
Segment  Operating Income (Loss)
   PDMC Other and Eliminations  Operating Loss
   South American Mines  Operating Income
  Candelaria/Ojos del Salado Segment  Operating Income
   Cerro Verde Segment  Operating Income




---



##### Table of Contents



31   El Abra Segment  Operating Income
   Primary Molybdenum  Operating Income
    i.e Metals Week Ryans Notes Metal Bulletin i.e.,
  Curtailed Properties




---



##### Table of Contents



32      PDMC  Other Matters
      Significant New Mexico Environmental and Reclamation Programs




---



##### Table of Contents



33     
 RESULTS OF PHELPS DODGE INDUSTRIES
    (Unaudited; $ in millions)First Quarter2006
    
    
    2005Sales and other operating revenues
to unaffiliated customers
    
    $
    321.1
    
    
    
    268.4Operating income
    
    $
    5.3
    
    
    
    12.0Special items and provisions, net
    
    $
    (8.7
    )
    
    
    0.4Operating income before special
items and provisions, net
    
    $
    14.0
    
    
    
    11.6Minority interests in consolidated subsidiaries
    
    $
    (2.1
    )
    
    
    (1.0
    )
 Wire and Cable  Sales
  Wire and Cable  Operating Income
     (Unaudited; $ in millions)First Quarter2006
    
    
    2005Sale of North American magnet wire assets:Gain on disposal
    
    $
    0.2
    
    
    
    Transaction and employee-related costs
    
    
    (4.7
    )
    
    
    Sale of HPC:Loss on disposal
    
    
    (1.5
    )
    
    
    Transaction and employee-related costs
    
    
    (2.7
    )
    
    
    Restructuring programs/closures
    
    
    
    
    
    
    0.4Special, pre-tax items
    
    $
    (8.7
    )
    
    
    0.4




---



##### Table of Contents



34 
 DISCONTINUED OPERATIONS
    (Unaudited; $ in millions)First Quarter2006
    
    
    2005Sales and other operating revenues
    
    $
    179.8
    
    
    
    180.0Income from discontinued operations
before loss on disposal
    
    $
    17.0
    
    
    
    14.4Loss on
disposal
    
    
    (29.5
    )
    
    
    Provision for taxes on income
    
    
    (4.4
    )
    
    
    (5.1
    )Income (loss) from discontinued operations
    
    $
    (16.9
    )
    
    
    9.3
  
 OTHER MATTERS RELATING TO THE CONSOLIDATED STATEMENT OF INCOME
 Cost of Products Sold
  Selling and General Administrative Expense
  Exploration and Research Expense
  Interest Expense, Net
  Miscellaneous Income and Expense, Net
  Provision for Taxes on Income




---



##### Table of Contents



35    Minority Interests in Consolidated Subsidiaries
  
 CHANGES IN FINANCIAL CONDITION; CAPITALIZATION
 Cash and Cash Equivalents
   (Unaudited; $ in millions)March 31,
    
    
    December 31,2006
    
    
    2005U.S. operations:Phelps Dodge*
    
    $
    1,399.8
    
    
    
    1,103.9Minority participants share
    
    
    0.4
    
    
    
    0.41,400.2
    
    
    
    1,104.3International operations:Phelps Dodge**
    
    
    512.1
    
    
    
    571.3Minority participants share**
    
    
    250.7
    
    
    
    261.9762.8
    
    
    
    833.2Total consolidated cash
    
    $
    2,163.0
    
    
    
    1,937.5
 
 *
    
    At March 31, 2006 and December 31, 2005, U.S. operations included restricted cash of
$9.7 million and $9.4 million, respectively.**
    
    At March 31, 2006 and December 31, 2005, international operations included restricted cash of
$0.6 million and $11.4 million, respectively. At December 31, 2005, $5.0 million of restricted
cash was associated with minority participants shares.  Working Capital
  
    
    a $250.6 million net decrease in assets held for sale and
liabilities related to assets held for sale due to the
completion of the sales of both Columbian ($159.7 million) and
the North American magnet wire assets ($90.9 million) in the
2006 first quarter;
    
    a $60.2 million increase in accrued income taxes primarily
due to higher foreign, federal and state income tax provisions
(approximately $108 million); partially offset by payments, net
of refunds (approximately $51 million); and
    
    a $36.5 million increase in accounts payable and accrued
expenses mostly due to (i) higher accruals for hedging and price
protection programs (approximately $77 million) mostly
associated with mark-to-market adjustments on copper collars,
(ii) higher balances for copper cathode and concentrate
purchases (approximately $21 million), (iii) higher royalty tax
accruals (approximately $12 million), (iv) a net increase in
environmental reserves (approximately $11 million) primarily
resulting from the reclassification of the current portion for
the acceleration of certain environmental projects, (v) higher
severance accruals associated with the sales of Columbian, the North
American magnet wire assets and HPC (approximately $12
million) and (vi) higher accrued interest (approximately $8
million); partially offset by timing of payments (approximately $54 million); and net reductions in employee incentive and
variable compensation plans (approximately $49 million);
partially offset by
    
    a $178.6 million increase in accounts receivable primarily
due to copper receivables mostly resulting from higher copper
prices




