Freeport-McMoRan 2009 Annual Report Download - page 84

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
82 FREEPORT- McMoRan COPPER & GOLD INC.
2009 Annual Report
the FCX common stock price is at or below $60.75 and 1.3716 when
the FCX common stock price is at or above $72.91. For FCX
common stock prices between these levels, the conversion rate will
be equal to $100 divided by FCX’s common stock price. Holders may
elect to convert at any time prior to May 1, 2010, at a conversion rate
equal to 1.3716 shares of FCX common stock, or an aggregate of
approximately 39 million shares. Dividends are payable quarterly on
February 1, May 1, August 1 and November 1.
In March 2004, FCX sold 1.1 million shares of 5½% Convertible
Perpetual Preferred Stock for net proceeds of $1.1 billion. The
conversion rate was adjustable upon the occurrence of certain
events, including the payment in any quarter of common stock
dividends exceeding $0.20 per share. As a result of the quarterly and
supplemental common stock dividends paid through August 31, 2009,
each share of preferred stock was convertible into 21.5305 shares of
FCX common stock, equivalent to a conversion price of
approximately $46.45 per common share. In December 2008,
through privately negotiated transactions, FCX induced conversion of
268,331 shares of its 5½% Convertible Perpetual Preferred Stock
with a liquidation preference of $268 million into 5.8 million shares of
FCX common stock. To induce conversion of these shares, FCX
issued to the holders an additional 1.0 million shares of FCX common
stock valued at $22 million, which was recorded as losses on induced
conversions in the consolidated statements of operations. In
September 2009, FCX called for redemption the remaining
outstanding shares of its 5½% Convertible Perpetual Preferred Stock.
Of the 831,554 shares outstanding at the time of the call, 830,529
shares were converted into 17.9 million shares of FCX common
stock, and the remaining 1,025 shares were redeemed for
approximately $1 million in cash.
Stock Award Plans.)&; FXUUHQWO\ KDV ÀYH VWRFNEDVHG
compensation plans, including two Phelps Dodge plans resulting from
the acquisition. As of December 31, 2009, only three of the plans, all
of which are stockholder approved (which are discussed below), have
awards available for grant.
The 2003 Stock Incentive Plan (the 2003 Plan) provides for the
issuance of stock options, SARs, restricted stock, restricted stock
units and other stock-based awards. The 2003 Plan allows FCX to
grant awards for up to 8 million common shares to eligible
participants. In 2004, FCX’s stockholders approved the 2004 Director
Compensation Plan (the 2004 Plan). The 2004 Plan authorizes
awards of options and restricted stock units for up to 1 million shares
of common stock and the one-time grant of 66,882 SARs. In 2006,
FCX’s stockholders approved the 2006 Stock Incentive Plan (the
2006 Plan), and in 2007, FCX’s stockholders approved amendments
to the plan primarily to increase the number of shares. The 2006 Plan
provides for the issuance of stock options, SARs, restricted stock,
restricted stock units and other stock-based awards for up to
37 million common shares. As of December 31, 2009, shares
NOTE 12. Stockholders’ Equity and Stock-Based Compensation
Common Stock. At the 2008 annual stockholder meeting, FCX’s
stockholders approved an increase in FCX’s authorized shares of
capital stock to 1.85 billion shares, consisting of 1.8 billion shares of
common stock and 50 million shares of preferred stock.
In July 2008, FCX’s Board of Directors approved an increase in the
open-market share purchase program for up to 30 million shares,
which replaced FCX’s previous program. During 2008, FCX acquired
6.3 million shares for $500 million ($79.15 per share average) and
23.7 million shares remain available under this program. The timing
of future purchases of FCX’s common stock is dependent on many
IDFWRUV LQFOXGLQJ )&;ҋV RSHUDWLQJ UHVXOWV FDVK ÁRZV DQG ÀQDQFLDO
position; copper, molybdenum and gold prices; the price of FCX’s
common stock; and general economic and market conditions. During
6HSWHPEHU  EHFDXVH RI WKH ÀQDQFLDO WXUPRLO DQG WKH GHFOLQH LQ
copper and molybdenum prices, FCX suspended its purchases of
shares under its open-market share purchase program.
In February 2009, FCX completed a public offering of 26.8 million
shares of FCX common stock at an average price of $28.00 per
share, which generated gross proceeds of $750 million (net proceeds
of approximately $740 million).
In December 2008, FCX’s Board of Directors suspended the cash
dividend on FCX’s common stock; accordingly, there were no
common stock dividends paid in 2009. In October 2009, the Board of
Directors reinstated an annual cash dividend on FCX’s common stock
of $0.60 per share. On December 30, 2009, FCX declared a quarterly
dividend of $0.15 per share, which was paid on February 1, 2010,
to common shareholders of record at the close of business on
January 15, 2010. The Board of Directors will continue to review
)&;ҋVÀQDQFLDO SROLF\ RQ DQ RQJRLQJ EDVLV
Preferred Stock. On March 28, 2007, FCX sold 28.75 million
shares of 6¾% Mandatory Convertible Preferred Stock, with a
liquidation preference of $100 per share, for net proceeds of $2.8
billion. The 6¾% Mandatory Convertible Preferred Stock will
automatically convert on May 1, 2010, into shares of FCX common
stock. The conversion rate is adjustable upon the occurrence of
certain events, including the payment in any quarter of common stock
dividends exceeding $0.3125 per share; however, adjustments
required as a result of dividends that do not exceed one percent are
carried forward and must be made no later than August 1 of each
year.As a result of the quarterly common stock dividends paid
through December 31, 2009, each share of preferred stock is now
convertible on May 1, 2010, into between 1.3716 and 1.6460 shares
of FCX common stock, for a total of between 39 million and 47 million
shares, depending on the applicable market value of FCX’s common
stock. The conversion rate depends on the applicable average
market price of FCX’s common stock over the 20 trading day period
ending on the third trading day prior to May 1, 2010. The conversion
rate per $100 face amount of the preferred stock will be 1.6460 when