<PAGE>   1
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                                  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 March 31, 2001

                           Commission file number 1-82



                            PHELPS DODGE CORPORATION

                            (a New York corporation)



                                   13-1808503

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


                2600 North Central Avenue, Phoenix, AZ 85004-3089


                  Registrant's telephone number: (602) 234-8100


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. Yes x No__.

Number of Common Shares outstanding at May 4, 2001: 78,702,213 shares.

================================================================================
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                                      -i-

                            PHELPS DODGE CORPORATION

                          QUARTERLY REPORT ON FORM 10-Q

                      FOR THE QUARTER ENDED MARCH 31, 2001


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                     Page
                                                                                     ----
<S>                                                                                  <C>
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 Common Shareholders' Equity ......................     4
      Financial Data by Business Segment .........................................     5
      Notes to Consolidated Financial Information ................................     6
      Review by Independent Accountants ..........................................    11
      Report of Independent Accountants on Review of Interim Financial Information    12

   Item 2. Management's Discussion and Analysis
      Results of Operations ......................................................    13
      Results of Phelps Dodge Mining Company .....................................    14
      Results of Phelps Dodge Industries .........................................    16
      Other Matters Relating to the Statement of Consolidated Operations .........    16
      Changes in Financial Condition .............................................    17

Part II. Other Information

   Item 1. Legal Proceedings .....................................................    18

   Item 6. Exhibits and Reports on Form 8-K ......................................    18

   Signatures ....................................................................    18

   Index to Exhibits .............................................................    18
</TABLE>
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                                      -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)

<TABLE>
<CAPTION>
                                                                                 First Quarter
                                                                            -----------------------
                                                                              2001           2000
                                                                            --------       --------
<S>                                                                         <C>             <C>
SALES AND OTHER OPERATING REVENUES .....................................    $1,100.7        1,119.7
                                                                            --------       --------
OPERATING COSTS AND EXPENSES
   Cost of products sold ...............................................       933.7          873.4
   Depreciation, depletion and amortization ............................       116.5          119.4
   Selling and general administrative expense ..........................        32.2           32.2
   Exploration and research expense ....................................        14.8           12.8
   Non-recurring items and provisions ..................................       (30.9)           2.1
                                                                            --------       --------
                                                                             1,066.3        1,039.9
                                                                            --------       --------
OPERATING INCOME .......................................................        34.4           79.8
   Interest expense ....................................................       (53.4)         (55.4)
   Capitalized interest ................................................         0.6            0.4
   Miscellaneous income and expense, net ...............................         3.7            6.4
                                                                            --------       --------
INCOME (LOSS) BEFORE TAXES, MINORITY INTERESTS, EQUITY IN NET EARNINGS
 OF AFFILIATED COMPANIES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE ....       (14.7)          31.2
   Provision for taxes on income .......................................        33.3          (11.2)
   Minority interests in consolidated subsidiaries .....................        (1.6)          (1.4)
   Equity in net earnings of affiliated companies ......................        (0.8)           0.8
                                                                            --------       --------

INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE ...................        16.2           19.4
   Cumulative effect of accounting change ..............................        (2.0)            --
                                                                            --------       --------
NET INCOME .............................................................    $   14.2           19.4
                                                                            ========       ========

AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC ...........................        78.5           78.4
BASIC EARNINGS PER SHARE BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE .    $   0.21           0.25
   Cumulative effect of accounting change ..............................       (0.03)            --
                                                                            --------       --------
BASIC EARNINGS PER SHARE ...............................................    $   0.18           0.25
                                                                            ========       ========

AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED .........................        78.8           78.8
DILUTED EARNINGS PER SHARE BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE    $   0.21           0.25
   Cumulative effect of accounting change ..............................       (0.03)            --
                                                                            --------       --------
DILUTED EARNINGS PER SHARE .............................................    $   0.18           0.25
                                                                            ========       ========
</TABLE>


See Notes to Consolidated Financial Information.
<PAGE>   4
                                      -2-


CONSOLIDATED BALANCE SHEET
(Unaudited; in millions)

<TABLE>
<CAPTION>
                                                         March 31,   December 31,
                                                           2001          2000
                                                         --------    ------------
<S>                                                      <C>         <C>
ASSETS
   Cash and cash equivalents ........................    $  244.2         250.0
   Accounts receivable, net .........................       609.3         528.7
   Inventories and supplies .........................       625.7         602.7
   Prepaid expenses .................................        42.5          36.7
   Deferred income taxes ............................        89.5          89.5
                                                         --------      --------
      Current assets ................................     1,611.2       1,507.6
   Net property, plant and equipment and other assets     6,251.3       6,278.1
   Non-current deferred income taxes ................        45.1          45.1
                                                         --------      --------
                                                         $7,907.6       7,830.8
                                                         ========      ========

LIABILITIES
   Short-term debt ..................................    $  690.2         518.2
   Current portion of long-term debt ................       306.8         206.5
   Accounts payable and accrued expenses ............       696.2         669.8
   Income taxes .....................................         8.7          23.4
                                                         --------      --------
      Current liabilities ...........................     1,701.9       1,417.9
   Long-term debt ...................................     1,853.2       1,963.0
   Deferred income taxes ............................       426.3         439.0
   Other liabilities and deferred credits ...........       825.1         814.2
                                                         --------      --------
                                                          4,806.5       4,634.1
                                                         --------      --------
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES .....        67.2          91.7
                                                         --------      --------

COMMON SHAREHOLDERS' EQUITY
   Common shares, 78.7 outstanding (12/31/00 - 78.7)        491.9         491.9
   Capital in excess of par value ...................     1,017.4       1,017.7
   Retained earnings ................................     1,806.5       1,831.7
   Accumulated other comprehensive income (loss) ....      (272.9)       (226.4)
   Other ............................................        (9.0)         (9.9)
                                                         --------      --------
                                                          3,033.9       3,105.0
                                                         --------      --------
                                                         $7,907.6       7,830.8
                                                         ========      ========
</TABLE>


See Notes to Consolidated Financial Information.
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                                      -3-


CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited; in millions)

<TABLE>
<CAPTION>
                                                                            Three months ended
                                                                                 March 31,
                                                                            -------------------
                                                                              2001       2000
                                                                            --------   --------
<S>                                                                         <C>        <C>
OPERATING ACTIVITIES
   Net income ..........................................................    $  14.2       19.4
   Adjustments to reconcile net income to net cash provided by operating
    activities:
      Depreciation, depletion and amortization .........................      116.5      119.4
      Deferred income taxes ............................................      (18.3)       6.3
      Equity earnings (loss) net of dividends received .................        1.3       (0.2)
      Non-recurring items and provisions ...............................      (30.9)       2.1
      Changes in current assets and liabilities:
         Accounts receivable ...........................................      (63.9)      (6.3)
         Inventories ...................................................      (26.5)      24.9
         Supplies ......................................................       (1.8)      (0.5)
         Prepaid expenses ..............................................       (5.7)     (17.0)
         Deferred income taxes .........................................        0.2       (0.1)
         Interest payable ..............................................       34.1       22.2
         Other accounts payable ........................................       10.1       15.9
         Accrued income taxes ..........................................      (14.5)     (22.6)
         Other accrued expenses ........................................       (7.9)     (32.3)
      Other adjustments, net ...........................................      (16.8)      (6.9)
                                                                            -------    -------
            Net cash provided by (used in) operating activities ........       (9.9)     124.3
                                                                            -------    -------
INVESTING ACTIVITIES
   Capital outlays .....................................................      (77.1)     (62.2)
   Capitalized interest ................................................       (0.6)      (0.4)
   Investment in subsidiaries ..........................................      (46.4)      (7.5)
   Proceeds from asset dispositions and other, net .....................        1.4      149.4
                                                                            -------    -------
            Net cash provided by (used in) investing activities ........     (122.7)      79.3
                                                                            -------    -------
FINANCING ACTIVITIES
   Increase in debt ....................................................      175.9        5.2
   Payment of debt .....................................................       (9.6)     (93.3)
   Common dividends ....................................................      (39.4)     (39.4)
   Other, net ..........................................................       (0.1)       1.3
                                                                            -------    -------
            Net cash provided by (used in) financing activities ........      126.8     (126.2)
                                                                            -------    -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .......................       (5.8)      77.4
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .......................      250.0      234.2
                                                                            -------    -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .............................    $ 244.2      311.6
                                                                            =======    =======
</TABLE>

See Notes to Consolidated Financial Information.
<PAGE>   6
                                      -4-


CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS' EQUITY
(Unaudited; in millions)


<TABLE>
<CAPTION>
                                              Common Shares                               Accumulated
                                           ------------------   Capital in                   Other                    Common
                                             Number    At Par   Excess of    Retained    Comprehensive            Shareholders'
                                           of Shares    Value   Par Value    Earnings    Income (Loss)   Other       Equity
                                           ---------   ------   ----------   --------    -------------   -----    -------------
<S>                                        <C>         <C>      <C>          <C>         <C>             <C>      <C>
BALANCE AT DECEMBER 31, 2000                  78.7     $491.9    $1,017.7    $1,831.7       $(226.4)     $(9.9)     $3,105.0
  Stock options exercised                                             0.1                                                0.1
  Restricted shares issued, net                                      (0.4)                                 0.9           0.5
  Dividends on common shares                                                    (39.4)                                 (39.4)
  Comprehensive income (loss):
    Net income                                                                   14.2                                   14.2
    Other comprehensive income (loss),
     net of tax:
      Translation adjustment                                                                  (32.4)                   (32.4)
      Cumulative effect of
        accounting change                                                                      (7.1)                    (7.1)
      Net loss on derivative instruments                                                       (7.2)                    (7.2)
      Unrealized gains on securities                                                            0.2                      0.2
                                                                                            -------                 --------
      Other comprehensive loss                                                                (46.5)                   (46.5)
                                                                                            -------                 --------
    Comprehensive loss                                                                                                 (32.3)
                                            ------     ------    --------    --------       -------      -----      --------

BALANCE AT MARCH 31, 2001                     78.7     $491.9    $1,017.4    $1,806.5       $(272.9)     $(9.0)     $3,033.9
                                            ======     ======    ========    ========       =======      =====      ========
</TABLE>


See Notes to Consolidated Financial Information.
<PAGE>   7
                                      -5-


FINANCIAL DATA BY BUSINESS SEGMENT
(Unaudited; in millions)

<TABLE>
<CAPTION>
                                                         PD Industries                        Corporate,
                                         Phelps    ---------------------------               Unallocated &
                                         Dodge     Specialty   Wire &             Segment     Reconciling
                                         Mining    Chemicals   Cable     Total    Subtotal   Eliminations    Totals
---------------------------------------------------------------------------------------------------------------------
<S>                                     <C>        <C>         <C>      <C>       <C>        <C>            <C>
FIRST QUARTER 2001
  Sales & other operating revenues:
    Unaffiliated customers .........    $  726.5     161.5     212.7      374.2    1,100.7        --         1,100.7
    Intersegment ...................    $   58.3      --        --         --         58.3       (58.3)         --
  Non-recurring items and provisions    $   --        --        --         --         --         (30.9)        (30.9)
  Operating income (loss) ..........    $   (5.1)     20.2       6.5       26.7       21.6        12.8          34.4
  Assets at March 31 ...............    $6,074.9     752.6     699.7    1,452.3    7,527.2       380.4       7,907.6

---------------------------------------------------------------------------------------------------------------------

FIRST QUARTER 2000
  Sales & other operating revenues:
    Unaffiliated customers .........    $  753.4     154.9     211.4      366.3    1,119.7        --         1,119.7
    Intersegment ...................    $   60.7      --        --         --         60.7       (60.7)         --
  Non-recurring items and provisions    $   --        --         2.1        2.1        2.1        --             2.1
  Operating income (loss) ..........    $   68.3      24.7       2.2       26.9       95.2       (15.4)         79.8
  Assets at March 31 ...............    $6,357.3     781.0     769.6    1,550.6    7,907.9       219.1       8,127.0
---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>   8
                                      -6-



NOTES TO CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)

1.       General Information

         The unaudited consolidated financial information 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, 2000. 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 period ended March 31,
         2001, are not necessarily indicative of the results to be expected for
         the full year.

