building fundamentals ®

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Building Fundamentals®

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How much do you know about Freeport-McMoRan Corporation’s

Key Success Measures?

Let’s find out!

Important Questions

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1 - How much Cash was on hand? $______

2 - How much Cash was generated by Operating Activities?$______

3 - What was our Total Revenues? $______

4 - What was our Operating Margin? ______%

5 - What was our Net Margin? ______%

6 – What was our Copper Reserves (billion lbs.)? ______

7 – What was our total equity ratio? ______%

8 - How much did Total Revenue change YOY? ______%

9 - How much did Net Income change YOY? ______%

10 - How much did Earnings Per Share (EPS) change YOY? ______%

11- What was FCX’s Total recordable incident rate (TRIR)? ______

12- Where would you go to get access to this information? ______

For fiscal year: 2010

Pop Quiz (Write your answers on Page 8-9)

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What’s your knowledge of Business terminology?

Let’s find out!

Group Activity

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The bills and coins in the register, petty cash, and cash in the bank. It also includes cash equivalents, like CD’s and other highly liquid investments, easily converted into cash within 90 days.

1. _____

Cash generation that is the difference between the cash that flows into the business and the cash that flows out of the business in a given period of time (month, quarter, annual)

2. _____

The total dollar payment received for goods & services during a specific period of time. It is the “top line” figure from which costs are subtracted to determine net income. Also synonymous with sales.

3. _____

The amount of profit realized from a business’s operations after taking out operating expenses such as costs of goods sold (COGS), SG&A, and depreciation. Also known as EBIT.

4. _____

A company's total earnings and is calculated by taking revenues and subtracting “all” expenses. This number is found on a company's income statement and is an important measure of how profitable the company is over a period of time. Often referred to as "the bottom line“.

5. _____

Amount of proven and probable copper available to be pulled out of our mining assets. 6. _____

A number used to help determine how much shareholders would receive in the event of a company-wide liquidation. The number is expressed as a percentage, is calculated by dividing total shareholders' equity by total assets of the firm, and it represents the amount of assets on which shareholders have a residual claim. The figures are taken from the company's balance sheet.

7. _____

An increase of a company's sales when compared to a previous month, quarter or year's revenue performance. 8. _____

An increase of a company’s net earnings compared to a previous month, quarter or year. 9. _____

The portion of a company's profit allocated to each outstanding share of common stock. Calculated as: Net Income – Dividends on Preferred Stock / Average Outstanding Shares.

10. _____

Rate of recordable workplace injuries, normalized per 200,000 hours worked. 11. _____

A. Revenue Growth B. Cash Flow C. GrowthD. Cash E. TRIR

F. Operating Income G. Revenue H. Net Income I. Equity Ratio J. EBITDAK. Net Income Growth L. Cooper Reserves M. Asset N. Liquidity O. EPS

Its OK to guess!

(Write your answers on Page 10-11)Group Activity!

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Accurately define pertinent business and financial terminology such as revenue, cost of goods sold, gross profit, net income, unit costs, etc.

Demonstrate in a team setting, an understanding of the 5 key drivers (cash, profit, assets, growth, people), that every business must focus on and how each driver influences business success.

Accurately describe the key measures and metrics used to assess business performance.

Identify and define each line item on a Basic Profit & Loss statement.

Articulate to one’s team the importance of business and financial acumen and how their individual role impacts the business.

Learning Objectives

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Only 5-10% of business start-ups survive past 5 years.

16% of CEOs lose their job every year. Booz Allen Hamilton 5th annual Study

70% of merger and acquisition activity do not live up to expectation. Wall Street Journal 2007

Why do businesses fail?

Business Can Be Tough!

http://wingatesalesinc.com/store-closing-sale.php

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Every business must focus on five business drivers.

If they do, they will be successful.

If they don’t, they’ll fail.

Let’s Start a Business!

7

Introduction to the 5 Drivers

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Can a company have too much cash?

13

• Earn it • Cash from Operation

• Sell Assets• Cash from Investing

• Borrow it• Cash from Financing

Pro: No Cost -Con: Time

Pro: Immediate -Con: Reduces Assets

Pro: Immediate -Con: Cost (Interest)

Sources of Cash

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Can a company have too much Cash?

1) More attractive in a buy-out.2) Low return.3) Shareholders don’t like it.4) May make poor decisions.

