##### Table of Contents



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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, 2002

Commission file number 1-82

PHELPS DODGE CORPORATION

(a New York corporation)

13-1808503

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

One North Central Avenue, Phoenix, AZ 85004-4416

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

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past
90 days.   Yes  (CHECKBOX   No  (BOX).

Number of Common Shares outstanding at May 10, 2002: 78,717,316 shares.



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TABLE OF CONTENTS



|                              |                                              |                                                                    |  |  |  |  |  | 
|----------------------------- | -------------------------------------------- | ------------------------------------------------------------------ |  |  |  |  |  | 
|Part I. Financial Information
|                              | Item 1. Financial Statements                
|                              |                                              | STATEMENT OF CONSOLIDATED OPERATIONS                              
|                              |                                              | CONSOLIDATED BALANCE SHEET                                        
|                              |                                              | CONSOLIDATED STATEMENT OF CASH FLOWS                              
|                              |                                              | CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS EQUITY             
|                              |                                              | FINANCIAL DATA BY BUSINESS SEGMENT                                
|                              |                                              | NOTES TO CONSOLIDATED FINANCIAL INFORMATION                       
|                              |                                              | REVIEW BY INDEPENDENT ACCOUNTANTS                                 
|                              |                                              | Report of Independent Accountants                                 
|                              | Item 2. Managements Discussion and Analysis
|                              |                                              | RESULTS OF OPERATIONS                                             
|                              |                                              | RESULTS OF PHELPS DODGE MINING COMPANY                            
|                              |                                              | RESULTS OF PHELPS DODGE INDUSTRIES                                
|                              |                                              | OTHER MATTERS RELATING TO THE STATEMENT OF CONSOLIDATED OPERATIONS
|                              |                                              | CHANGES IN FINANCIAL CONDITION                                    
|Part II. Other Information   
|                              | Item 1. Legal Proceedings                   
|                              | Item 6. Exhibits and Reports on Form 8-K    
|Signatures                   
|Index to Exhibits            
|EX-10.14                     
|EX-12                        
|EX-15                        



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##### Table of Contents



-i-

PHELPS DODGE CORPORATION

Quarterly Report on Form 10-Q

For the Quarter Ended March 31, 2002

Table of Contents

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|Part I. Financial Information |                                              |                                                                    |  |     
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|                              | Item 1. Financial Statements (unaudited)     |                                                                    |  |      |   
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|                              |                                              | Statement of Consolidated Operations                               |  |      | 1  | 
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|                              |                                              | Consolidated Balance Sheet                                         |  |      | 2  | 
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|                              |                                              | Consolidated Statement of Cash Flows                               |  |      | 3  | 
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|                              |                                              | Consolidated Statement of Common Shareholders Equity              |  |      | 4  | 
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|                              |                                              | Financial Data by Business Segment                                 |  |      | 5  | 
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|                              |                                              | Notes to Consolidated Financial Information                        |  |      | 6  | 
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|                              |                                              | Review by Independent Accountants                                  |  |      | 10 | 
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|                              |                                              | Report of Independent Accountants                                  |  |      | 11 | 
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|                              | Item 2. Managements Discussion and Analysis |                                                                    |  |      |   
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|                              |                                              | Results of Operations                                              |  |      | 12 | 
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|                              |                                              | Results of Phelps Dodge Mining Company                             |  |      | 13 | 
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|                              |                                              | Results of Phelps Dodge Industries                                 |  |      | 14 | 
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|                              |                                              | Other Matters Relating to the Statement of Consolidated Operations |  |      | 15 | 
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|                              |                                              | Changes in Financial Condition                                     |  |      | 15 | 
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|Part II. Other Information    |                                              |                                                                    |  |     
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|                              | Item 1. Legal Proceedings                    |                                                                    |  | 16   |   
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|                              | Item 6. Exhibits and Reports on Form 8-K     |                                                                    |  | 16   |   
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|                              | Signatures                                   |                                                                    |  | 16   |   
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|                              | Index to Exhibits                            |                                                                    |  | 16   |   





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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)

|                                                                                                                                        |                                                                       |   |               |       |      |  |         |       |  
|--------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------- | - | ------------- | ----- | ---- |  | ------- | ----- | -
|                                                                                                                                        |                                                                       |   | First Quarter
|                                                                                                                                        |                                                                       |   |              
|                                                                                                                                        |                                                                       |   | 2002          |       | 2001
|                                                                                                                                        |                                                                       |   |               |       |     
|Sales and other operating revenues                                                                                                      |                                                                       | $ | 918.5         |       |      |  | 1,100.7 |      
|                                                                                                                                        |                                                                       |   |               |       |      |  |         |      
|Operating costs and expenses                                                                                                            |                                                                       |   |               |       |      |  |         |      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Cost of products sold                                                 |   |               | 768.8 |      |  |         | 933.7 |  
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Depreciation, depletion and amortization                              |   |               | 105.6 |      |  |         | 116.5 |  
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Selling and general administrative expense                            |   |               | 32.2  |      |  |         | 32.2  |  
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Exploration and research expense                                      |   |               | 8.7   |      |  |         | 14.8  |  
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Special items and provisions (see Note 2)                             |   |               | (3.8  | )    |  |         | (30.9 | )
|                                                                                                                                        |                                                                       |   |               |       |      |  |         |      
|                                                                                                                                        |                                                                       |   | 911.5         |       |      |  | 1,066.3 |      
|                                                                                                                                        |                                                                       |   |               |       |      |  |         |      
|Operating income                                                                                                                        |                                                                       |   | 7.0           |       |      |  | 34.4    |      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Interest expense                                                      |   |               | (52.8 | )    |  |         | (53.4 | )
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Capitalized interest                                                  |   |               |      |      |  |         | 0.6   |  
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Miscellaneous income and expense, net                                 |   |               | 2.0   |      |  |         | 3.7   |  
|                                                                                                                                        |                                                                       |   |               |       |      |  |         |      
|Loss before taxes, minority interests, equity in net earnings (loss)
of affiliated companies and cumulative effect of accounting change |                                                                       |   | (43.8         | )     |      |  | (14.7   | )    
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Benefit for taxes on income (see Note 8)                              |   |               | 39.7  |      |  |         | 33.3  |  
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Minority interests in consolidated subsidiaries                       |   |               | (1.2  | )    |  |         | (1.6  | )
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Equity in net earnings (loss) of affiliated companies                 |   |               | 0.5   |      |  |         | (0.8  | )
|                                                                                                                                        |                                                                       |   |               |       |      |  |         |      
|Income (loss) before cumulative effect of accounting change                                                                             |                                                                       |   | (4.8          | )     |      |  | 16.2    |      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Cumulative effect of accounting change, net of taxes of $10.1 in 2002 |   |               | (22.9 | )    |  |         | (2.0  | )
|                                                                                                                                        |                                                                       |   |               |       |      |  |         |      
|Net income (loss)                                                                                                                       |                                                                       | $ | (27.7         | )     |      |  | 14.2    |      
|                                                                                                                                        |                                                                       |   |               |       |      |  |         |      
|Average number of shares outstanding  basic                                                                                            |                                                                       |   | 78.5          |       |      |  | 78.5    |      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Basic earnings (loss) per share before cumulative effect of accounting change                                                           |                                                                       | $ | (0.06         | )     |      |  | 0.21    |      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Cumulative effect of accounting change                                |   |               | (0.29 | )    |  |         | (0.03 | )
|                                                                                                                                        |                                                                       |   |               |       |      |  |         |      
|Basic earnings (loss) per share                                                                                                         |                                                                       | $ | (0.35         | )     |      |  | 0.18    |      
|                                                                                                                                        |                                                                       |   |               |       |      |  |         |      
|Average number of shares outstanding  diluted                                                                                          |                                                                       |   | 78.5          |       |      |  | 78.8    |      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Diluted earnings (loss) per share before cumulative effect of accounting change                                                         |                                                                       | $ | (0.06         | )     |      |  | 0.21    |      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Cumulative effect of accounting change                                |   |               | (0.29 | )    |  |         | (0.03 | )
|                                                                                                                                        |                                                                       |   |               |       |      |  |         |      
|Diluted earnings (loss) per share                                                                                                       |                                                                       | $ | (0.35         | )     |      |  | 0.18    |      
|                                                                                                                                        |                                                                       |   |               |       |      |  |         |      

See Notes to Consolidated Financial Information.