2.       Non-Recurring Items and Provisions

         Non-Recurring Items

         In the first quarter of 2001, a non-recurring, pre-tax (and after-tax)
         gain of $30.9 million (net of fees and expenses) was recognized
         consisting of recoveries associated with settlements reached with
         several insurance companies on historic environmental liability claims.

         It is our policy to recognize recoveries of environmental expenditures
         or costs from insurance companies or other parties when they become
         probable.

         Negotiations with several insurers recently have culminated in
         agreements for the settlement of $39.3 million of recoveries associated
         with certain historic environmental liability claims primarily at
         properties owned or operated by Cyprus Amax (which we acquired in late
         1999) or its subsidiaries. Fees and expenses associated with these
         recoveries were $8.4 million.

         We continue to pursue recovery of other potential claims from insurance
         companies and other third parties, including the U.S. Government and
         other potentially responsible parties.

         Restructuring Plans

         On June 27, 2000, we announced a plan to reduce operating costs and
         restructure operations at our mining and wire and cable segments. This
         plan comprised the following actions: (i) curtailing higher cost
         production at the Miami copper mine in Arizona and reducing production
         at the Henderson molybdenum mine in Colorado; (ii) ceasing production
         at two wire and cable plants in Venezuela; and (iii) initiating the
         closure of a telephone cable operation in El Salvador.

         On June 30, 1999, we announced a plan to reduce costs and improve
         operating performance at all three of our business segments by (i)
         curtailing higher-cost copper production by temporarily closing our
         Hidalgo smelter in New Mexico and the smaller of two concentrators at
         our Morenci mining operations in Arizona, as well as curtailing
         production by 50 percent at our copper refinery in El Paso, Texas; (ii)
         selling a non-core South African fluorspar mining unit; (iii)
         restructuring certain wire and cable assets to respond to changing
         market conditions; and (iv) suspending operations at our carbon black
         plant in the Philippines.

         In the 2001 first quarter, there were no charges associated with these
         restructuring plans, which are substantially complete.

         In the 2000 first quarter, our wire and cable segment incurred pre-tax
         charges of $2.1 million associated with these restructuring plans ($1.3
         million, or 1 cent per share, after taxes).
<PAGE>   9
                                      -7-


         The following table presents a roll-forward of the liabilities incurred
         in connection with the restructuring plans, which were all reflected as
         current liabilities in our consolidated balance sheet:


<TABLE>
<CAPTION>
                                             (Payments/
                      12/31/00   Additions   Deductions)   3/31/01
                      --------   ---------   -----------   -------
<S>                   <C>        <C>         <C>           <C>
PD Mining:
Employee
  Severance           $    2.0                     (0.6)       1.4
Mothballing/Take
  or Pay Contracts         2.5                     (0.2)       2.3
                      --------   ---------   ----------    -------
    PD Mining              4.5          --         (0.8)       3.7
                      --------   ---------   ----------    -------

PD Industries:
WIRE AND CABLE
Employee Severance
  and Relocation           0.4                     (0.1)       0.3
Take or Pay
  Contracts                2.0                     (0.8)       1.2
Disposal &
  Dismantling              3.8                     (1.0)       2.8
                      --------   ---------   ----------    -------
                           6.2          --         (1.9)       4.3
                      --------   ---------   ----------    -------

SPECIALTY CHEMICALS
Disposal &
  Dismantling              1.3                     (1.0)       0.3
Environmental              0.7                                 0.7
                      --------   ---------   ----------    -------
                           2.0          --         (1.0)       1.0
                      --------   ---------   ----------    -------
  PD Industries            8.2          --         (2.9)       5.3
                      --------   ---------   ----------    -------
Total                 $   12.7          --         (3.7)       9.0
                      ========   =========   ==========    =======
</TABLE>



3.       Accounting Standards

         In December 1999, the SEC issued Staff Accounting Bulletin (SAB) 101,
         "Revenue Recognition in Financial Statements" (as amended by SAB 101A
         and 101B) that provides guidance on the recognition, presentation and
         disclosure of revenue in financial statements filed with the SEC. SAB
         101 outlines the basic criteria that must be met to recognize revenue
         and provides guidance for disclosures related to revenue recognition
         policies and was adopted by us as of the fourth quarter of 2000. There
         was no material impact on our consolidated financial statements upon
         implementation.


4.       Environmental Matters

         As of December 31, 2000, we had a reserve balance of $307.1 million for
         estimated future costs associated with environmental matters. During
         the first three months of 2001, net spending against that reserve
         totaled $7.9 million. As of March 31, 2001, the reserve balance was
         $299.2 million.

         We have contingencies regarding environmental, closure and other
         matters. For a further discussion of these contingencies, please see
         our Form 10-K for the year ended December 31, 2000, and Note 18 to the
         Consolidated Financial Statements included therein.

5.       Acquisitions

         In January 2001, Alcoa Aluminio, S.A. exercised a put option that
         required Phelps Dodge or a designee company to acquire the 40 percent
         minority interest in Alcoa Fios e Cabos Electricos, S.A., our wire and
         cable facility in Brazil, in which we had a 60 percent interest (prior
         to acquiring the 40 percent minority interest). The transaction closed
         in March 2001. The final settlement price of $44.8 million has been
         allocated initially to goodwill ($26.6 million) and minority interests
         in consolidated subsidiaries ($18.2 million).

