Freeport-McMoRan 2009 Annual Report Download - page 29

Gains on Sales of Assets
Gains on sales of assets totaled $13 million ($8 million to net loss
attributable to FCX common stockholders or $0.02 per share) in 2008
and $85 million ($52 million to net income attributable to FCX
common stockholders or $0.13 per share) in 2007 primarily
associated with sales of marketable securities.
Other (Expense) Income, Net
Other (expense) income, net, totaled $(53) million in 2009, $(22)
million in 2008 and $157 million in 2007. The decrease in 2009,
compared with 2008, primarily related to lower interest income ($46
million). The decrease in 2008, compared with 2007, primarily related
to lower interest income ($82 million) and higher foreign currency
exchange losses ($64 million) mostly associated with estimated
Chilean tax payments.
(Provision for) Benefit from Income Taxes
Our income tax provision for 2009 resulted from taxes on international
operations ($2.3 billion) and U.S. operations ($35 million). Our effective
tax rate is sensitive to changes in commodity prices and the mix of
income between U.S. and international operations. The difference
between our consolidated effective income tax rate of 40 percent in
2009 and the U.S. federal statutory rate of 35 percent primarily was
attributable to the high proportion of income earned in Indonesia, which
was taxed at an effective tax rate of 42 percent.
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($3.4 billion), partly offset by taxes on international operations
($604 million). The difference between our consolidated effective
income tax rate of 21 percent in 2008 and the U.S. federal statutory
rate of 35 percent primarily was attributable to goodwill impairment
charges, which were non-deductible for tax purposes, and the
recognition of a valuation allowance against U.S. federal alternative
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and U.S. state income taxes.
A summary of the approximate amounts in the calculation of our
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2008 follows (in millions, except percentages):
Goodwill Impairment
Our annual impairment test of goodwill at December 31, 2008,
resulted in the recognition of goodwill impairment charges
totaling $6.0 billion ($6.0 billion to net loss attributable to FCX
common stockholders or $15.69 per share). Refer to Note 6 for
further discussion.
Interest Expense, Net
Consolidated interest expense (before capitalization) totaled $664
million in 2009, $706 million in 2008 and $660 million in 2007. Lower
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repayments of debt and lower interest rates on our variable-rate debt
during 2009. Higher interest expense in 2008, compared with 2007,
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values of environmental obligations (determined on a discounted
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offset by lower interest expense associated with net repayments of
debt during 2007. Refer to “Capital Resources and Liquidity –
Financing Activities” for discussion of debt repayments.
Capitalized interest is primarily related to our development projects
and totaled $78 million in 2009, $122 million in 2008 and $147 million
in 2007. The decrease in capitalized interest in 2009 primarily
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Tenke Fungurume mine. Refer to “Current Development Projects” for
further discussion.
Losses on Early Extinguishment of Debt
During 2009, we recorded losses on early extinguishment of debt
totaling $48 million ($43 million to net income attributable to FCX
common stockholders or $0.09 per share), including $14 million
($13 million to net income attributable to FCX common stockholders)
associated with the redemption of our $340 million of 67
/8% Senior
Notes and $34 million ($30 million to net income attributable to FCX
common stockholders) for open-market purchases of our 8.25%
Senior Notes, 8.375% Senior Notes and 8¾% Senior Notes.
During 2008, we recorded net losses on early extinguishment of
debt totaling $6 million ($5 million to net loss attributable to FCX
common stockholders or $0.01 per share) associated with an open-
market purchase of $33 million of our 9½% Senior Notes.
During 2007, we recorded net losses on early extinguishment of
debt totaling $173 million ($132 million to net income attributable to
FCX common stockholders or $0.33 per share) primarily related to
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with early repayment of amounts under the $11.5 billion senior credit
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included was $17 million ($10 million to net income attributable to
FCX common stockholders or $0.02 per share) related to premiums
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associated with the May 2007 redemption of our 101
/8% Senior Notes.
Refer to Note 10 for further discussion of these transactions.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FREEPORT- McMoRan COPPER & GOLD INC. 27
2009 Annual Report