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-2-

CONSOLIDATED BALANCE SHEET
(Unaudited; in millions)

|                                                |                                                                                            |                     |         |           |         |              |         |         |         | 
|----------------------------------------------- | ------------------------------------------------------------------------------------------ | ------------------- | ------- | --------- | ------- | ------------ | ------- | ------- | ------- | 
|                                                |                                                                                            |                     |         | March 31, |         | December 31,
|                                                |                                                                                            |                     |         | 2002      |         | 2001        
|                                                |                                                                                            |                     |         |           |         |             
|Assets                                          |                                                                                            |                     |         |           |         |              |         |        
|                                               
|                                               
|                                               
|                                               
|                                                | Cash and cash equivalents                                                                  |                     | $       | 454.3     |         |              |         | 386.9   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Accounts receivable, net                                                                   |                     |         | 440.0     |         |              |         | 398.8   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Inventories and supplies                                                                   |                     |         | 562.3     |         |              |         | 602.1   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Prepaid expenses and other current assets                                                  |                     |         | 126.5     |         |              |         | 116.4   |        
|                                                |                                                                                            |                     |         |           |         |              |         |        
|                                                |                                                                                            | Current assets      |         |           | 1,583.1 |              |         |         | 1,504.2 | 
|                                               
|                                               
|                                               
|                                               
|                                                | Investments and long-term receivables                                                      |                     |         | 107.3     |         |              |         | 105.3   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Property, plant and equipment, net                                                         |                     |         | 5,573.5   |         |              |         | 5,665.6 |        
|                                               
|                                               
|                                               
|                                               
|                                                | Non-current deferred income taxes                                                          |                     |         | 68.5      |         |              |         | 56.3    |        
|                                               
|                                               
|                                               
|                                               
|                                                | Other assets and deferred charges                                                          |                     |         | 237.3     |         |              |         | 287.4   |        
|                                                |                                                                                            |                     |         |           |         |              |         |        
|                                                |                                                                                            | $                   | 7,569.7 |           |         |              | 7,618.8 |        
|                                                |                                                                                            |                     |         |           |         |              |         |        
|Liabilities                                     |                                                                                            |                     |         |           |         |              |         |        
|                                               
|                                               
|                                               
|                                               
|                                                | Short-term debt                                                                            |                     | $       | 54.5      |         |              |         | 59.3    |        
|                                               
|                                               
|                                               
|                                               
|                                                | Current portion of long-term debt                                                          |                     |         | 261.3     |         |              |         | 269.7   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Accounts payable and accrued expenses                                                      |                     |         | 640.8     |         |              |         | 673.7   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Accrued income taxes                                                                       |                     |         | 12.8      |         |              |         | 11.5    |        
|                                                |                                                                                            |                     |         |           |         |              |         |        
|                                                |                                                                                            | Current liabilities |         |           | 969.4   |              |         |         | 1,014.2 | 
|                                               
|                                               
|                                               
|                                               
|                                                | Long-term debt                                                                             |                     |         | 2,515.2   |         |              |         | 2,522.0 |        
|                                               
|                                               
|                                               
|                                               
|                                                | Deferred income taxes                                                                      |                     |         | 451.0     |         |              |         | 441.8   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Other liabilities and deferred credits                                                     |                     |         | 895.6     |         |              |         | 874.2   |        
|                                                |                                                                                            |                     |         |           |         |              |         |        
|                                                |                                                                                            |                     | 4,831.2 |           |         |              | 4,852.2 |        
|                                                |                                                                                            |                     |         |           |         |              |         |        
|Minority interests in consolidated subsidiaries |                                                                                            |                     | 59.6    |           |         |              | 59.4    |        
|                                                |                                                                                            |                     |         |           |         |              |         |        
|Common shareholders equity                     |                                                                                            |                     |         |           |         |              |         |        
|                                               
|                                               
|                                               
|                                               
|                                                | Common
shares, par value $6.25; 200.0 shares authorized;
78.7 outstanding in 2002 and 2001 |                     |         | 492.0     |         |              |         | 491.9   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Capital in excess of par value                                                             |                     |         | 1,017.4   |         |              |         | 1,016.8 |        
|                                               
|                                               
|                                               
|                                               
|                                                | Retained earnings                                                                          |                     |         | 1,469.9   |         |              |         | 1,497.6 |        
|                                               
|                                               
|                                               
|                                               
|                                                | Accumulated other comprehensive loss                                                       |                     |         | (294.0    | )       |              |         | (292.7  | )      
|                                               
|                                               
|                                               
|                                               
|                                                | Other                                                                                      |                     |         | (6.4      | )       |              |         | (6.4    | )      
|                                                |                                                                                            |                     |         |           |         |              |         |        
|                                                |                                                                                            |                     | 2,678.9 |           |         |              | 2,707.2 |        
|                                                |                                                                                            |                     |         |           |         |              |         |        
|                                                |                                                                                            | $                   | 7,569.7 |           |         |              | 7,618.8 |        
|                                                |                                                                                            |                     |         |           |         |              |         |        

See Notes to Consolidated Financial Information





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##### Table of Contents



-3-




CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited; in millions)

|                                                 |                                                                                                    |                                                  |                                           |                                                     |       |               |       |       |       |       |        |  
|------------------------------------------------ | -------------------------------------------------------------------------------------------------- | ------------------------------------------------ | ----------------------------------------- | --------------------------------------------------- | ----- | ------------- | ----- | ----- | ----- | ----- | ------ | -
|                                                 |                                                                                                    |                                                  |                                           |                                                     |       | First Quarter
|                                                 |                                                                                                    |                                                  |                                           |                                                     |       |              
|                                                 |                                                                                                    |                                                  |                                           |                                                     |       | 2002          |       | 2001 
|                                                 |                                                                                                    |                                                  |                                           |                                                     |       |               |       |      
|Operating activities                             |                                                                                                    |                                                  |                                           |                                                     |       |               |       |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Net income (loss)                                                                                  |                                                  | $                                         | (27.7                                               | )     |               |       | 14.2  |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities: |                                                  |                                           |                                                     |       |               |       |       |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                    | Depreciation, depletion and amortization         |                                           |                                                     | 105.6 |               |       |       | 116.5 |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                    | Deferred income taxes                            |                                           |                                                     | (2.2  | )             |       |       | (18.3 | )    
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                    | Equity earnings (loss) net of dividends received |                                           |                                                     | (0.5  | )             |       |       | 1.3   |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                    | Special items and provisions (see Note 2)        |                                           |                                                     | 29.7  |               |       |       | (28.9 | )    
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                    | Changes in current assets and liabilities:       |                                           |                                                     |       |               |       |       |       |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                    |                                                  | Accounts receivable                       |                                                     |       | (50.4         | )     |       |       | (63.9 | )     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                    |                                                  | Proceeds from sale of accounts receivable |                                                     |       | 4.7           |       |       |       |      |       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                    |                                                  | Inventories                               |                                                     |       | 40.9          |       |       |       | (26.5 | )     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                    |                                                  | Supplies                                  |                                                     |       | (1.4          | )     |       |       | (1.8  | )     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                    |                                                  | Prepaid expenses                          |                                                     |       | (10.7         | )     |       |       | (5.7  | )     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                    |                                                  | Deferred income taxes                     |                                                     |       |              |       |       |       | 0.2   |       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                    |                                                  | Interest payable                          |                                                     |       | 43.3          |       |       |       | 34.1  |       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                    |                                                  | Other accounts payable                    |                                                     |       | (50.4         | )     |       |       | 10.1  |       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                    |                                                  | Accrued income taxes                      |                                                     |       | 2.9           |       |       |       | (14.5 | )     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                    |                                                  | Other accrued expenses                    |                                                     |       | (27.3         | )     |       |       | (7.9  | )     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                    | Other adjustments, net                           |                                           |                                                     | 53.7  |               |       |       | (18.8 | )    
|                                                 |                                                                                                    |                                                  |                                           |                                                     |       |               |       |      
|                                                 |                                                                                                    |                                                  |                                           | Net cash provided by (used in) operating activities |       |               | 110.2 |       |       |       | (9.9   | )
|                                                 |                                                                                                    |                                                  |                                           |                                                     |       |               |       |      
|Investing activities                             |                                                                                                    |                                                  |                                           |                                                     |       |               |       |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Capital outlays                                                                                    |                                                  |                                           | (21.4                                               | )     |               |       | (77.1 | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Capitalized interest                                                                               |                                                  |                                           |                                                    |       |               |       | (0.6  | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Investment in subsidiaries and other                                                               |                                                  |                                           | (1.4                                                | )     |               |       | (46.4 | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from asset dispositions and other, net                                                    |                                                  |                                           | (1.4                                                | )     |               |       | 1.4   |      
|                                                 |                                                                                                    |                                                  |                                           |                                                     |       |               |       |      
|                                                 |                                                                                                    |                                                  |                                           | Net cash used in investing activities               |       |               | (24.2 | )     |       |       | (122.7 | )
|                                                 |                                                                                                    |                                                  |                                           |                                                     |       |               |       |      
|Financing activities                             |                                                                                                    |                                                  |                                           |                                                     |       |               |       |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Increase in debt                                                                                   |                                                  |                                           | 6.8                                                 |       |               |       | 175.9 |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Payment of debt                                                                                    |                                                  |                                           | (24.3                                               | )     |               |       | (9.6  | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Common dividends                                                                                   |                                                  |                                           |                                                    |       |               |       | (39.4 | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Other, net                                                                                         |                                                  |                                           | (1.1                                                | )     |               |       | (0.1  | )    
|                                                 |                                                                                                    |                                                  |                                           |                                                     |       |               |       |      
|                                                 |                                                                                                    |                                                  |                                           | Net cash provided by (used in) financing activities |       |               | (18.6 | )     |       |       | 126.8  |  
|                                                 |                                                                                                    |                                                  |                                           |                                                     |       |               |       |      
|Increase (decrease) in cash and cash equivalents |                                                                                                    |                                                  | 67.4                                      |                                                     |       |               | (5.8  | )    
|                                                
|                                                
|                                                
|                                                
|Cash and cash equivalents at beginning of period |                                                                                                    |                                                  | 386.9                                     |                                                     |       |               | 250.0 |      
|                                                 |                                                                                                    |                                                  |                                           |                                                     |       |               |       |      
|Cash and cash equivalents at end of period       |                                                                                                    | $                                                | 454.3                                     |                                                     |       |               | 244.2 |      
|                                                 |                                                                                                    |                                                  |                                           |                                                     |       |               |       |      