6.       Contingencies

         The Company's wholly owned subsidiary, Cyprus Amax Minerals Company,
         filed suit in an action entitled Cyprus Amax Minerals Company v. Asarco
         Incorporated, 99 Civ. 11198 (JSM), on November 9, 1999, in the United
         States District Court for the Southern District of New York. The
         complaint alleges, among other things, that Asarco breached a merger
         agreement and subsequent agreement between Cyprus and Asarco by
         soliciting an alternative takeover proposal for Asarco from another
         company. On March 14, 2001, the Court denied the motion by Asarco
         Incorporated ("Asarco") for judgment on the pleadings pursuant to Fed.
         R. Civ. P. 12(c). On April 10, 2001, Asarco filed an amended answer and
         counterclaims against Cyprus and the Company for recovery of a $30
         million termination fee paid to the Company in October 1999 and for
         other unspecified damages related to the bidding process for Asarco.
<PAGE>   10
                                      -8-


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 the dilutive potential common shares were issued. The
         average number of basic common shares outstanding excludes 0.2 million
         shares, primarily attributable to restricted stock issued to employees.
         The average number of diluted common shares outstanding for the
         three-month period ended March 31, 2001, includes 0.3 million for the
         dilutive impact of restricted stock and stock options issued to
         employees. The average number of diluted common shares outstanding for
         the three-month period ended March 31, 2000, included 0.3 million for
         the dilutive impact of restricted stock issued to employees and 0.1
         million for the dilutive impact of employee stock options. Stock
         options excluded from the computation of diluted earnings per share
         because option prices exceeded the market value of the Company's stock
         were as follows:

--------------------------------------------------------------------------------

(in millions, except for option price)

<TABLE>
<CAPTION>
                                     First Quarter
                                  -------------------
                                   2001         2000
                                  ------       ------
<S>                               <C>          <C>
Outstanding options                  7.6          5.5

Average option price              $46.66        55.07
</TABLE>


8.       Provision for Taxes on Income

         The 2001 effective tax rate is based on a full year earnings forecast
         reflecting an average New York Commodity Exchange (COMEX) copper price
         of 85 cents per pound and a blend of our worldwide tax rates. Our
         effective tax rate exceeds an expected blended statutory rate of
         approximately 37 percent as some operations (primarily our consolidated
         U.S. operations) are generating losses that do not currently result in
         the recognition of any tax benefit, while other operations (primarily
         our international mining and specialty chemicals operations) are
         generating taxable income. There are no anticipated taxes for the $30.9
         million net gain associated with insurance settlements (see Note 2) or
         the cumulative effect of accounting change (see Note 9).
         Our forecast for the average COMEX copper price will be reviewed from
         time to time, which may result in changes to the projected full-year
         earnings and associated income tax estimates. Such changes and
         estimates may also result in significant adjustments to the effective
         tax rate that we recognize in any subsequent period.

9.       Accounting for Derivative Instruments and Hedging Activities

         Phelps Dodge 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 result in exposing us to
         market risk. 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, foreign exchange and interest rate risks
         from our primary business activities. The fair values of our derivative
         instruments, as summarized later in this note, are based on quoted
         market prices for similar instruments and on market closing prices at
         period end.

         Effective January 1, 2001, Phelps Dodge adopted SFAS No. 133,
         "Accounting for Derivative Instruments and Hedging Activities," that
         incorporates the amendments contained in SFAS No. 137, "Accounting for
         Derivative Instruments and Hedging Activities -- Deferral of the
         Effective Date of FASB Statement No. 133," and SFAS No. 138,
         "Accounting for Certain Derivative Instruments and Certain Hedging
         Activities," an amendment of Statement 133. The Statement, as amended,
         establishes accounting and reporting standards for derivative
         instruments, including certain derivative instruments embedded in other
         contracts and for hedging activities. All derivatives, whether
         designated in hedging relationships or not, are required to be recorded
         on the balance sheet at fair value. If the derivative is designated as
         a fair value hedge, the changes in the fair value of the derivative and
         of the hedged item attributable to the hedged
<PAGE>   11
                                      -9-


         risk are recognized in earnings. If the derivative is designated as a
         cash flow hedge, the effective portions of changes in the fair value of
         the derivative are recorded in other comprehensive income (OCI) and are
         recognized in the income statement when the hedged item affects
         earnings. Ineffective portions of changes in the fair value of cash
         flow hedges are recognized in earnings. For all non-hedging
         derivatives, the changes in the fair value of the derivative
         attributable to the hedged risk are recognized in earnings.

         The adoption of SFAS No. 133 on January 1, 2001, resulted in a
         cumulative pre-tax reduction to income of $2.0 million ($2.0 million
         after-tax) and a cumulative pre-tax reduction to OCI of $7.1 million
         ($7.1 million after-tax). The reduction to income was attributable to a
         loss relating to the fair value of certain of our copper price
         protection arrangements, which were previously designated as hedges of
         fair value exposure, that did not meet certain criteria required to be
         designated as hedging instruments under the new standard. The reduction
         to OCI was primarily attributable to unrealized losses on interest rate
         swap contracts. The net derivative losses included in OCI as of January
         1, 2001, will be recognized in earnings as the associated hedge risk is
         realized. A summary of the derivative instruments we hold follows.

         FAIR VALUE HEDGES

         Copper Hedging

         Some of our wire, cathode and rod (collectively, copper) customers
         request a fixed sales price instead of the COMEX or London Metal
         Exchange (LME) average price in the month of shipment or receipt. As a
         convenience to these customers, we enter into copper swap and futures
         contracts that will allow us to receive the COMEX or LME average price
         in the month of shipment or receipt while our customers receive the
         agreed upon fixed price. We accomplish this by liquidating the copper
         futures contracts and settling the copper swap contracts during the
         month of shipment or receipt, which generally results in the
         realization of the COMEX or LME average price. As a portion of our
         copper contracts did not meet all of the required criteria to be fixed
         commitments under the new standard, a portion of our copper swap and
         futures contracts could not be designated as hedging instruments.

         At March 31, 2001, we had futures and swap contracts hedging
         approximately 32 million pounds of copper. These hedge instruments were
         considered effective.