13

Cash Challenges of Too Much Cash

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DEFINITION:What is required to Grow and Maintain the business.

HOW MUCH CASH SHOULD A COMPANY HAVE?

“Companies ought to keep just enough cash to cover their o Operational expenseso Interest expenseso Capital expenditureso ….plus a little bit more in case of emergencies.”

~Investopedia

Fred Smith - FedEx

People

Cash

Profit

Assets

Growth

®

Cash: Definition

12

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Cash (Cash position):“The bills and coins in the register, petty cash, and cash in the bank. It also includes cash equivalents, like CD’s and other highly liquid investments, that is easily converted into cash within 90 days.”

KEY MEASURES

Cash Flow:“Cash generation or “cash flow” is the difference between the cash that flows into the business and the cash that flows out of the business in a given period of time (month, quarter, annual)”

Cash: Measures

12

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Cash generated from operations activities Cash generated from investing activities Cash from financing activities

Cash management Liquidity Cash Equivalents

Cash: Related Terms

Cash generation or Cash from Operations refers to cash flow. Core operations or operating activities means the primary activities we perform in our business.

What are our core operating activities?

13

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Balance Sheet - Entry:Cash and Cash Equivalents (some companies add short-term and long-term investments/securities when considering their Cash Position.

Statement of Cash Flows – Entry:From Operations, or Cash Generated from Operations.

Cash: Where Measured

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“Cash is more important than your mother." Al Shugart Former Seagate CEO

“Cash is a company’s oxygen supply.”

-Ram Charan

What happens to a company who runs low on cash?

Cash: Insights & Importance

Cash is King!

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(In Millions)

Cash Freeport McMoRan Corporation

13

Business Measures and Metrics

Freeport McMoRan-

FCX

Freeport McMoRan-

FCX

Freeport McMoRan-

FCX

Freeport McMoRan-

FCX

2010 2009 2008 2007

Revenues $18,982 $15,040 $17,796 $16,939

Cash

Cash and Equivalents $3,738 $2,656 $872 $1,626

Cash from Operating Activities $6,273 $4,397 $3,370 $6,225

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WHY? • They sell commodities• Short sales cycle• Predictable business model

High Cash vs. Low Cash

1.8%

2.0%

1.7%

High Cash % of Revenue

WHY? • Acquisitions• Long sales cycle• High risk industries (pharma, tech)

S&P 500 Average: Cash = 14%

Low Cash % of Revenue

75%42%32%

13

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High Cash Low Cash


Freeport McMoRan-FCX Microsoft Pfizer ExxonMobil Wal-mart

2010 6/30/2011 2010 2010 1/31/2011

Revenues $18,982 $69,943 $67,809 $383,221 $421,849

Cash

Cash and Equivalents $3,738 $52,772 $28,479 7,827 7,395

Cash as % of Revenue 19.69% 75.45% 42.00% 2.04% 1.75% Cash from Operating Activities $6,273 $26,994 $11,454 $48,413 $23,643

CashExamples

(In Millions)

13

S&P 500 Average: Cash = 14%

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To increase CASH:

Paying slower Collecting faster … with the same sales revenues and costs.

To increase CASH and CASH FLOW:

Increase revenues/sales Reduce/cut costs Adjust inventories

Key Ways to Increase Cash & Cash Flow

13

-Action Plan:

What Single Action are You Committed to do to Positively Impact CASH and CASH

FLOW?

• Better training/faster ramp up• Increase employee/customer retention• Have clear policies & procedures that will

enable better efficiencies• Reduce/conserve utilities• Reduce conflicts (systems, people, processes, IT

technologies) Your own idea…

Review:CASH: Increase Profits by increasing sale and/or reducing costs (next

section) Pay slower/JIT: (to Vendors strategies – A/P) Collect faster (from customers strategies – A/R) Manage inventory levels Scrutinize capital expenditures

• Increase sales/revenues• Compress A/R – Extend A/P• Increase operational efficiencies• Control expenses• Reduce waste, re-work• Manage/Reduce OT• Maintain schedule/ship dates• Vendor owned/Managed inventory 3

8

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DEFINITION:

The money made after all expenses are subtracted from your sales. It can be expressed in dollars ($) or as a percent (%). You can improve profit in two fundamental ways:

People

Cash

Profit

Assets

Growth

®

Profit: Definition

1) Increase Sales Price (Revenues)

2) Reduce Expenses

14

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Gross Profit/Margin: Total Revenues (Sales) less Cost of Goods Sold.