See Notes to Consolidated Financial Information





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##### Table of Contents



-4-




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

|                             |                               |                                       |                    |                                    |  |               |       |            |  |           |         |          |  |               |         |             |       |        |        |               |  |   |      |   |  |   |         |     |       |       |      |  
|---------------------------- | ----------------------------- | ------------------------------------- | ------------------ | ---------------------------------- |  | ------------- | ----- | ---------- |  | --------- | ------- | -------- |  | ------------- | ------- | ----------- | ----- | ------ | ------ | ------------- |  | - | ---- | - |  | - | ------- | --- | ----- | ----- | ---- | -
|                             |                               |                                       |                    |                                    |  | 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
|                             |                               |                                       |                    |                                    |  |               |       |            |  |           |         |          |  |               |         |             |       |       
|Balance at December 31, 2001 |                               |                                       | 78.7               |                                    |  | $             | 491.9 |            |  | $         | 1,016.8 |          |  | $             | 1,497.6 |             |       | $      | (292.7 | )             |  | $ | (6.4 | ) |  | $ | 2,707.2 |    
|                            
|                            
|                            
|                            
|                             | Stock options exercised       |                                       |                    |                                    |  |               |       |            |  |           |         | 0.2      |  |               |         |             |       |        |        |               |  |   |      |   |  |   |         | 0.2 |      
|                            
|                            
|                            
|                            
|                             | Restricted shares issued, net |                                       |                    |                                    |  |               |       | 0.1        |  |           |         | 0.4      |  |               |         |             |       |        |        |               |  |   |      |   |  |   |         | 0.5 |      
|                            
|                            
|                            
|                            
|                             | Comprehensive loss:           |                                       |                    |                                    |  |               |       |            |  |           |         |          |  |               |         |             |       |        |        |               |  |   |      |   |  |   |         |     |      
|                            
|                            
|                            
|                            
|                             |                               | Net loss                              |                    |                                    |  |               |       |            |  |           |         |          |  |               |         |             | (27.7 | )      |        |               |  |   |      |   |  |   |         |     | (27.7 | )    
|                            
|                            
|                            
|                            
|                             |                               | Other comprehensive loss,
net of tax: |                    |                                    |  |               |       |            |  |           |         |          |  |               |         |             |       |        |        |               |  |   |      |   |  |   |         |     |       |      
|                            
|                            
|                            
|                            
|                             |                               |                                       |                    | Translation adjustment             |  |               |       |            |  |           |         |          |  |               |         |             |       |        |        |               |  |   | (4.6 | ) |  |   |         |     |       |       | (4.6 | )
|                            
|                            
|                            
|                            
|                             |                               |                                       |                    | Net gain on derivative instruments |  |               |       |            |  |           |         |          |  |               |         |             |       |        |        |               |  |   | 3.5  |   |  |   |         |     |       |       | 3.5  |  
|                            
|                            
|                            
|                            
|                             |                               |                                       |                    | Unrealized loss on securities      |  |               |       |            |  |           |         |          |  |               |         |             |       |        |        |               |  |   | (0.2 | ) |  |   |         |     |       |       | (0.2 | )
|                             |                               |                                       |                    |                                    |  |               |       |            |  |           |         |          |  |               |         |             |       |        |        |               |  |   |      |   |  |   |         |    
|                             |                               |                                       |                    | Other comprehensive loss           |  |               |       |            |  |           |         |          |  |               |         |             |       |        |        |               |  |   | (1.3 | ) |  |   |         |     |       |       | (1.3 | )
|                             |                               |                                       |                    |                                    |  |               |       |            |  |           |         |          |  |               |         |             |       |        |        |               |  |   |      |   |  |   |         |    
|                             |                               |                                       | Comprehensive loss |                                    |  |               |       |            |  |           |         |          |  |               |         |             |       |        |        |               |  |   |      |   |  |   |         |     |       | (29.0 | )   
|                             |                               |                                       |                    |                                    |  |               |       |            |  |           |         |          |  |               |         |             |       |        |        |               |  |   |      |   |  |   |         |    
|Balance at March 31, 2002    |                               |                                       | 78.7               |                                    |  | $             | 492.0 |            |  | $         | 1,017.4 |          |  | $             | 1,469.9 |             |       | $      | (294.0 | )             |  | $ | (6.4 | ) |  | $ | 2,678.9 |    
|                             |                               |                                       |                    |                                    |  |               |       |            |  |           |         |          |  |               |         |             |       |        |        |               |  |   |      |   |  |   |         |    

See Notes to Consolidated Financial Information.





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##### Table of Contents



-5-




FINANCIAL DATA BY BUSINESS SEGMENT
(Unaudited; in millions)