         Copper Scrap Purchase Hedging

         From time to time, we may purchase copper scrap as a raw material to be
         processed eventually into rod for sale to customers. The copper scrap
         is purchased from third parties at a copper content price different
         from the price contracted with eventual rod customers. To mitigate the
         copper price risk resulting from the difference between the purchase
         and sales price of the purchased copper, we hedge such transactions.
         The hedge transactions involve the sale of an over-the-counter swap
         priced at the COMEX average price in the month of scrap delivery. In
         the month that the copper rod associated with the scrap purchase is
         sold, the swap is liquidated at the COMEX average price in the month of
         the copper rod sale. We did not have any material outstanding copper
         scrap purchase hedge contracts during the three-months ended March 31,
         2001.

         Foreign Currency Hedging

         We are a global company and we transact business in many countries and
         in many currencies. Foreign currency transactions increase our risks
         because exchange rates can change between the time agreements are made
         and the time foreign currencies are actually exchanged. One of the ways
         we manage these exposures is by entering into forward exchange
         contracts in the same currency as the transaction to lock in or
         minimize the effects of changes in exchange rates. With regard to
         foreign currency transactions, we may hedge or protect transactions for
         which we have a firm legal obligation. We do not enter into foreign
         exchange contracts for speculative purposes. In the process of
         protecting our transactions, we may use a number of offsetting currency
         contracts. Because of the nature of the hedge settlement process, the
         net hedge value, rather than the sum of the face value of our
         outstanding contracts, is a more accurate measure of our market risk
         from the use of such contracts.
<PAGE>   12
                                      -10-


         At March 31, 2001, we had net hedging instruments in place to hedge
         intercompany loans between our international subsidiaries or foreign
         currency exposures with our trading partners. There were no significant
         gains or losses recorded during the quarter as these hedge instruments
         were considered effective.

         CASH FLOW HEDGES

         Aluminum Hedging

         Our Brazilian wire and cable operation entered into aluminum swap
         contracts with a financial institution to lock in the cost of aluminum
         ingot needed in manufacturing cable contracted by customers. To
         accomplish this, we entered into aluminum swap contracts to hedge the
         aluminum ingot purchases in a manner that will allow us to receive the
         LME average price in the month metal is purchased while fixing the
         price paid for an equal quantity of aluminum. These swap contracts are
         generally settled during the month of shipment or receipt of metal,
         which results in a net LME average price equal to the fixed price
         agreed upon with our customers.

         At March 31, 2001, we had swap contracts for approximately 4 million
         pounds of aluminum. We did not have any significant gains or losses
         recorded during the quarter as these hedge instruments were considered
         effective. Aluminum swap contracts generally mature in less than one
         year.

         Interest Rate Hedging

         In some situations, we may enter into interest rate swap contracts to
         manage interest expense costs associated with floating-rate debt. We do
         not enter into interest rate swap contracts for speculative purposes.
         During the first quarter of 2001 an additional $7.2 million in
         unrealized losses on these contracts was recorded in OCI.

         We estimate that $3.5 million of net derivative losses associated with
         these contracts included in OCI at March 31, 2001, will be reclassified
         into earnings within the next twelve months.

         The maximum length of time for which we are managing our interest
         expense costs through hedging instruments is December 2008.

         Diesel Fuel Price Protection Program

         We purchase large quantities of diesel fuel to operate our mine sites.
         Price volatility of diesel fuel impacts the cost of producing copper
         cathode and other copper products. The objective of the diesel fuel
         price protection program is to minimize the effects of significant
         upward movements in diesel fuel prices while retaining the opportunity
         to benefit from any downward price movement.

         To implement these objectives, we may purchase and/or sell diesel fuel
         option contracts. The physical purchases and options are both priced on
         the same basis, which eliminates pricing basis risk between the hedge
         and the hedged item. We do not purchase or sell diesel fuel options for
         speculative purposes.

         At March 31, 2001, we had purchased option contracts to protect second
         quarter 2001 diesel fuel consumption of approximately 16 million
         gallons. We did not have any significant gains or losses recorded
         during the quarter as these hedge instruments were considered
         effective.

         Natural Gas Price Protection Program

         We purchase substantial quantities of natural gas to supply our
         operations primarily as a means to generate electricity. Price
         volatility of natural gas impacts the cost of producing copper cathode
         and other copper products. The objective of the natural gas price
         protection program is to minimize the effects of significant upward
         movement in natural gas prices while retaining the opportunity to
         benefit from downward price movements.

         To implement these objectives, we may purchase and/or sell natural gas
         option contracts. The physical purchases and the options are both
         priced on the same basis, which eliminates pricing basis risk between
         the hedge and the hedged item. We do not purchase or sell natural gas
         options for speculative purposes.

         At March 31, 2001, we had purchased option contracts to protect April
         through October 2001 natural gas consumption of approxi-
<PAGE>   13
                                      -11-


         mately 9 million decatherms. We did not have any significant gains or
         losses recorded during the quarter as these hedge instruments were
         considered effective.

         HEDGING SUMMARY

         For options designated either as fair value or cash flow hedges,
         changes in the time value are excluded from the assessment of hedge
         effectiveness. No amounts related to changes in time value were
         recorded in earnings during the three-months ended March 31, 2001.
         Hedge ineffectiveness, determined in accordance with SFAS No. 133, had
         no significant impact on earnings for the three-months ended March 31,
         2001. No fair value hedges or cash flow hedges were derecognized or
         discontinued for the three-months ended March 31, 2001.

         For the three-months ended March 31, 2001, revenues included a net
         unrealized non-cash loss of $3.0 million for changes in the fair value
         of derivative instruments that did not meet certain criteria required
         to be designated as hedging instruments under the new standard. The
         amounts are classified in revenues consistent with our objective of
         obtaining average market price in the month of shipment or receipt.

         Derivative gains and losses included in OCI are reclassified into
         earnings at the time forecasted purchases or interest are recognized in
         earnings. During the three-months ended March 31, 2001, no significant
         derivative gains or losses were reclassified into earnings.

         REVIEW BY INDEPENDENT ACCOUNTANTS

         The financial information as of March 31, 2001, and for the three-month
         periods ended March 31, 2001 and 2000, 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
         audit tests 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.
<PAGE>   14
                                      -12-


                        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 March 31, 2001, and the related
consolidated statements of operations, of cash flows and of common shareholders'
equity for the three-month periods ended March 31, 2001 and 2000. These
financial statements are 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 generally accepted auditing standards, 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 statements for them
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, 2000, and the related consolidated statements of operations, of cash flows
and of common shareholders' equity for the year then ended (not presented
herein), and in our report dated January 24, 2001 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, 2000, is fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.