KEY MEASURES

Net Profit/Net Profit Margin:Profit after all expenses have been subtracted from sales.

Earnings Per Share (EPS):Profit allocated to each outstanding share of Common Stock.

People

Cash

Profit

Assets

Growth

®

Profit: Measures

14

Operating Profit/ Margin: Reflects earnings before interest and taxes.

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Sales Price: $1.50Water - .04Label - .11Bottle & cap - .15 Packaging - .20 Direct LaborTotal: ( .50)

$1.50 - .50 = $1.00 Gross Profit 66.7% Gross Margin

Rent - .03Salaries, Gen, Admin. (SG&A) - .30Marketing - .08 Shipping - .19 Depreciation /Amortization - .02 Total: ( .62)

$1.50 - $.50 - $.62 = $.38 EBIT (Operating Income) 25.3% Margin

Interest Expense - .04Taxes - .06Total: ( .10)

$1.50 - $.50 - $.62 - $.10 = $.28 Net Profit 18.6% Net Profit Margin

Life Spring

Artesian Water

COGS

Controllables

Less-Controllables

Difference Between Profit ($) & Margin (%)

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Profit = Earnings = Income

Gross profit, gross margin, gross income:Sales from core operations less direct costs associated with those sales (before deducting overhead or indirect costs).

Net profit, net margin, net income:Total sales/revenue less all expenses.

All these terms represent what is left over after certain categories of expense are deducted from revenue.

Profit: Related Terms

15

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Consolidated Statement of Operations:Also referred to informally as the Profit and Loss Statement or P&L. Profit (earnings) is usually measured in dollars. Margin is frequently stated as a percent of sales (as in, “6% Profit Margin”) meaning Profit is 6% of Sales/Revenues.

Profit: Where Measured

15

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“Every business must earn a return that is greater than the cost of using other people’s money.”

~Ram Charan

“No Margin, No Mission.”

~Stephen R. Covey

Profit: Insights & Importance

15

-ProfitFreeport McMoRan

Corporation

11

(In Millions)


Freeport McMoRan-

FCX

Freeport McMoRan-

FCX

Freeport McMoRan-

FCX

Freeport McMoRan-

FCX

2010 2009 2008 2007

Revenues $18,982 $15,040 $17,796 $16,939

Net Income $4,273 $2,527 $(11,341) $2,769

Profit

Operating Margin 47.8% 43.2% -71.4% 38.7%

Net Margin 22.5% 16.8% -63.7% 16.3%

Unit Cash Cost Copper (per lbs.) $0.79 $0.55 $1.16 $1.31

EPS $4.57 $2.93 $(14.86) $3.75

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WHY?

They sell commodities.“If you’re not unique, you better be cheap!”

To drive Profit($) you need either: High Margin (%) or High Volume

28%

32%

22%

3.6%

8.0%

1.7%

High Margins

Low Margins

WHY?

They offer something Unique!

S&P 500 2011 Averages: Net Margin = 13%

High Margin vs. Low Margin

15

-

9

High Profit Low Profit


Freeport McMoRan-FCX Coca-Cola Microsoft ExxonMobil Wal-mart

2010 6/30/2011 2010 2010 1/31/2011

Revenues $18,982 $35,119 $69,943 $383,221 $421,849

Profit

Operating Margin 47.8% 24.1% 38.8% 13.8% 6.1%

Net Margin 22.5% 33.6% 33.1% 7.9% 3.9%

ProfitExamples

(In Millions)

-

11

United Parcel Services (UPS) – Avoiding left-hand turns

-92,000 trucks worldwide-Saved over 28,541,472 miles-Saved 3 million gallons of fuel-Reduced insurance premiums-Reduced maintenance frequency and costs

Profit in Action

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• Increase product sales prices• Increase company sales• Increase accessory sales (higher margin

sales)• Reduce/eliminate color copies • Reduce expenses• Decrease utilities• Decrease equipment returns • Decrease equipment replacement • Decrease discounting• Decrease credits

• Effective management of operational costs• Educate employees on company products to

enhance up-selling and cross-selling • Manage/Reduce OCC’s (Other Credits & Charges)• Decrease delinquent customers • Book flights 4 wks in advance• Faster on-boarding• Reduce 0 – 12 month turnover ($24,000)• Reduce overall company turnover• Effective training

(Personal action plan - page 11)

What Single Action are You Committed to do to Positively Impact PROFIT?