|                                         |                        |  |              |       |           |  |                         |       |       |  |          |       |                |  |                  |       |  |  |         |         |  |  |       |       |   |  |         |         | 
|---------------------------------------- | ---------------------- |  | ------------ | ----- | --------- |  | ----------------------- | ----- | ----- |  | -------- | ----- | -------------- |  | ---------------- | ----- |  |  | ------- | ------- |  |  | ----- | ----- | - |  | ------- | ------- | 
|                                         |                        |  |              |       |           |  | Phelps Dodge Industries |       |       |  |          |       |                |  |                  |       |  |  |        
|                                         |                        |  | Phelps Dodge |       |           |  |                         |       |       |  |          |       |                |  |                  |       | 
|                                         |                        |  | Mining       |       | Specialty |  | Wire &                  |       |       |  |          |       | Segment        |  | Corporate, Other |       |  |  |        
|                                         |                        |  | Company      |       | Chemicals |  | Cable                   |       | Total |  | Subtotal |       | & Eliminations |  | Totals          
|                                        
|First Quarter 2002                       |                        |  |              |       |           |  |                         |       |       |  |          |       |                |  |                  |       |  |  |         |         |  |  |       |       |   |  |         |        
|                                        
|                                        
|                                        
|                                        
|Sales & other operating revenues:        |                        |  |              |       |           |  |                         |       |       |  |          |       |                |  |                  |       |  |  |         |         |  |  |       |       |   |  |         |        
|                                        
|                                        
|                                        
|                                        
|                                         | Unaffiliated customers |  | $            | 611.7 |           |  |                         | 129.3 |       |  |          | 177.5 |                |  |                  | 306.8 |  |  |         | 918.5   |  |  |       |      |   |  |         | 918.5   | 
|                                        
|                                        
|                                        
|                                        
|                                         | Intersegment           |  |              | 37.0  |           |  |                         |      |       |  |          | 0.2   |                |  |                  | 0.2   |  |  |         | 37.2    |  |  |       | (37.2 | ) |  |         |        | 
|                                        
|                                        
|                                        
|                                        
|Depreciation, depletion
and amortization |                        |  | 82.4         |       |           |  | 10.5                    |       |       |  | 10.7     |       |                |  | 21.2             |       |  |  | 103.6   |         |  |  | 2.0   |       |   |  | 105.6   |        
|                                        
|                                        
|                                        
|                                        
|Special items and provisions             |                        |  | 13.8         |       |           |  |                        |       |       |  |         |       |                |  |                 |       |  |  | 13.8    |         |  |  | (10.0 | )     |   |  | 3.8     |        
|                                        
|                                        
|                                        
|                                        
|Operating income (loss)                  |                        |  | 21.3         |       |           |  | 13.2                    |       |       |  | 2.8      |       |                |  | 16.0             |       |  |  | 37.3    |         |  |  | (30.3 | )     |   |  | 7.0     |        
|                                        
|                                        
|                                        
|                                        
|Assets at March 31                       |                        |  | 5,522.6      |       |           |  | 674.1                   |       |       |  | 601.5    |       |                |  | 1,275.6          |       |  |  | 6,798.2 |         |  |  | 771.5 |       |   |  | 7,569.7 |        
|                                        
|                                        
|                                        
|                                        
|Capital outlays and investments          |                        |  | 17.4         |       |           |  | 2.0                     |       |       |  | 1.7      |       |                |  | 3.7              |       |  |  | 21.1    |         |  |  | 1.7   |       |   |  | 22.8    |        
|                                        
|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 | ) |  |         |        | 
|                                        
|                                        
|                                        
|                                        
|Depreciation, depletion
and amortization |                        |  | 92.3         |       |           |  | 11.5                    |       |       |  | 12.1     |       |                |  | 23.6             |       |  |  | 115.9   |         |  |  | 0.6   |       |   |  | 116.5   |        
|                                        
|                                        
|                                        
|                                        
|Special 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 |        
|                                        
|                                        
|                                        
|                                        
|Capital outlays and investments          |                        |  | 63.9         |       |           |  | 6.2                     |       |       |  | 47.0     |       |                |  | 53.2             |       |  |  | 117.1   |         |  |  | 6.4   |       |   |  | 123.5   |        
|                                        





---



##### Table of Contents



-6-




NOTES TO CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)



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

(Unaudited; gains/(losses) in millions, except per share)

|                                                  |                                         |   |                    |       |           |  |           |       |   |  |       |       |  
|------------------------------------------------- | --------------------------------------- | - | ------------------ | ----- | --------- |  | --------- | ----- | - |  | ----- | ----- | -
|                                                  |                                         |   | First Quarter 2002
|                                                  |                                         |   |                   
|                                                  |                                         |   | Pre-tax            |       | After-tax |  | $/Share  
|                                                  |                                         |   | Earnings           |       | Earnings  |  | After-tax
|                                                  |                                         |   |                    |       |           |  |          
|Special items and provisions, net:                |                                         |   |                    |       |           |  |           |       |   |  |       |      
|                                                 
|                                                 
|                                                 
|                                                 
|Phelps Dodge Mining Company -                     |                                         |   |                    |       |           |  |           |       |   |  |       |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Environmental insurance
recoveries, net |   | $                  | 13.8  |           |  |           | 11.2  |   |  |       | 0.14  |  
|                                                  |                                         |   |                    |       |           |  |           |       |   |  |       |      
|Corporate and other -                             |                                         |   |                    |       |           |  |           |       |   |  |       |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Environmental provisions                |   |                    | (12.1 | )         |  |           | (12.1 | ) |  |       | (0.15 | )
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Environmental insurance
recoveries, net |   |                    | 2.1   |           |  |           | 1.9   |   |  |       | 0.02  |  
|                                                  |                                         |   |                    |       |           |  |           |       |   |  |       |      
|                                                  |                                         |   | (10.0              | )     |           |  | (10.2     | )     |   |  | (0.13 | )    
|                                                  |                                         |   |                    |       |           |  |           |       |   |  |       |      
|                                                  |                                         |   | 3.8                |       |           |  | 1.0       |       |   |  | 0.01  |      
|                                                  |                                         |   |                    |       |           |  |           |       |   |  |       |      
|Miscellaneous income and
expense, net:            |                                         |   |                    |       |           |  |           |       |   |  |       |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Write-off of cost basis investment      |   |                    | (0.5  | )         |  |           | (0.4  | ) |  |       |      |  
|                                                  |                                         |   |                    |       |           |  |           |       |   |  |       |      
|Tax benefit for 2001 net
operating loss carryback |                                         |   |                   |       |           |  | 38.5      |       |   |  | 0.49  |      
|                                                  |                                         |   |                    |       |           |  |           |       |   |  |       |      
|Cumulative effect of
accounting change            |                                         |   | (33.0              | )     |           |  | (22.9     | )     |   |  | (0.29 | )    
|                                                  |                                         |   |                    |       |           |  |           |       |   |  |       |      
|Total                                             |                                         | $ | (29.7              | )     |           |  | 16.2      |       |   |  | 0.21  |      
|                                                  |                                         |   |                    |       |           |  |           |       |   |  |       |      



| |  | In the 2002 first quarter, a special, net pre-tax loss of $29.7 million
was recognized consisting of pre-tax charges of $33.0 million ($22.9
million after-tax) for the cumulative effect of an accounting change
(refer to Note 3 for further discussion), $12.1 million (before and after
taxes) for environmental provisions (refer to Note 4) and a $0.5 million
($0.4 million after-tax) write-off of a cost basis investment, partially
offset by $15.9 million ($13.1 million after-tax), net of fees and
expenses, in recoveries associated with insurance settlements reached with
companies on historic environmental claims at Phelps Dodge Mining Company
and Corporate and other. It is our policy to recognize recoveries of
environmental expenditures or costs from insurance companies or other
parties when they become probable. In addition, the 2002 first quarter
included a tax benefit of $38.5 million for a
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





---



##### Table of Contents



-7-



| |  | net operating loss carryback prior to 2002 resulting from recent U.S. tax
legislation (refer to Note 8).
| |  | --------------------------------------------------------------------------------------------------------
|
| |  | The following schedule summarizes the special items and provisions for the
quarter ended March 31, 2001:

(Unaudited; gains/(losses) in millions, except per share)

|                                       |                                         |   |                    |      |           |  |           |      |  |  |       |      | 
|-------------------------------------- | --------------------------------------- | - | ------------------ | ---- | --------- |  | --------- | ---- |  |  | ----- | ---- | 
|                                       |                                         |   | First Quarter 2001
|                                       |                                         |   |                   
|                                       |                                         |   | Pre-tax            |      | After-tax |  | $/Share  
|                                       |                                         |   | Earnings           |      | Earnings  |  | After-tax
|                                       |                                         |   |                    |      |           |  |          
|Special items and provisions, net:     |                                         |   |                    |      |           |  |           |      |  |  |       |     
|                                      
|                                      
|                                      
|                                      
|Corporate and other -                  |                                         |   |                    |      |           |  |           |      |  |  |       |     
|                                      
|                                      
|                                      
|                                      
|                                       | Environmental insurance
recoveries, net |   | $                  | 30.9 |           |  |           | 30.9 |  |  |       | 0.40 | 
|                                       |                                         |   |                    |      |           |  |           |      |  |  |       |     
|Cumulative effect of
accounting change |                                         |   | (2.0               | )    |           |  | (2.0      | )    |  |  | (0.03 | )   
|                                       |                                         |   |                    |      |           |  |           |      |  |  |       |     
|Total                                  |                                         | $ | 28.9               |      |           |  | 28.9      |      |  |  | 0.37  |     
|                                       |                                         |   |                    |      |           |  |           |      |  |  |       |     