PricewaterhouseCoopers LLP
Phoenix, Arizona
April 23, 2001
<PAGE>   15
                                      -13-


Item 2. Management's Discussion and Analysis

         The U.S. 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,
the Corporation, we, us or ours) cannot give assurance that such statements will
prove to be correct. Please refer to the Management's Discussion and Analysis
sections of the Company's report on Form 10-K for the year ended December 31,
2000.

RESULTS OF OPERATIONS

         Earnings

         The Company had a consolidated loss in the 2001 first quarter of $14.7
million, or 19 cents per common share, before a non-recurring net gain of $28.9
million ($28.9 million, or 37 cents per share, after taxes). The non-recurring
net gain consisted of $30.9 million in insurance recoveries (see Note 2) and a
cumulative loss of $2.0 million from the adoption of Statement of Financial
Accounting Standard (SFAS) No. 133 (see Note 9). By comparison, earnings for the
first quarter of 2000 were $20.7 million, or 26 cents per share, before pre-tax,
non-recurring charges of $2.1 million ($1.3 million, or 1 cent per share, after
taxes). After non-recurring charges and the cumulative effect of accounting
change, 2001 first quarter net income was $14.2 million, or 18 cents per share,
compared with 2000 first quarter net income of $19.4 million, or 25 cents per
share.

         Earnings before non-recurring items were lower in the 2001 first
quarter than in the corresponding 2000 period principally as a result of higher
energy-related costs, combined with the anticipated temporary impact of lower
production volumes and higher costs associated with the transition to total
mine-for-leach production at our Morenci, Arizona, operation.

         The COMEX spot price per pound of copper cathode, primarily upon which
we base our selling price, averaged 82 cents in the 2001 first quarter, compared
with 82 cents in the corresponding 2000 period. From April 1 to May 4, 2001, the
COMEX price averaged 76 cents per pound, closing at 78 cents on May 4, 2001.

         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 is approximately 2.3 billion pounds of copper. Accordingly,
each 1 cent per pound change in our average annual realized copper price, or in
our average annual unit production costs, causes a variation in annual operating
income before taxes of approximately $23 million.

         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 March 31, 2001.

         On April 24, 2001, we announced a plan to improve operating income by
$30 million in 2001, $100 million in 2002, and $150 million annually beginning
in 2003. The operating income improvements will be achieved primarily through a
restructuring of our professional, administrative and operations support
functions.

         We will transition to shared service models to provide consistent and
more efficient delivery of human resources, information systems, accounting and
finance, legal, engineering, environmental, training and other professional
services at our operating units. The redesign and consolidation of some
functions, as well as business process streamlining, program reductions and the
elimination of 500 positions, will occur during the shift to shared service
models.

         Employees at Phelps Dodge Mining Company operations and corporate and
administrative offices throughout North and South America will be affected by
restructuring-related job reductions. The elimination of these positions is
unrelated to the March 26, 2001, renewal of the Worker Adjustment and Retraining
Notification (WARN) Act notices announced on January 25, 2001, to 2,350
employees of our Chino, Tyrone and Sierrita facilities. We anticipate the jobs
of some employees at these operations will be impacted as shared services become
fully operational.

         Business Segments

         Results for 2001 and 2000 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,
mar-
<PAGE>   16
                                      -14-

keting 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 (PD Mining) 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. PD Mining
sells copper to others primarily as rod, cathode or concentrate, and as rod to
our wire and cable segment. In addition, PD Mining at times smelts and refines
copper and produces copper rod for customers on a toll basis. It is also an
integrated producer of molybdenum, with mining, roasting and processing
facilities producing molybdenum concentrate as well as metallurgical and
chemical 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.


<TABLE>
<CAPTION>
                                              First Quarter
                                            ------------------
                                             2001        2000
<S>                                         <C>        <C>
Copper production (thousand short tons):
   Total production ....................     359.2       371.8
   Less minority participants' shares *       65.0        67.4
                                            ------      ------
   Net Phelps Dodge share ..............     294.2       304.4
                                            ======      ======

Copper sales (thousand short tons):
   Net Phelps Dodge share
     from own mines ....................     289.7       315.4
   Purchased copper ....................     113.8        99.0
                                            ------      ------
   Total copper sales ..................     403.5       414.4
                                            ======      ======

COMEX:
Average spot price per pound -
   copper cathodes .....................    $  0.82        0.82

Molybdenum concentrate production
   (million pounds) ....................      14.7        12.7
Molybdenum sales (million pounds) ......      15.1        16.4

Metals Week:
Molybdenum oxide price per pound .......    $  2.25        2.54

<CAPTION>
                                               (in millions)

<S>                                         <C>         <C>
Sales and other operating revenues
   - unaffiliated customers ............    $726.5       753.4

Operating income .......................    $ (5.1)       68.3
</TABLE>


*  Minority participant interests include (i) a 15 percent undivided interest in
   the 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, and (iii) the 20 percent
   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 interest in the El Abra copper mining
   operation in Chile held by Corporacion Nacional del Cobre de Chile (CODELCO).


         PD Mining - Sales

         PD Mining sales and other operating revenues to unaffiliated customers
decreased by $26.9 million, or 4 percent, in the 2001 first quarter compared
with the corresponding 2000 period. This variance primarily reflected lower U.S.
copper, gold, silver and molybdenum sales volumes of approximately $69 million,
partially offset by higher international sales volumes of approximately $44
million.
<PAGE>   17
                                      -15-


         PD Mining - Operating Income

         PD Mining reported an operating loss of $5.1 million in the 2001 first
quarter, compared with operating income of $68.3 million in the corresponding
2000 period. This decrease primarily reflected higher copper production costs
(approximately $54 million), lower sales volumes of PD-mined copper
(approximately $7 million) and slightly lower realized selling prices
(approximately $7 million). The costs increases primarily resulted from higher
energy costs of approximately $39 million, the anticipated temporary effects of
lower production and higher costs associated with transitioning to total
mine-for-leach production at Morenci of approximately $3 million and higher
depreciation of approximately $3 million.