Action Planning:

38

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What we have and how well we use what we have.

DEFINITION

Asset Strength:The ability to remain viable during ups and downs in the marketplace.

Asset Utilization:The ability to remain viable during ups and downs in the marketplace.

People

Cash

Profit

Assets

Growth

®

Assets: Definition

16

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Copper Reserves (Billion Lbs.)total estimated proven and probable copper reserves remaining

KEY MEASURES

Equity Ratio:indicates what proportion of equity and debt the company is using to finance its assets

Asset Strength (Have)

• People:

• Property:

• Cash:

• Inventory:

• Plant & Equipment:

• Information:

Asset Utilization (Use)

Increase employee productivity.

increase usage with lower number of buildings.

Buy back stock, acquire another company, invest in higher returns.

“just in time” inventory increasing inventory turnover.

Decrease cycle time.

Increase number of patents per year.

Asset: Measures

17

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Assets:Resources, investments, property.

Asset Strength:Liquidity, risk, measurement, risk profile.

Asset Utilization:Efficiency, effectiveness, operations, return on investment, return on assets, return on equity, return on investment, sales per employee, income per employee, worker productivity, process efficiency, process improvement.

ROA = Net Income Total Assets

Inventory Turnover = Sales Inventory

Assets: Related Terms

17

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Balance Sheet - Entry:Current assets, and other (long-term) assets, Measurements include current ratio, quick ratio, debt-to-equity ratio, and others ratios and their trends, return on assets (ROA), return on equity (ROE), and return on investment (ROI).

Assets: Where Measured

17

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Assets are what the company has to work with to generate revenue. Asset Utilization is directly related to profitability.

Leaders must balance Asset Strength with Asset Utilization.

Assets: Insights & Importance

17

Asset Strength(Have)

• Solid base of liquidity

• Low debt • High capital• Low risk

Asset Utilization(Use)

Efficiencies/Productivity

• Higher Inventory Turnover

• Higher ROA (Return on Assets)

-Assets Freeport McMoRan

Corporation

Equity Ratio = Total Equity $14,560 Total Assets $29,386 1

7

(In Millions)

Business Measures and Metrics Freeport

McMoRan-FCX Freeport



McMoRan-FCX

2010 2009 2008 2007

Revenues $18,982 $15,040 $17,796 $16,939

Net Income $4,273 $2,527 $(11,341) $2,769

Assets

Copper Reserves (Billion lbs) 120.50 104.20 102.00 93.20

Equity Ratio 49.5% 41.4% 30.4% 44.8%

= 49.5%Bought Phelps Dodge

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High ROA Low ROA


Freeport McMoRan-FCX Coach RIMM Proctor &

Gamble Abbott Labs

2010 6/2/2011 2-26-2011 6-30-2011 2010

Revenues $18,982 $4,158 $19,907 $82,559 $35,166

Assets

Return on Assets (ROA) 14.8% 33.4% 26.5% 8.5% 7.8%

(In Millions)

FCX ROA = Net Income = 4,336 = 14.8% Total Assets 29,386

Assets: High-Low ROA

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An increase over a period of time such as year, quarter, or month. Growth is most commonly measured by:

DEFINITION

There are two types of Growth:1. Organic Growth:

Comes from a company’s existing business2. Inorganic Growth:

Comes from a merger or an acquisition

“In today’s business world, no growth means lagging behind in a world that grows every day…”

People

Cash

Profit

Assets

Growth

®

Sales Profit EarningsTop-Line Bottom-Line Per-Share

Growth: Definition

18

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Revenue Growth:Increase in revenues/sales

KEY MEASURES

Net Income Growth:Increase in Net Income

EPS Growth:Earnings per share increase

Growth: Measures

People

Cash

Profit

Assets

Growth

®

18

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• Organic Growth: Growth that comes from company increase.

• Inorganic Growth: Growth through acquisitions.

• Top Line Growth: An increase is sales/revenues.

• Bottom Line Growth: An increase in net income, or profit.

• Other Terms: Merger & acquisition (M&A), expansion, business development, customer base, number of employees, number of offices, asset growth.

Growth: Related Terms

19

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Any financial statement or other report can be used, by comparing figures from one time frame to another time frame. For example: Year over year, quarter over quarter, month over month, etc.

