Freeport-McMoRan 2013 Annual Report Download - page 104

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
102 | FREEPORT-McMoRan
December 31, 2013 and 2012, assumed the first year trend rate
was 7.75 percent, which declines over the next 15 years with an
ultimate trend rate of 4.25 percent.
FCX has a number of postemployment plans covering severance,
long-term disability income, continuation of health and life
insurance coverage for disabled employees or other welfare
benefits. The accumulated postemployment benefit consisted of
a current portion of $9 million (included in accounts payable
and accrued liabilities) and a long-term portion of $75 million
(included in other liabilities) at December 31, 2013, and a current
portion of $8 million and a long-term portion of $69 million at
December 31, 2012.
FCX also sponsors savings plans for the majority of its U.S.
employees. The plans allow employees to contribute a portion of
their pre-tax income in accordance with specified guidelines.
These savings plans are principally qualified 401(k) plans for all
U.S. salaried and non-bargained hourly employees. In these
plans, participants exercise control and direct the investment of
their contributions and account balances among various
investment options. FCX contributes to these plans at varying rates
and matches a percentage of employee pre-tax deferral
contributions up to certain limits, which vary by plan. For
employees whose eligible compensation exceeds certain levels, FCX
provides an unfunded defined contribution plan, which has a
liability balance of $65 million at December 31, 2013, and $59 million
at December 31, 2012.
The costs charged to operations for employee savings plans
totaled $66 million in 2013 (of which $5 million was capitalized to
oil and gas properties), $43 million in 2012 and $35 million in
2011. FCX has other employee benefit plans, certain of which are
related to FCX’s financial results, which are recognized in
operating costs.
NOTE 10. STOCKHOLDERS’ EQUITY AND
STOCK-BASED COMPENSATION
FCX’s authorized shares of capital stock total 1.85 billion shares,
consisting of 1.8 billion shares of common stock and 50 million
shares of preferred stock.
Common Stock. At December 31, 2013, 23.7 million shares
remain available for purchase under FCX’s open-market share
purchase program, which does not have an expiration date. There
have been no purchases under this program since 2008. The
timing of future purchases of FCX’s common stock is dependent
on many factors, including FCX’s operating results, cash flows
and financial position; copper, molybdenum, gold, crude oil and
natural gas prices; the price of FCX’s common stock; and general
economic and market conditions.
FCX’s Board of Directors (the Board) authorized an increase in
the cash dividend on FCX’s common stock in February 2012 to the
current annual rate of $1.25 per share. The Board declared
supplemental cash dividends of $0.50 per share, which was paid
in June 2011, and $1.00 per share, which was paid in July 2013.
instruments could result in a different fair value measurement at
the reporting date.
The expected benefit payments for FCX’s and PT-FI’s pension
plans follow:
FCX PT-FI
a
2014 $ 93 $ 21
2015 147 12
2016 99 13
2017 102 18
2018 106 21
2019 through 2023 584 194
a. Based on a December 31, 2013, exchange rate of 12,128 Indonesian rupiah to one U.S. dollar.
Postretirement and Other Benefits. FCX also provides postretirement
medical and life insurance benefits for certain U.S. employees
and, in some cases, employees of certain international
subsidiaries. These postretirement benefits vary among plans,
and many plans require contributions from retirees. The expected
cost of providing such postretirement benefits is accrued during
the years employees render service.
The discount rate for FCX’s postretirement medical and life
insurance benefit plans was determined on the same basis as
FCX’s pension plans. Information on the postretirement benefit
plans as of December 31 follows:
2013 2012
Change in benefit obligation:
Benefit obligation at beginning of year $ 213 $ 223
Service cost 1 1
Interest cost 7 9
Actuarial (gains) losses (24) 2
Plan amendments and acquisition 6 —
Benefits paid, net of employee and joint venture partner
contributions, and Medicare Part D subsidy (21) (22)
Benefit obligation at end of year 182 213
Change in plan assets:
Fair value of plan assets at beginning of year — —
Employer and joint venture partner contributions 23 25
Employee contributions 11 10
Benefits paid (34) (35)
Fair value of plan assets at end of year — —
Funded status $ (182) $ (213)
Discount rate assumption 4.30% 3.50%
Balance sheet classification of funded status:
Accounts payable and accrued liabilities $ (19) $ (21)
Other liabilities (163) (192)
Total $ (182) $ (213)
Expected benefit payments for these plans total $19 million for
2014, $18 million for 2015, $17 million for 2016, $16 million for
2017, $15 million for 2018 and $70 million for 2019 through 2023.
The discount rate used to determine net periodic benefit cost and
the components of net periodic benefit cost for FCX’s
postretirement benefits was 3.50 percent in 2013, 4.20 percent in
2012 and 4.90 percent in 2011. The medical-care trend rates at