| |  | In the 2001 first quarter, a special, net gain of $28.9 million (before
and after taxes) was recognized consisting of $30.9 million (before and
after taxes), net of fees and expenses, in recoveries associated with
settlements reached with several insurance companies on historic
environmental liability claims, partially offset by a $2.0 million (before
and after taxes) charge for the cumulative effect of an accounting change
(refer to Note 9 for further discussion).                                                                                                                                                  
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Restructuring Programs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | During 2001, two restructuring/operational improvement plans occurred. In
the fourth quarter of 2001, Phelps Dodge announced a series of actions to
address the economic environment, including changes in copper
operations that would lead or have led to temporary curtailment of approximately
220,000 metric tons of copper production annually (including our partners
share), and the reduction of approximately 1,600 employees in 2002. In
the second quarter of 2001, we announced a restructuring of our
professional, administrative and operational support functions, as well as
various other operational improvements.
|
| |  | In the second quarter of 2000 and 1999, we announced plans to reduce
operating costs and restructure operations at our mining and wire and
cable segments. Refer to the Companys Form 10-K for the year ended
December 31, 2001, for additional discussion.                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | The following schedule presents a roll-forward from December 31, 2001, of
the liabilities incurred in connection with the 1999, 2000 and 2001
restructuring programs, which were reflected as current liabilities in our
consolidated balance sheet:                                                                                                                                                                                                                                                                                                                                                                                   

(Unaudited; $ in millions)

|                              |                                   |   |          |     |             |  |            |      |   |  |      |     | 
|----------------------------- | --------------------------------- | - | -------- | --- | ----------- |  | ---------- | ---- | - |  | ---- | --- | 
|                              |                                   |   |          |     |             |  | (Payments/ |      |   |  |     
|                              |                                   |   | 12/31/01 |     | Deductions) |  | 3/31/02   
|                              |                                   |   |          |     |             |  |           
|Phelps Dodge Mining Company - |                                   |   |          |     |             |  |            |      |   |  |      |    
|                             
|                             
|                             
|                             
|                              | Employee severance
and relocation |   | $        | 9.6 |             |  |            | (3.8 | ) |  |      | 5.8 | 
|                             
|                             
|                             
|                             
|                              | Mothballing/take-or-pay
contracts |   |          | 9.7 |             |  |            | (2.6 | ) |  |      | 7.1 | 
|                              |                                   |   |          |     |             |  |            |      |   |  |      |    
|                              |                                   |   | 19.3     |     |             |  | (6.4       | )    |   |  | 12.9 |    
|                              |                                   |   |          |     |             |  |            |      |   |  |      |    
|Phelps Dodge Industries -     |                                   |   |          |     |             |  |            |      |   |  |      |    
|                             
|                             
|                             
|                             
|Specialty Chemicals           |                                   |   |          |     |             |  |            |      |   |  |      |    
|                             
|                             
|                             
|                             
|                              | Disposal and dismantling          |   |          | 0.8 |             |  |            |     |   |  |      | 0.8 | 
|                             
|                             
|                             
|                             
|                              | Employee severance
and relocation |   |          | 0.8 |             |  |            | (0.4 | ) |  |      | 0.4 | 
|                             
|                             
|                             
|                             
|                              | Environmental                     |   |          | 0.6 |             |  |            |     |   |  |      | 0.6 | 
|                              |                                   |   |          |     |             |  |            |      |   |  |      |    
|                              |                                   |   | 2.2      |     |             |  | (0.4       | )    |   |  | 1.8  |    
|                              |                                   |   |          |     |             |  |            |      |   |  |      |    
|Wire and Cable                |                                   |   |          |     |             |  |            |      |   |  |      |    
|                             
|                             
|                             
|                             
|                              | Take-or-pay contracts             |   |          | 1.1 |             |  |            |     |   |  |      | 1.1 | 
|                             
|                             
|                             
|                             
|                              | Plant remodel and
dismantling     |   |          | 2.1 |             |  |            | (0.2 | ) |  |      | 1.9 | 
|                              |                                   |   |          |     |             |  |            |      |   |  |      |    
|                              |                                   |   | 3.2      |     |             |  | (0.2       | )    |   |  | 3.0  |    
|                              |                                   |   |          |     |             |  |            |      |   |  |      |    
|                              |                                   |   | 5.4      |     |             |  | (0.6       | )    |   |  | 4.8  |    
|                              |                                   |   |          |     |             |  |            |      |   |  |      |    
|Total                         |                                   | $ | 24.7     |     |             |  | (7.0       | )    |   |  | 17.7 |    
|                              |                                   |   |          |     |             |  |            |      |   |  |      |    



|3. |  | Accounting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible
Assets. Under SFAS No. 142, goodwill and intangible assets that have
indefinite useful lives will not be amortized but rather will be tested at
least annually for impairment. Intangible assets that have finite useful
lives will continue to be amortized over their useful lives. As of
December 31, 2001, the Company had goodwill of $115.2 million less
accumulated amortization of $26.7 million associated with the specialty
chemicals segment and goodwill of $70.8 million less accumulated
amortization of $16.2 million associated with the wire and cable segment, for
a total of $143.1 million, net. Upon completion of the transitional
impairment tests, the implied fair value of goodwill at three of the
Companys international wire and cable reporting units was determined to
be less than the reporting units carrying amount. The impairment loss
recognized upon adoption of SFAS No. 142 was $33.0 million, pre-tax ($22.9
million, after-





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##### Table of Contents



-8-



|   |  | tax), and has been recognized as a cumulative effect of a change in accounting
principle. The pro forma effect of not amortizing goodwill on the first
quarter of 2001 would have reduced goodwill amortization expense $1.9
million, increased net income $1.5 million, and increased basic and
diluted earnings per share by 2 cents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | In August 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets. This Statement supersedes SFAS No. 121 and the accounting and
reporting provisions of Accounting Principles Board (APB) Opinion No. 30,
and also amends Accounting Research Bulletin (ARB) No. 51. This Statement
requires that one accounting model be used for long-lived assets to be
disposed of by sale, whether previously held and used or newly acquired,
and will broaden the presentation of discontinued operations to include
more disposal transactions. This Statement was adopted by the Company on
January 1, 2002, with no significant effect on our financial reporting or
disclosures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   |  | In June 2001, FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. With the adoption of this Statement, retirement obligations
will be recognized when they are incurred and displayed as liabilities and
the initial measurement will be at fair value. In addition, the asset
retirement cost will be capitalized as part of the assets carrying value
and subsequently allocated to expense over the assets useful life. This
Statement is required to be adopted by the Company on January 1, 2003. We
are in the process of evaluating the effect that SFAS No. 143 will have on
our financial reporting and disclosures and are developing procedures to
effect its implementation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|4. |  | Environmental Matters                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   |  | As of December 31, 2001, we had a reserve balance of $311.2 million for
estimated future costs associated with environmental matters. During the
first three months of 2002, we had a $12.1 million increase in the reserve
and $4.0 million net spending against that reserve. As of March 31, 2002,
the reserve balance was $319.3 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |  | We have contingencies regarding environmental, closure and other matters.
For a further discussion of these contingencies, please refer to our Form
10-K for the year ended December 31, 2001, 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 to acquire an additional 40 percent interest in Alcoa Fios e
Cabos Electricos, S.A., our wire and cable facility in Brazil, in which we
already held a 60 percent interest. The final settlement price of $44.8
million was allocated to goodwill ($13.0 million), fixed assets ($3.2
million), other net assets ($1.3 million) and minority interests in
consolidated subsidiaries ($27.3 million).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|6. |  | Contingencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |  | Our mining operations are subject to laws and regulations establishing new
requirements for mined land reclamation and financial assurance. New
Mexico passed a mined land reclamation law in 1993 authorizing regulations
that were adopted in 1994. The permitting process for New Mexico mining
operations commenced in December 1994. Approval of closeout plans
describing the reclamation planned for the Chino, Tyrone and Cobre mines
currently is due by October 1, 2002. Two New Mexico State agencies
currently are reviewing the permit applications for facility closure and
reclamation, and one public hearing was held on Chinos plan to protect
water quality in August 2001. A second public hearing was held in
February 2002 on the Chino plan to discuss a draft permit proposed jointly
by Chino and the New Mexico Environment Department (NMED). The Company
is awaiting the hearing officers decision. The cost estimate to carry
out this plan, including water treatment for 100 years, if needed, is $386
million in current dollars (i.e., on an undiscounted basis). This figure compares to Chinos previous
estimate of approximately $100 million. The final cost estimate is
subject to the results of the hearing and any subsequent judicial appeals.
Actual reclamation costs may differ significantly from the cost estimate
based on a variety of factors including possible changes in legal
standards over time and potential cost savings from use of the Companys
own personnel and equipment at each site versus third-party contractor
costs (under New Mexico law, financial assurance requirements are
calculated based on estimated third-party costs), advances in technology
and reclamation techniques, and opportunities to prepare each site for
more efficient reclamation through careful development of the site over
time. The plan also calls for studies over the next four to five years to
refine the plan.