26.2%

16.7%

16.1%

5.7%

Growth: Where Measured

19

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Business in Growth Mode

• Best & brightest leave first• Productivity goes down• Morale goes down• Costs are cut, which limits ability to grow,

and the company becomes less profitable.

Business in Rapid Decline

• Attracts/Retains the best & brightest!• Productivity goes up = more profit =

more cash = more ability to grow!• Morale is typically higher.• You have the ability to grow in your

career!

Growth: Insights & Importance

-Growth

Freeport McMoRan Corporation

(In Millions)





McMoRan-FCX

2010 2009 2008 2007

Revenues $18,982 $15,040 $17,796 $16,939

Net Income $4,273 $2,527 $(11,341) $2,769

Growth

Revenue Growth 26.2% -15.5% 5.1% 193.0%

Net Income Growth 69.1% 122.3% -509.6% 98.4%

EPS Growth 56.0% 119.7% -496.3% 11.8%

Recorded Reserve Growth Copper

15.6% 2.2% 9.4% 72.2%

19

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High Revenue Growth Low Revenue Growth


Freeport McMoRan-FCX Apple Amazon Wal-mart Yahoo!

2010 9-10/9-11 2010 2010 2010

Revenues $18,982 $108,249 $34,204 $421,849 $6,324

Growth

Revenue Growth 26.2% 65.9% 39.6% 3.4% (2.1)

(In Millions)

FCX Revenue Growth = 2010 Rev - 1 x 100 = 26.2% 2011 Rev

Growth: High-Low Revenue Growth

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GROWTH = Increase: -Sales, and/or

-Profits, and/or -Earnings per share (EPS) for public companies.

Quarter over quarter, or year over year increases Organic growth: comes from a company’s existing business Inorganic growth: comes from merger and acquisitions.

• Increase: customers, revenues, and product offerings

• Up sell product sales• Increase R2B sales• Reduce churn (retain customers!)• Increase subscribers/customers• Increase add-a-line sales• Sell value• Create customer loyalty

• Increase global services• Increase network forecasting• Provide exceptional service (Int’l & Ext’l)• Increase open protocol• Invest in employees• Better utilize marketing utilization • Play a part in culture shaping and acquisition

integration• Hire talent that is strong and adaptable• Develop great leaders• Anticipate employee needs that will support a growth

strategy

What Single Action are You Committed to do to Positively Impact GROWTH?

Action Planning:

38

-

People: The “external customer”

or consumer of your product.

The “internal customer” or employees.

“Communicate a persons potential so clearly that they are inspired to see it within themselves.”

Many great organizations have stumbled because they failed to anticipate their customers changing needs.

In a competitive world wide market place, a company’s ability to innovate around customers needs or to improve the efficiency of core processes depends on having the right people.

Keeping the right people requires having the right leaders.

People

People: Definition

20

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What is more important than meeting customer expectations?

Exceeding?Anticipating Customer Needs & Expectations!

“If I would have asked my customer what they wanted, they would have said a faster horse!”

~Henry Ford

People:

21

-

What companies have failed to anticipate customer expectations? What were the results?

What limits companies from anticipating their customers’ wants and needs?

Anticipating External People

-

• There are no direct measures on financial statements. Revenues on the P&L measure customer sales and cost categories such as labor, measure associate payroll expenses and benefits.

• Companies keep track separately of data on external customers such as numbers of customers, patients, members, or other consumer and users of products and services; Customer satisfaction levels; turnover rates of customers; and numbers of new customers per period. Employees, or internal customers, are measured by management as to their satisfaction levels, turnover, productivity, etc.

People: Measures

21

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• People are the most important part of any organization – its most important “asset” or resource. People, through making decision, govern, control or direct all other resources.

• It is 3-5 times more expensive to obtain new external Customers than to retain existing Customers.

• It is simply more expensive to replace an Employee with a new hire than to retain and train, or redeploy, a current employee.

• As desirable as it is to meet and/or exceed Customer needs, it is better yet to anticipate those needs!

People: Insights & Importance

21

-

PeopleFreeport McMoRan Corporation

21

(In Millions)





McMoRan-FCX

2010 2009 2008 2007

Revenues $18,982 $15,040 $17,796 $16,939

Net Income $4,273 $2,527 $(11,341) $2,769

People

Total Recordable Incident Rate (TRIR-(Per 200K Man Hours Worked)

0.65 0.74 1.25 1.18

Mine Safety & Health Admin TRIR Average: 2010= 2.53 2009= 2.61 2008= 3.14 2007= 3.30

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High Revenue Growth Low Revenue Growth


Freeport McMoRan-FCX Apple Amazon Wal-mart Yahoo!