         In the 2001 first quarter, copper unit production costs were adversely
impacted by the effects of abnormally high spot prices for energy. In total,
higher energy costs increased our first quarter 2001 cash costs per pound of
copper by approximately 6 cents relative to those experienced in the first
quarter of 2000.

         Energy, including electricity, diesel fuel and natural gas, represents
a significant portion of the production costs for our operations. During much of
2000 and through the first quarter of 2001, our Arizona and New Mexico
operations were adversely affected by significantly higher costs for
electricity, diesel fuel and natural gas.

         Beginning in the spring of 2000, the combination of a power
supply/demand imbalance in California, higher natural gas prices, a drought in
the U.S. Pacific Northwest (a region that has provided a significant amount of
hydroelectric power to California and the Southwest U.S.) and service
interruptions at several California power plants due to both scheduled and
unscheduled maintenance, caused a shortage of electricity in the western United
States that resulted in extremely high spot electricity prices. While peak spot
electricity prices have improved moderately in the first quarter of 2001, prices
remain high relative to historical levels and continue to impact adversely
production costs at our Southwest U.S. mines. It is expected that spot
electricity prices will continue to exceed historical levels for the foreseeable
future and, accordingly, the cost structure of our Southwest U.S. mines will be
impacted adversely. In the first quarter of 2001, approximately 15 percent of
our Arizona and New Mexico power consumption was priced relative to the spot
electricity market. As a result of the implementation of the power cost
stabilization plan, announced on March 26, 2001, which includes expansion of
internal generating capacity, alternating production curtailments at our Tyrone,
New Mexico, operation and our Sierrita and Bagdad operations in Arizona, and
curtailments at our Chino, New Mexico, operation, our exposure to the spot
electricity market is not expected to be material.

         In the 2001 first quarter, diesel fuel prices were adversely impacted
by rising global oil prices and the shortage of refining capacity in certain
parts of the United States that began in 2000. To mitigate our exposure to
increases in diesel fuel prices, we initiated a diesel fuel price protection
program in December 2000. The objective of the program is to protect against a
significant upward movement in diesel fuel prices while retaining the
opportunity to benefit from any downward price movement. To implement these
objectives, we purchased call options settled at the average price for the
option period representing approximately 50 percent of planned second quarter
2001 diesel fuel consumption for the Arizona and New Mexico properties.

         Natural gas prices in the United States also increased significantly
during 2000 and through the first quarter of 2001 due to low levels of supply.
To mitigate our exposure to further increases in the price of natural gas, we
initiated a natural gas price protection program during the first quarter of
2001. The objective of the program is to protect against a significant upward
movement in natural gas prices while retaining the opportunity to benefit from
any downward price movement. To implement these objectives, we purchased call
options for natural gas covering approximately 64 percent of our budgeted
natural gas consumption for the Arizona, New Mexico and Texas operations for the
months of April through October 2001. Purchase of these call options allows for
full participation in downward price movements.

         PD Mining - Other Matters

         After a review of the near-term market outlook for energy prices and a
thorough analysis of the molybdenum market, we announced on January 25, 2001,
that we would notify all 2,350 employees at our Chino and Tyrone, New Mexico,
and Sierrita, Arizona, operations of the possibility of production curtailments.
The possible production curtailments are attributable primarily to high
energy-related costs at the New Mexico facilities, and a combination of low
molybdenum prices and high energy costs at the Sierrita facility. All affected
employees and the unions representing some of the employees at Chino have
received Worker Adjustment and Retraining Notification (WARN) Act letters
advising them that production
<PAGE>   18
                                      -16-


curtailments could become effective following the legally required, 60-day
notification period.

         On March 26, 2001, we announced actions that will reduce
electricity-related costs at our U.S. mining operations. Production at portions
of our Chino operation are expected to be curtailed at least through the end of
2001 impacting approximately 130 Chino workers. We will also implement 30-to-60
day, alternating production curtailments during the third quarter at our Tyrone,
Sierrita, and Bagdad, Arizona operations. To further manage electricity costs,
we have negotiated an additional 60-megawatt, firm power contract and have begun
construction of a 40-megawatt, co-generation power plant in New Mexico, which is
scheduled to be operational in August 2001.

          Due to continuing economic uncertainties, including the on-going
volatility of the electrical power, copper and molybdenum markets, we renewed,
for an additional period of less than 60 days, the Worker Adjustment and
Retraining Notification (WARN) Act notices announced on January 25, 2001, to the
2,350 employees of the Chino, Tyrone and Sierrita facilities.

         Unrelated to electricity costs, we also announced we would reduce
molybdenum production at our Henderson operation in Colorado through 30-to-
90 day shift curtailments, which will occur between June and August.

         The collective curtailments are expected to reduce our 2001 copper
production by 175 million pounds (including our partner's share at Chino) and
molybdenum production by 7 million pounds. Our concentrate and sulfuric acid
supplies will remain in balance. Our copper refining, rod production and
molybdenum processing facilities generally will be unaffected by the
curtailments. However, changes in economic conditions, including copper and
molybdenum prices, could alter the timing and length of the curtailments as well
as the number of affected employees.

RESULTS OF PHELPS DODGE INDUSTRIES

Phelps Dodge Industries (PD Industries), 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.

         In December 2000, we announced our intention to explore strategic
alternatives for, including the potential sale of, PD Industries. On May 3,
2001, we announced our termination of the sale process, noting that after months
of extensive discussions with interested parties, it is clear the current
economic environment will not deliver transactions for our specialty chemicals
and wire and cable businesses that offer appropriate value to our shareholders.