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##### Table of Contents



-9-



|   |  | The Company is continuing to negotiate with the State regarding the amount
of financial assurance required to cover the $386 million cost estimate.
Based upon our current understanding of the States position, the net
present value of the obligation when adjusted to reflect the appropriate
escalation and discount rates, is approximately $180 million to $200 million. The
final permits are subject to the public hearing process and consideration
of public comments, and a portion of the plan will require the issuance of
a waiver of certain standards as authorized by the New Mexico Mining Act.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The Company expects the next hearing on the Tyrone plan in May 2002. In
anticipation of the hearing, the State has proposed a plan with a cost
estimate of $440 million with a financial assurance estimate based on an
adjusted net present value of $267 million. The Company believes the cost
estimate, financial assurance requirement, and actual reclamation costs
for the Tyrone plan should more appropriately be comparable to the Chino
plan and the differences in valuation will be a subject of the upcoming
hearing. The initial hearing for the Cobre plan will likely occur in
the summer of 2002. The Company expects the cost estimate for the Cobre plan to
be approximately $40 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |  | The Companys accounting policy is to recognize estimated final
reclamation costs over the life of active mining properties on a
units-of-production basis. Non-operating sites that are currently on
care-and-maintenance status suspend accruing mine closure costs until the
site resumes production. When management determines a mine should be
permanently closed, any unrecognized closure obligation is recognized
immediately.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   |  | In September 2000, RAG American Coal Company (RAG) filed a complaint
against Cyprus Amax Minerals Company and Amax Energy Inc. (collectively,
Cyprus). The complaint alleges claims relating to breach of contract,
fraud, negligent misrepresentation, and negligence arising from alleged
inaccuracies in financial statements relating to the sale by Cyprus of its
coal subsidiary to RAG in June 1999. The complaint seeks damages in the
amount of $115 million under four different legal theories (breach of
contract, fraud, negligent misrepresentation and negligence). On April
18, 2002, the court issued its decision on the motion to dismiss filed by
Cyprus. The Court granted Cyprus motion to dismiss with respect to the
negligent misrepresentation and negligence claims, and denied Cyprus
motion with respect to the contract and fraud claims.                                                                                                                                                                                                                                                                                  
|  
|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 for each of the
three-months periods ended March 31, 2002 and 2001, excluded 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, 2002, excluded 0.3 million shares for
restricted stock and stock options issued to employees and for the three-month period ended
March 31, 2001, included 0.3 million shares for restricted
stock and stock options issued to
employees. 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)

|                     |  |               |       |      |  |  |       | 
|-------------------- |  | ------------- | ----- | ---- |  |  | ----- | 
|                     |  | First Quarter
|                     |  |              
|                     |  | 2002          |       | 2001
|                     |  |               |       |     
|Outstanding options  |  |               | 7.5   |      |  |  | 7.6   | 
|                    
|                    
|                    
|                    
|Average option price |  | $             | 36.49 |      |  |  | 46.66 | 



|8. |  | Benefit for Taxes on Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The Companys income tax
benefit for the 2002 first quarter comprised the following: (i) a $38.5 million tax benefit,
recorded as a special item, associated with the carryback of 2001 net
operating losses resulting from the March enactment of the Job Creation
and Worker Assistance Act of 2002; (ii) a $12.9 million benefit recognized
for first quarter 2002 net operating losses that, based on the new tax
legislation, may also be carried back to recover prior years taxes paid;
and (iii) an $11.7 million expense for taxes on earnings at international
operations.
|  
|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                                                                                                                                                                                                                                                                                                                                                                             





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##### Table of Contents



-10-



| |  | market risk. We do not enter into any contracts for speculative purposes.
We use various strategies to manage our market risk, including the
use of derivative contracts to limit, offset or reduce our market
exposure. Derivative instruments are used to manage well-defined
commodity price, energy, foreign exchange and interest rate risks from our
primary business activities. The fair values of our derivative
instruments are based on quoted market prices for similar instruments and
on market closing prices at period end. Please refer to the Managements
Discussion and Analysis and Note 19 of Form 10-K
for the year ended December 31, 2001, for a discussion on our derivative
instruments.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | During the first quarter of 2002, we reclassified
approximately $3.6 million of other comprehensive losses to earnings,
which was principally related to our floating-to-fixed interest rate
swaps.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | On January 1, 2001, Phelps Dodge adopted SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, (as amended by SFAS No.
137) and SFAS No. 138, Accounting for Certain Derivative Instruments and
Certain Hedging Activities. The implementation resulted in a cumulative
reduction to income of $2.0 million (before and after taxes), or 3 cents
per share, and a cumulative reduction to other comprehensive income of $7.1 million (before and
after taxes).                                                                                                                                                                                                                           




REVIEW BY INDEPENDENT ACCOUNTANTS

The financial information as of March 31, 2002, and for the three-month periods
ended March 31, 2002 and 2001, included in Part I pursuant to Rule 10-01 of
Regulation S-X has been reviewed by PricewaterhouseCoopers LLP
(PricewaterhouseCoopers), the Companys independent accountants, in accordance
with standards established by the American Institute of Certified Public
Accountants. PricewaterhouseCoopers report is included in this quarterly
report.

PricewaterhouseCoopers does not carry out any significant or additional 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.





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##### Table of Contents



-11-




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, 2002, and the related
consolidated statements of operations, of cash flows and of common
shareholders equity for the three-month periods ended
March 31, 2002 and March 31, 2001.
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, 2001, 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 28, 2002 we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated balance sheet as of
December 31, 2001, is fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.



/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Phoenix, Arizona
April 19, 2002





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##### Table of Contents



-12-




Item 2.   Managements Discussion and Analysis

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




RESULTS OF OPERATIONS

Consolidated Results

(Unaudited; $ in millions, except per share amounts)

|                                                               |  |               |       |      |  |  |         |  
|-------------------------------------------------------------- |  | ------------- | ----- | ---- |  |  | ------- | -
|                                                               |  | First Quarter
|                                                               |  |              
|                                                               |  | 2002          |       | 2001
|                                                               |  |               |       |     
|Sales and other operating revenues                             |  | $             | 918.5 |      |  |  | 1,100.7 |  
|                                                              
|                                                              
|                                                              
|                                                              
|Operating income before special items                          |  | $             | 3.2   |      |  |  | 3.5     |  
|                                                              
|                                                              
|                                                              
|                                                              
|Operating income                                               |  | $             | 7.0   |      |  |  | 34.4    |  
|                                                              
|                                                              
|                                                              
|                                                              
|Net loss before special items                                  |  | $             | (43.9 | )    |  |  | (14.7   | )
|                                                              
|                                                              
|                                                              
|                                                              
|Net income (loss)                                              |  | $             | (27.7 | )    |  |  | 14.2    |  
|                                                              
|                                                              
|                                                              
|                                                              
|Loss per common share, basic and
diluted, before special items |  | $             | (0.56 | )    |  |  | (0.19   | )
|                                                              
|                                                              
|                                                              
|                                                              
|Net income (loss) per common
share, basic and diluted          |  | $             | (0.35 | )    |  |  | 0.18    |  

The Company had a consolidated loss in the 2002 first quarter of $43.9
million, or 56 cents per share, before a net special gain of $16.2 million, or
21 cents per share, after-tax. The net special gain included (i) a $33.0
million pre-tax charge for the cumulative effect of adopting SFAS No. 142
($22.9 million after-tax, or 29 cents per share); (ii) a $15.9 million pre-tax
net gain in recoveries associated with insurance settlements reached with
companies on historic environmental liability claims ($13.1 million after-tax,
or 16 cents per share); (iii) a $12.1 million (before and after taxes, or 15
cents per share) charge for environmental provisions; (iv) a $0.5 million ($0.4
million after-tax) charge to write-off a cost basis investment; and (v) a $38.5
million, or 49 cents per share, tax benefit associated with 2001 operating
losses resulting from the March enactment of the Job Creation and Worker
Assistance Act of 2002. (Refer to Notes 2 and 8 to the consolidated financial
statements for further discussion of these special items.) By comparison, the
loss in the 2001 first quarter was $14.7 million, or 19 cents per common share,
before a special net pre-tax gain of $28.9 million ($28.9 million, or 37 cents
per share, after-tax). The special net gain consisted of $30.9 million in net
insurance recoveries (refer to Note 2) and a cumulative loss of $2.0 million
from the adoption of SFAS No. 133 (refer to Note 9).