2010 9/2011 2010 2010 2010

Revenues $18,982 $108,249 $34,204 $421,849 $6,324

Profit $4,336 $25,922 $1,152 $16,389 $1,231

People

Employees 29,700 60,400 43,200 2,100,000 13,600

Revenue Per Employee $639,124 $1,792,201 $791,759 $200,880 $465,000

Profit Per Employee $145,933 $429,172 $26,666 $7,804 $90,514

(In Millions)

People: High-Low Metrics

-

INTERNAL:

• Develop teams into leaders• Invest in employees• Develop a learning culture• Exceed deadlines• Be positive• Always follow through• Increase vision• Anticipate needs and expectations• Increase employee education• HR: Hire the best!

EXTERNAL:

• Listen with empathy to resolve unhappy customers• Ensure equipment functionality before customer takes it

home• Possess good product knowledge when selling • Qualify each customer• Better educate customers• Set up customer phones• Increase customer negotiations• Increase customer awareness• Accurately set customer expectations

What Single Action are You Committed to do to Positively Impact PEOPLE?

Action Planning:

39

-5 Business Drivers & Financial Statements

Income Statement

Balance Sheet

Statement of Cash Flows

People

Assets

Profit

Cash

Growth

-

1. What is the basic equation for each statement?

2. What is the purpose of the statement?

3. What are the key numbers and how are they trending?

4. How can you impact each statement?

The Annually Reported Financial Statements• Statement of Cash Flows• Statement of Income (P&L)• Balance Sheet

21

Financial Statements

-Basic Statement of Income

Revenues (Sales) (Millions)$18,982 100%

- Production & Delivery $ 8,354 - Depreciation, Depletion, & Amort. $ 1,036 = Gross Profit/Margin $ 9,592 51% - Selling, General, & Admin. (SG&A) $ 381 - Exploration & Research $ 143= Operating Margin $ 9,068 48%-Interest & Other Expense $ 556

-Taxes $ 2,983

= Net Income$ 5,544 29%

-N.I. attrib. to Noncontrolling interest/Div. $ 1,271 = Net Income Attrib. FCX Com. Sto $ 4,273 23%

-

Net Profit Margin

Net Income: 4,273

Total Revenue: ÷ 18,982

= 22.5%

S&P 500 Ave. = 11%

Indicates:Profitability

(SG&A)

SG&A: • Salaries•Sales commissions•Benefits/Severance• Rental Expense• Bad debt charges• Merger integration costs• Professional services: Attorney fees, Accounting

(Revenue = Sales) = Top Line

= Bottom Line

= EBIT

Equation: Revenues– Expenses = Income

Operating MarginTotal Revenue: 18,982Operating Expense: - 9,914

= 9,068 ÷ 18,982

= 47.76%

COGS

P&L

26%

69%

19% 2%

19% 16%Gross margin = 51%

59%

16%Operating margin = 48%

Net profit margin = 23%

-Impairment Charges

• During fourth-quarter 2008, we evaluated the carrying values of our long-lived assets, including goodwill associated with the acquisition of Phelps Dodge, for impairment.

• These evaluations resulted in the recognition of impairment charges of $10.9 billion associated with long-lived assets and $6.0 billion associated with goodwill.

Refer to Notes 2 and 7 and “Critical Accounting Estimates – Asset Impairments” for further discussion of these impairment charges (pg. 65, 2008 10-K)

-

Increase revenue by 100K

100K

44K5K

49K

49K51K

51K18K

33K 7K

26K

Statement of Operations (P&L)

-

Lower costs by 100K

100K

100K

100K100K

100K35K

65K22K

43K

Statement of Operations (P&L)

-

Raising Revenues $100M = $26 -or-

Cutting Costs by $100M = $43

What are the implications of each action?

Which has a greater impact?

-

Freeport McMoRan Financial Statements

1. What is the basic equation for each statement?

2. What is the purpose of the statement?

3. What are the key numbers and how are they trending?

4. How can you impact each statement?

The Annually Reported Financial Statements• Statement of Income (P&L)• Balance Sheet• Statement of Cash Flows

21

Financial Statements

-

Becomes Cash < 1 year

Most Liquid

Least Liquid

Due First

Due Last

Due in < 1 year

Balance

Equation:Assets = Liabilities + Equity

Equity Position: 50%

Snapshot in time

Indicates:Financial (asset) Strength

?