---



##### Table of Contents



36 (approximately $175 million) and the impact of forward
prices on provisionally priced copper sales (approximately $35
million); partially offset by lower molybdenum receivables
mostly resulting from lower molybdenum prices (approximately $19
million);
    
    a $35.5 million increase in prepaid expenses and other
current assets primarily due to timing of payments for insurance
(approximately $13 million), higher prepaid foreign income taxes
(approximately $8 million), fair value adjustments associated
with derivatives (approximately $6 million) and timing of
activities associated with the Cerro Verde sulfide project
(approximately $5 million);
    
    a $32.6 million increase in inventories primarily due to
higher purchases at Wire and Cable mostly in anticipation of
increased customer demand (approximately $20 million) and the
impact of adopting Emerging Issues Task Force (EITF) Issue No.
04-6, Accounting for Stripping Costs Incurred During Production
in the Mining Industry, (approximately $7 million); and
    
    a $22.2 million increase in mill and leach stockpiles
primarily due to the reclassification of the current portion
(approximately $18 million) and the adoption of EITF Issue No.
04-6 (approximately $4 million).
 Capital Expenditures and Investments
   Debt




---



##### Table of Contents



37 Dividends




---



##### Table of Contents



38 Contractual Obligations
  Contractual Obligations:(Unaudited; $ in millions)Less Than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 YearsShort-term debt
    
    $
    27.1
    
    
    
    27.1
    
    
    
    
    
    
    
    
    
    
    
    Long-term debt
    
    
    677.3
    
    
    
    2.5
    
    
    
    65.7
    
    
    
    28.6
    
    
    
    580.5Scheduled interest payment obligations*
    
    
    978.3
    
    
    
    52.7
    
    
    
    97.6
    
    
    
    93.3
    
    
    
    734.7Asset retirement obligations**
    
    
    56.2
    
    
    
    23.6
    
    
    
    19.3
    
    
    
    8.8
    
    
    
    4.5Take-or-pay contracts
    
    
    1,394.3
    
    
    
    1,163.2
    
    
    
    152.5
    
    
    
    40.4
    
    
    
    38.2Total contractual cash obligations
    
    $
    3,133.2
    
    
    
    1,269.1
    
    
    
    335.1
    
    
    
    171.1
    
    
    
    1,357.9
 
 *
    
    Scheduled interest payment obligations were calculated using stated coupon rates for fixed
debt and interest rates applicable at March 31, 2006, for variable rate debt.**
    
    Asset retirement obligations only include our estimated contractual cash payments associated
with reclamation activities at certain sites for which our costs are estimable and the timing
of payments is reasonably determinable as of March 31, 2006. The timing and the amount of
these payments could change as a result of changes in regulatory requirements, changes in
scope of reclamation activities and as actual reclamation spending occurs. The table excludes
remaining cash payments of approximately $78 million that are expected to be incurred in
connection with accelerating certain closure projects, which are in the Companys discretion.
Additionally, we have also excluded estimated payments for reclamation activities that are
expected to occur after five years and the associated trust assets of approximately $493
million that have been dedicated to funding these reclamation activities because the majority
of these cash flows are expected to occur over an extended period of time and are dependent
upon the timing of the end of the mine life, which is subject to revision.   Guarantees
  Other Items that May Affect Liquidity




---



##### Table of Contents



39




---



##### Table of Contents



40    de minimis
  
 Item 3. Quantitative and Qualitative Disclosure About Market Risk
  
 Item 4. Controls and Procedures
   Changes in Internal Control Over Financial Reporting
  
 Part II. Other Information
 
 Item 1. Legal Proceedings




---



##### Table of Contents



41  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   (c) Total Number of
    
    
    (d) Maximum Number (orShares (or Units)
    
    
    Approximate Dollar Value)(a) Total Number
    
    
    (b) Average Price
    
    
    Purchased as Part of
    
    
    of Shares (or Units) That Mayof Shares (or Units)
    
    
    Paid Per
    
    
    Publicly Announced
    
    
    Yet Be Purchased UnderPeriod
    
    Purchased*
    
    
    Share (or Unit)
    
    
    Plans or Programs
    
    
    the Plans or ProgramsJanuary 1-31, 2006
    
    
    14,677
    
    
    $
    72.86
    
    
    
    
    
    
    
    February 1-28, 2006
    
    
    1,748
    
    
    
    71.53
    
    
    
    
    
    
    
    March 1-31, 2006
    
    
    3,577
    
    
    
    71.08
    
    
    
    
    
    
    
    Total
    
    
    20,002
    
    
    
    72.42
    
    
    
    
    
    
    
    
 
 *
    
    This category includes shares repurchased under the Companys applicable stock option and
restricted stock plans (Plans) and its non-qualified supplemental savings plan (SSP). Through
the Plans, the Company repurchases shares to satisfy tax obligations on restricted stock
awards, and in the SSP, the Company repurchases shares as a result of changes in investment
elections by plan participants.




---



##### Table of Contents



42 
 Item 6. Exhibits
  
 Signatures
    Date: April 27, 2006
    By:
    /s/ Denise R. DannerDenise R. DannerVice President and Controller
(Principal Accounting Officer) 
 Index to Exhibits
 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.31
    
    Certifications of J. Steven Whisler, Chairman and Chief Executive Officer of the Company,
and Ramiro G. Peru, Executive Vice President and Chief Financial Officer of the Company,
pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 906 of the
Sarbanes-Oxley Act of 2002.32
    
    Certifications of J. Steven Whisler, Chairman and Chief Executive Officer of the Company,
and Ramiro G. Peru, Executive Vice President and Chief Financial Officer of the Company,
pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the
Sarbanes-Oxley Act of 2002.