The loss in the 2002 first quarter including special items was $27.7
million, or 35 cents per share, compared with 2001 first quarter earnings
including special items of $14.2 million, or 18 cents per share.

The New York Commodity Exchange (COMEX) spot price per pound of copper
cathode, primarily upon which we base our U.S. sales, averaged 72 cents in the
2002 first quarter, compared with 82 cents in the corresponding 2001 period.
The London Metal Exchange (LME) spot price per pound of copper cathode,
primarily upon which we base our international sales, averaged 71 cents in the
2002 first quarter, compared with 80 cents in the corresponding 2001 period.

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

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, 2002.

Quest for ZeroOperational Improvement Program

In May 2001, Phelps Dodge commenced Quest for Zero, our company-wide,
comprehensive, lean-production program designed to deliver $400 million of
annual operating income improvements by the end of 2003. During the 2002 first
quarter, we achieved $44 million in improvements, bringing the total to $99
million since the program was announced. Phelps Dodge Mining Company is
pursuing aggressively its Quest for Zerotarget of all-in 60 cents per pound
implied unit cost of copper production by the end of 2003. This target is the
heart of our Quest for





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##### Table of Contents



-13-

Zeroprogram, and should enhance the tremendous leverage we have to rising
copper prices.

Business Segments

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




RESULTS OF PHELPS DODGE MINING COMPANY

Phelps Dodge Mining Company (PDMC) is our international business segment
that comprises a group of companies involved in vertically integrated copper
operations including mining, concentrating, electrowinning, smelting, refining,
rod production, marketing and sales, and related activities. PDMC sells copper
to others primarily as rod, cathode or concentrate, and as rod to our wire and
cable segment. In addition, PDMC at times smelts and refines copper and
produces copper rod for customers on a toll basis. 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, and a process technology center
that directs its activities at improving existing processes and developing new
cost-competitive technologies.

(Unaudited)

|                                                             |                                        |   |               |       |      |  |       |       | 
|------------------------------------------------------------ | -------------------------------------- | - | ------------- | ----- | ---- |  | ----- | ----- | 
|                                                             |                                        |   | First Quarter
|                                                             |                                        |   |              
|                                                             |                                        |   | 2002          |       | 2001
|                                                             |                                        |   |               |       |     
|Copper production (thousand short tons):                     |                                        |   |               |       |      |  |       |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Total production                       |   |               | 321.9 |      |  |       | 359.2 | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Less minority participants shares (A) |   |               | 64.7  |      |  |       | 65.0  | 
|                                                             |                                        |   |               |       |      |  |       |      
|                                                             | Net Phelps Dodge share                 |   |               | 257.2 |      |  |       | 294.2 | 
|                                                             |                                        |   |               |       |      |  |       |      
|Copper sales (thousand short tons):                          |                                        |   |               |       |      |  |       |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Net Phelps Dodge share
from own mines  |   |               | 268.5 |      |  |       | 289.7 | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Purchased copper                       |   |               | 112.2 |      |  |       | 113.8 | 
|                                                             |                                        |   |               |       |      |  |       |      
|                                                             | Total copper sales                     |   |               | 380.7 |      |  |       | 403.5 | 
|                                                             |                                        |   |               |       |      |  |       |      
|LME average spot copper price
per pound  cathodes           |                                        | $ | 0.71          |       |      |  | 0.80  |      
|                                                            
|                                                            
|                                                            
|                                                            
|COMEX average spot copper price
per pound  cathodes         |                                        | $ | 0.72          |       |      |  | 0.82  |      
|                                                            
|                                                            
|                                                            
|                                                            
|Implied full unit cost of
copper production (B)              |                                        | $ | 0.69          |       |      |  | 0.81  |      
|                                                            
|                                                            
|                                                            
|                                                            
|Implied cash unit cost of
copper production (B)              |                                        | $ | 0.53          |       |      |  | 0.65  |      
|                                                            
|                                                            
|                                                            
|                                                            
|Molybdenum production (million pounds)                       |                                        |   | 10.6          |       |      |  | 14.7  |      
|                                                            
|                                                            
|                                                            
|                                                            
|Molybdenum sales (million pounds):                           |                                        |   |               |       |      |  |       |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Net Phelps Dodge share
from own mines  |   |               | 12.8  |      |  |       | 15.0  | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Purchased molybdenum                   |   |               | 2.6   |      |  |       | 0.1   | 
|                                                             |                                        |   |               |       |      |  |       |      
|                                                             |                                        |   | 15.4          |       |      |  | 15.1  |      
|                                                             |                                        |   |               |       |      |  |       |      
|Metals Week:                                                 |                                        |   |               |       |      |  |       |      
|                                                            
|                                                            
|                                                            
|                                                            
|Molybdenum oxide price per pound                             |                                        | $ | 2.74          |       |      |  | 2.25  |      
|                                                            
|                                                            
|                                                            
|                                                            
|($ in millions)                                              |                                        |   |               |       |      |  |       |      
|                                                            
|                                                            
|                                                            
|                                                            
|Sales and other operating revenues
to unaffiliated customers |                                        | $ | 611.7         |       |      |  | 726.5 |      
|                                                            
|                                                            
|                                                            
|                                                            
|Operating income (loss) (C)                                  |                                        | $ | 21.3          |       |      |  | (5.1  | )    



---

|(A) |  | Minority participant interests include (i) a 15 percent undivided
interest in Morenci, Arizona, copper mining complex held by Sumitomo Metal
Mining Arizona, Inc., (ii) a one-third partnership interest in Chino Mines
Company in New Mexico held by Heisei Minerals Corporation, (iii) a 20
percent 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 Corporación Nacional del Cobre de Chile
(CODELCO).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(B) |  | Implied full unit cost of copper production is based on PDMCs all-in
operating margin per pound of copper sold (i.e., PDMC operating income
(loss) before special items, divided by pounds of PD-mined copper sold,
plus or minus the LME copper price). Implied cash unit cost of copper
production excludes PDMCs segment depreciation, depletion and
amortization and copper mine closure expense, from its all-in operating
margin in the above calculation.                                                                                                                                              
|   
|   
|   
|   
|(C) |  | Includes a special, pre-tax gain of $13.8 million in the 2002 first
quarter for recoveries associated with settlements reached with insurance
companies on historic environmental liability claims. Refer to Note 2.                                                                                                                                                                                                                                                                                                                                                                                            





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##### Table of Contents



-14-

PDMC  Sales

In the 2002 first quarter, PDMCs sales and other operating revenues to
unaffiliated customers decreased by $114.8 million, or 16 percent, compared
with the corresponding 2001 period. The variance primarily reflected lower
copper prices and lower PD-mined sales volumes.

PDMC  Operating Income (Loss)

PDMC reported operating income of $7.5 million in the 2002 first quarter
before a special, net pre-tax gain of $13.8 million, compared with an operating
loss of $5.1 million in the corresponding 2001 period. This increase primarily
reflected a lower implied unit cost of copper production ($63 million),
partially offset by lower copper prices ($51 million) and slightly lower sales
volumes of PD-mined copper.

The 2002 first quarter included a special, net pre-tax gain of $13.8
million for recoveries associated with settlements reached with insurance
companies on historic environmental liability claims.

In the 2002 first quarter, the implied unit cost of copper production,
both full and cash, decreased by 12 cents per pound to 69 cents and 53 cents
per pound, respectively, compared with the corresponding 2001 quarter despite
the inefficiencies associated with the production curtailments initiated at the
beginning of the quarter. Approximately one-half of the cost improvement was
due to lower energy costs. The other half was due to full operation of the
Morenci mine-for-leach process and general operational improvements associated
with the Companys Quest for Zeroprogram.