Current Ratio = 2.6

-

The bills and coins in the register, petty cash, and cash in the bank. It also includes cash equivalents, like CD’s and other highly liquid investments, easily converted into cash within 90 days.

1. _____

Cash generation that is the difference between the cash that flows into the business and the cash that flows out of the business in a given period of time (month, quarter, annual)

2. _____

The total dollar payment received for goods & services during a specific period of time. It is the “top line” figure from which costs are subtracted to determine net income. Also synonymous with sales.

3. _____

The amount of profit realized from a business’s operations after taking out operating expenses such as costs of goods sold (COGS), SG&A, and depreciation. Also known as EBIT.

4. _____

A company's total earnings and is calculated by taking revenues and subtracting “all” expenses. This number is found on a company's income statement and is an important measure of how profitable the company is over a period of time. Often referred to as "the bottom line“.

5. _____

Amount of proven and probable copper available to be pulled out of our mining assets. 6. _____

A number used to help determine how much shareholders would receive in the event of a company-wide liquidation. The number is expressed as a percentage, is calculated by dividing total shareholders' equity by total assets of the firm, and it represents the amount of assets on which shareholders have a residual claim. The figures are taken from the company's balance sheet.

7. _____

An increase of a company's sales when compared to a previous month, quarter or year's revenue performance. 8. _____

An increase of a company’s net earnings compared to a previous month, quarter or year. 9. _____

The portion of a company's profit allocated to each outstanding share of common stock. Calculated as: Net Income – Dividends on Preferred Stock / Average Outstanding Shares.

10. _____

Rate of recordable workplace injuries, normalized per 200,000 hours worked. 11. _____

A. Revenue Growth B. Cash Flow C. GrowthD. Cash E. TRIR

F. Operating Income G. Revenue H. Net Income I. Equity Ratio J. EBITDAK. Net Income Growth L. Cooper Reserves M. Asset N. Liquidity O. EPS

Its OK to guess!

(Write your answers on Page 10-11)Group Activity!

D

B

G

F

H

LI

AFO

E

-

12

3

4

5

6

7

8

9

10

11

9,068

3,738

47.7718,982

-

9,068

14,560 29,386

18,982 15,040

4,273 2,527

3,738

6,273

18,982

22.51

26.21

55.97

47.7718,982

4,273 18,982

49.55

69.09

2.934.57

120.50

.65

-Google and Reuters

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Time

Cont

ent R

eten

tion Review

ApplyTeach

15%

40

Retaining Content Over Time

-

Find a Partner now and:1. Set up a specific date and time in 30 days to report your

progress on your action plan.

2. Exchange emails

3. Exchange phone numbers

4. Decide who will initiate the call

5. Determine a back-up plan

6. Transfer this information to your planner or PDA now.

53

Accountability Conversations

-

1. 7 days: Teach one of the principals learned in class today, to someone in your department.

2. 7 days: Discuss your action items with your manager in the next 7 days.

3. 30 days: Read the first 90 pages of: “What The CEO Wants You to Know“

4. 30 days: Get with your class partner and give an account of your progress on your action item(s).

Start now: Build and practice your new business acumen skills. When making decisions, determine how the outcome will impact Cash, Profit, Assets,

Growth, People…

Post Course Action Items

-Building Business Acumen 2 Day Course

• Build on your foundation of the 5 drivers model • Gain greater understanding of Freeport-

McMoRan• Deeper dive into the financials• Analyze our competitors• Enhance your business decision making skills• Develop a greater understanding of our key

strategies• Understand external realities impacting FCX

Next Course May 9-10 Safford AZ

-

Accurately define pertinent business and financial terminology such as revenue, cost of goods sold, gross profit, net income, unit costs, etc.

Demonstrate in a team setting, an understanding of the 5 key drivers (cash, profit, assets, growth, people), that every business must focus on and how each driver influences business success.

Accurately describe the key measures and metrics used to assess business performance.

Identify and define each line item on a Basic Profit & Loss statement.

Articulate to one’s team the importance of business and financial acumen and how their individual role impacts the business.

Learning Objectives

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One final thought…

People will work hard for a paycheck,harder for a person,

and hardest for a reason.

-

Thank You!Participant Feedback Form

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