<TABLE>
<CAPTION>
                                       First Quarter
                                      ---------------
                                       2001     2000
                                      ------   ------
                                       (in millions)
<S>                                   <C>      <C>
Sales and other operating revenues
   - unaffiliated customers:
   Specialty chemicals ...........    $161.5    154.9
   Wire and cable ................     212.7    211.4
                                      ------   ------
                                       374.2    366.3
                                      ======   ======

Operating income:
   Specialty chemicals ...........    $ 20.2     24.7
   Wire and cable* ...............       6.5      2.2
                                      ------   ------
                                        26.7     26.9
                                      ======   ======
</TABLE>

----------
*  The 2000 first quarter includes a $2.1 million pre-tax charge associated with
   the restructuring plan initiated in 1999.


         PD Industries - Operating Income

         PD Industries reported 2001 first quarter operating income of $26.7
million. Operating income in the 2000 first quarter was $29.0 million, before
non-recurring, pre-tax charges of $2.1 million for costs associated with the
restructuring plan initiated in 1999.

OTHER MATTERS RELATING TO THE STATEMENT OF CONSOLIDATED OPERATIONS

         Provision for Taxes on Income

         The effective tax rate on earnings before non-recurring items was 73
percent in the 2001 first quarter. That rate is based on our full-year earnings
forecast reflecting an average COMEX copper price of 85 cents per pound and a
blend of our worldwide tax
<PAGE>   19
                                      -17-


rates. It exceeds an expected tax rate of 37 percent as certain operations are
generating losses that do not currently result in the recognition of any tax
benefit, while other operations are generating taxable income.

         Our forecast for the average COMEX copper price will be reviewed from
time to time, which may result in changes to the projected full-year earnings
and associated income tax estimates. Such changes and estimates may also result
in significant adjustments to the effective tax rate that we recognize in any
subsequent period.

CHANGES IN FINANCIAL CONDITION

         Working Capital

         During the 2001 first quarter, net working capital balances (excluding
cash and cash equivalents and debt) increased $97.7 million. This increase
resulted primarily from:

         -   an $80.6 million increase in accounts receivable primarily due to
             the recognition of insurance recoveries associated with historic
             environmental liability claims ($39.3 million - see Note 2), a
             large cash sale ($25.0 million) at year-end 2000 and a $14.6
             million increase due to tax benefits recognized on first quarter
             losses that will likely be reversed in subsequent periods;

         -   a $23.0 million increase in inventories and supplies due to a
             temporary increase of $13.3 million in copper inventories at U.S.
             mining properties (including a temporary increase during the
             conversion of Morenci to mine-for-leach processing), and an
             increase of $9.7 million at PD Industries primarily associated with
             higher inventory levels to support increased business activity; and

         -   a $26.4 million increase in accounts payable and accrued expenses
             primarily due to a $33.9 million increase in interest payable
             associated with debt for which semi-annual payments are made in the
             second and fourth quarters.

         Debt

         At March 31, 2001, our total debt was $2,850.2 million, compared with
$2,687.7 million at year-end 2000. Our ratio of debt to total capitalization was
47.9 percent at March 31, 2001, compared with 45.7 percent at December 31, 2000.
The increase principally represented $188.3 million in additional short-term
borrowings under our commercial paper program.

         In order to reduce interest costs and better coordinate debt maturities
with potential growth opportunities, we may, from time to time, repurchase or
refinance our debt securities through open market purchases, privately
negotiated transactions or otherwise. Any such repurchases or refinancings will
depend upon market conditions, our cash availability and requirements, and the
availability of replacement debt or equity financing on acceptable terms.

         Capital Expenditures and Investments

         Capital expenditures and investments during the 2001 first quarter were
$63.9 million for PD Mining, $53.2 million for PD Industries (including $44.8
million for the contractually obligated acquisition of the remaining 40 percent
minority share of our wire and cable manufacturing operation in Brazil - see
Note 5) and $6.4 million for Corporate and other. Capital expenditures and
investments in the corresponding 2000 period were $44.9 million for PD Mining,
$11.6 million for PD Industries and $13.2 million for Corporate and other. We
expect capital expenditures and investments for the year 2001 to be
approximately $265 million for PD Mining, approximately $100 million for PD
Industries, and approximately $35 million for Corporate and other. These capital
expenditures and investments are expected to be funded primarily from operating
cash flows and cash reserves.

         Dividends

         On March 9, 2001, we paid a regular quarterly dividend of 50 cents per
share on our common shares for the 2001 first quarter; the total amount paid was
$39.4 million.

         On May 2, 2001, we declared a dividend of 12.5 cents per common share
for the 2001 second quarter. This represents a 75 percent decrease from the
first quarter amount. The second quarter dividend is payable on June 8, 2001, to
shareholders of record at the close of business on May 18, 2001.

         Other Matters

         For a discussion of new accounting standards, please refer to Notes 3
and 9 to the consolidated financial information.
<PAGE>   20
                                      -18-


Part II. Other Information

Item 1.  Legal Proceedings

         The Company's wholly owned subsidiary, Cyprus Amax Minerals Company,
filed suit in an action entitled Cyprus Amax Minerals Company v. Asarco
Incorporated, 99 Civ. 11198 (JSM), on November 9, 1999, in the United States
District Court for the Southern District of New York. The complaint alleges,
among other things, that Asarco breached a merger agreement and subsequent
agreement between Cyprus and Asarco by soliciting an alternative takeover
proposal for Asarco from another company. On March 14, 2001, the Court denied
the motion by Asarco Incorporated ("Asarco") for judgment on the pleadings
pursuant to Fed. R. Civ. P. 12(c). On April 10, 2001, Asarco filed an amended
answer and counterclaims against Cyprus and the Company for recovery of a $30
million termination fee paid to the Company in October 1999 and for other
unspecified damages related to the bidding process for Asarco.

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)      No reports on Form 8-K were filed by us during the quarter
                  ended March 31, 2001.


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: May 9, 2001               By: Stanton K. Rideout
                                    ------------------
                                    Stanton K. Rideout
                              Vice President and Controller
                             (Principal Accounting Officer)
<PAGE>   21
Index to Exhibits

<TABLE>
<S>      <C>
12       Computation of ratios of total debt to total capitalization.

15       Letter from PricewaterhouseCoopers LLP with respect to unaudited
         interim financial information.
</TABLE>