Energy, including electricity, diesel fuel and natural gas, represents a
significant portion of the production costs for our operations. During the
first quarter of 2001, our Arizona and New Mexico operations were affected
adversely by significantly higher costs for all three. In response, the
Company implemented a power cost stabilization plan in March 2001. As a
result, in the 2002 first quarter Phelps Dodge was able to reduce and mitigate
the impacts of volatile electricity markets, diesel fuel and natural gas
prices.

PDMC  Other Matters

On February 6, 2002, we announced that our Bagdad mine will begin
construction in the 2002 second quarter of a $40 million copper concentrate
leaching demonstration plant that is designed to recover commercial-grade
copper cathode from chalcopyrite concentrates. It is expected to begin
operating during the first half of 2003. At full capacity, it is expected to
produce 35 million pounds of copper cathode from concentrate annually. If
successful, this technique could assist in our long-term cost reduction
strategy.




RESULTS OF PHELPS DODGE INDUSTRIES

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

(Unaudited; $ in millions)

|                                                              |                     |   |       |               |  |      |       |       |  | 
|------------------------------------------------------------- | ------------------- | - | ----- | ------------- |  | ---- | ----- | ----- |  | 
|                                                              |                     |   |       | First Quarter
|                                                              |                     |   |       |              
|                                                              |                     |   |       | 2002          |  | 2001
|                                                              |                     |   |       |               |  |     
|Sales and other operating revenues
to unaffiliated customers: |                     |   |       |               |  |      |       |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Specialty chemicals |   | $     | 129.3         |  |      |       | 161.5 | 
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Wire and cable      |   |       | 177.5         |  |      |       | 212.7 | 
|                                                              |                     |   |       |               |  |      |       |      
|                                                              |                     | $ | 306.8 |               |  |      | 374.2 |      
|                                                              |                     |   |       |               |  |      |       |      
|Operating income:                                             |                     |   |       |               |  |      |       |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Specialty chemicals |   | $     | 13.2          |  |      |       | 20.2  | 
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Wire and cable      |   |       | 2.8           |  |      |       | 6.5   | 
|                                                              |                     |   |       |               |  |      |       |      
|                                                              |                     | $ | 16.0  |               |  |      | 26.7  |      
|                                                              |                     |   |       |               |  |      |       |      

PDI  Sales

PDI reported sales to unaffiliated customers of $306.8 million in the 2002
first quarter, compared with sales of $374.2 million in the corresponding 2001
period. The decrease of 20 percent in specialty chemicals sales was the result
of lower average unit selling prices and lower sales volumes. The decrease of
17 percent in wire and cable sales was primarily the result of lower sales
volumes due to continued economic weakness principally in the United States.





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##### Table of Contents



-15-

PDI  Operating Income

PDI reported 2002 first quarter operating income of $16.0 million,
compared with $26.7 million in the 2001 first quarter. The decrease was primarily
due to the weak economic conditions globally. This resulted in lower sales
volumes in the specialty chemicals segment and additional softness in the U.S.
aerospace market for the wire and cable segment.




OTHER MATTERS RELATING TO THE STATEMENT OF CONSOLIDATED OPERATIONS

Depreciation, Depletion and Amortization Expense

Depreciation, depletion and amortization expense was $105.6 million in the
2002 first quarter, compared with $116.5 million in the corresponding 2001
period. The decrease was primarily due to the temporary shutdowns and
production curtailments at PDMC and the $1.9 million reduction of goodwill
amortization expense at PDI resulting from the adoption of SFAS No. 142.

Exploration and Research and Development Expense

Our exploration and research expense was $8.7 million in the 2002 first
quarter, a decrease of $6.1 million from the corresponding period in 2001.
The decrease primarily resulted from lower spending at most of our locations
and the absence of expenditures at the Sossego joint venture in Brazil, which
was sold in October 2001.

Benefit for Taxes on Income

The
Companys income tax benefit for the 2002 first quarter comprised the following: (i) a $38.5 million tax benefit, recorded
as a special item, associated with the carryback of 2001 net operating losses
resulting from the March enactment of the Job Creation and Worker Assistance
Act of 2002; (ii) a $12.9 million benefit recognized for the first quarter 2002
net operating losses that, based on the new tax legislation, may also be
carried back to recover prior years taxes paid; and (iii) an $11.7 million
expense for taxes on earnings at international operations.




CHANGES IN FINANCIAL CONDITION

Working Capital

During the 2002 first quarter, net working capital balances (excluding
cash and cash equivalents and debt) increased $43.1 million. This increase
resulted primarily from:



| |  |  | a $41.2 million increase
in accounts receivable primarily due to a
$51.4 million increase associated with the tax benefit to carryback
the 2001 and the 2002 first quarter net operating losses resulting
from the March enactment of the Job Creation and Worker Assistance
Act of 2002 (refer to Note 8), partially offset by $11 million of
collections for environmental insurance recoveries;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | a $39.8 million decrease in inventories and supplies primarily
due to a $34.7 million decrease in copper, gold and molybdenum
inventories at mining operations and a $5.5 million decrease at PDI
primarily associated with seasonally high levels of inventory at
year-end 2001;                                                                                                                 
|
| |  |  | a $10.1 million increase in prepaid expenses and other current
assets primarily due to the prepayment of insurance premiums that
will be amortized over the remaining portion of the year; and                                                                                                                                                                                                    
|
| |  |  | a $32.9 million decrease in accounts payable and accrued
expenses primarily due to the production curtailments, shutdown of
facilities, staff reductions and payments of environmental costs,
partially offset by a $43.3 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, 2002, our total debt was $2,831.0 million, compared with
$2,851.0 million at year-end 2001. Our ratio of debt to total capitalization
was 50.8 percent at March 31, 2002 and December 31, 2001. On April 1, 2002,
the Company paid the $150 million of principal on its 10.125 percent notes then
due from cash on hand.

As of March 31, 2002, the Company had no borrowings against its $1 billion
revolving credit facility which is available, provided compliance with the





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##### Table of Contents



-16-

covenant requirements, until its scheduled maturity on May 10, 2005.

On
April 15, 2002, Standard and Poors confirmed its BBB
credit rating on our senior debt,
but will continue to assess our credit rating based on the economic environment
in the 2002 second half.

Capital Expenditures and Investments

Capital expenditures and investments during the 2002 first quarter were
$17.4 million for PDMC, $3.7 million for PDI and $1.7 million for Corporate and
other. Capital expenditures and investments in the corresponding 2001 period
were $63.9 million for PDMC, $53.2 million for PDI (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  refer to Note
5) and $6.4 million for Corporate and other. We expect capital expenditures
and investments for the year 2002 to be approximately $185 million, including
$130 million for PDMC, approximately $45 million for PDI, and approximately $10
million for Corporate and other. These capital expenditures and investments
are expected to be funded primarily from operating cash flows and cash
reserves.

Dividends

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

Other Matters

For a discussion of new accounting standards, please refer to Note 3 to
the consolidated financial information.




Part II.   Other Information




Item 1.   Legal Proceedings

Reference is made to Paragraph VIII of
Item 3. Legal Proceedings of the Companys Form 10-K for the year ended
December 31, 2001, regarding the matters described therein:

On April 18, 2002, the court issued its decision on the motion to dismiss
filed by Cyprus Amax Minerals Company and Amax Energy Inc. (collectively,
Cyprus). The Court granted Cyprus motion to dismiss with respect to the
negligent misrepresentation and negligence claims, and denied Cyprus motion
with respect to the contract and fraud claims.




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, 2002.     




Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company 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 14, 2002 |  | By: |  | /s/ Stanton K. Rideout                                                         
|                   |  |     |  |                                                                                
|                   |  |     |  | Stanton K. Rideout
Vice President and Controller
(Principal Accounting Officer)




Index to Exhibits



|10.14 |  | Retirement Agreement, dated
March 6, 2002, between the Company
and Manuel J. Iraola (SEC File No. 1-82).
|----- |  | --------------------------------------------------------------------------------------------------------
|     
|12    |  | Computation of ratios of total debt to total capitalization.                                            
|     
|15    |  | Letter from PricewaterhouseCoopers LLP with respect to unaudited
interim financial information.