Freeport-McMoRan 2011 Annual Report Download - page 92

90 | FREEPORT-McMoRan COPPER & GOLD INC.
August31, 2009, each share of preferred stock was convertible into
43.061shares of FCX common stock, equivalent to a conversion
price of approximately $23.22 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
11.5 million shares of FCX common stock. To induce conversion
of these shares, FCX issued to the holders an additional 2.0 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 35.8 million shares of FCX common stock, and the remaining
1,025 shares were redeemed for approximately $1 million in cash.
Stock Award Plans. FCX currently has awards outstanding under
its stock-based compensation plans, including two FMC plans
resulting from the acquisition. As of December31,2011, only two
of the plans, both of which are stockholder approved (which are
discussed below), have awards available for grant.
e 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. e 2003 Plan allows FCX to
grant awards for up to 16 million common shares to eligible
participants. In 2006, FCX’s stockholders approved the 2006 Stock
Incentive Plan (the 2006 Plan), and FCX’s stockholders approved
amendments to the plan in 2007 primarily to increase the number
of shares available for grants and in 2010 to permit grants to
outside directors. e 2006 Plan provides for the issuance of stock
options, SARs, restricted stock, restricted stock units and other
stock-based awards for up to 74 million common shares. As of
December31,2011, shares available for grant totaled 37.2 million
under the 2006 Plan and less than 500 shares under the 2003 Plan.
In connection with the FMC acquisition, former FMC stock
options and restricted stock awards were converted into 1,613,190
FCX stock options and 174,782 FCX restricted stock awards, which
retain the terms by which they were originally granted under
FMC’s plans. e stock options carry a maximum term of 10 years
with 1,344,268 stock options vested upon the acquisition of FMC
and 268,922 stock options that vested ratably over a three-year
period or the period until the participant became retirement-
eligible, whichever was shorter. Restricted stock awards generally
became fully vested in ve years, with a majority of these shares
having graded-vesting features in which 25 percent of the shares
would vest on the third and fourth anniversaries of the award and
the remaining 50 percent in the h year. In February 2010, the
former FMC restricted stock agreements were amended to
accelerate the vesting period of the restricted stock awards that
were converted upon the acquisition of FMC; therefore, these
restricted stock awards (excluding the cash portion that resulted
from the conversion of these restricted stock awards at the time of
the acquisition) became fully vested. e fair value of the restricted
stock awards was determined based on the quoted market price at
the time of the acquisition.
Stock-Based Compensation Cost. Compensation cost charged
against earnings for stock-based awards for the years ended
December31 follows:
2011 2010 2009
Stock options awarded to employees
(including directors) $ 84 $ 84 $ 67
Stock options awarded to nonemployees 1 5 5
Restricted stock units awarded to employees
(including directors) 32 30 29
Restricted stock awards to employees — 1 2
SARs (2) 2 4
Total stock-based compensation cost
a
115 122 107
Tax benefit (42) (45) (41)
Noncontrolling interests’ share (4) (3) (3)
Impact on net income $ 69 $ 74 $ 63
a. Amounts are before Rio Tinto’s share of the cost of employee exercises of in-the-money
stock options, which decreased consolidated selling, general and administrative expenses
by $3 million in 2011, $4 million in 2010 and $2 million in 2009.
FCX did not capitalize any stock-based compensation costs to
property, plant, equipment and development costs during the years
ended December31,2011, 2010 and 2009.
Options and SARs. Stock options and SARs granted under the
plans generally expire 10 years aer the date of grant and vest in
25 percent annual increments beginning one year from the date of
grant. e plans and award agreements provide that participants
will receive the following year’s vesting aer retirement and provide
for accelerated vesting if there is a change in control (as dened
in the plans). erefore, FCX accelerates one year of amortization
for retirement-eligible employees.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS