Freeport-McMoRan 2003 Annual Report Download - page 63

2003 Annual Report FREEPORT-McMoRan COPPER & GOLD INC. 61
amount of $234.0 million were tendered for $239.0
million cash. FCX recorded a charge of $6.6 million
($4.8 million to net income) to losses on early
extinguishments of debt. In July 2003, FCX pur-
chased an additional $76.0 million face amount of
its 7.20% Senior Notes for $77.2 million, and
recorded a charge to losses on early extinguishment
of debt of $1.3 million ($0.9 million to net income).
In October 2003, holders of $68.9 million of 7.20%
Senior Notes elected early repayment as permitted
under their terms. At December 31, 2003, FCX had
outstanding $66.5 million of its 7.50% Senior Notes
and $4.5 million of its 7.20% Senior Notes.
Redeemable Preferred Stock. As discussed in
Note 1, upon adoption of SFAS No. 150 on July 1,
2003, mandatorily redeemable preferred stock total-
ing $450.0 million was reclassified as debt. On
August 1, 2003, FCX redeemed the 6.0 million
depositary shares representing its Gold-Denominated
Preferred Stock, which traded on the New York Stock
Exchange (NYSE) under the symbol “FCX PrB,” for
$210.5 million. The mandatory redemption of the
FCX PrB shares reduced total consolidated debt
by $232.6 million and resulted in a hedging gain to
revenues of $22.1 million in 2003.
FCX has outstanding 4.3 million depositary shares
representing 215,279 shares of its Gold-Denominated
Preferred Stock, Series II totaling $167.4 million.
Each depositary share has a cumulative quarterly
cash dividend equal to the value of 0.0008125
ounce of gold and is mandatorily redeemable in
February 2006 for the cash value of 0.1 ounce of
gold. These depositary shares trade on the NYSE
under the symbol “FCX PrC.”
FCX has outstanding 4.8 million depositary shares
representing 44,625 shares of its Silver-Denominated
Preferred Stock totaling $37.5 million at December
31, 2003, and had 59,500 shares totaling $50.0 mil-
lion at December 31, 2002. As of December 31,
2003, each depositary share has a cumulative quar-
terly cash dividend equal to the value of 0.01547
ounce of silver, which will decline by 33 percent after
the next scheduled redemption payment. FCX made
five annual mandatory partial redemption payments on
the underlying Silver-Denominated Preferred Stock
through August 2003. For each of the partial
redemptions, the difference between FCX’s carrying
amount of $12.5 million and the actual redemption
payments was credited to revenues as a hedging
gain. The gain to revenues totaled $1.7 million in
2003, $0.8 million in 2002 and $2.1 million in 2001.
Three annual redemption payments remain and will
vary with the price of silver. These depositary shares
trade on the NYSE under the symbol “FCX PrD.”
Maturities and Capitalized Interest. Maturities of
debt instruments and infrastructure asset financings
based on the amounts and terms outstanding at
December 31, 2003, totaled $152.4 million in 2004,
$107.1 million in 2005, $635.3 million in 2006
(including $292.6 million of
8
1
/ 4 % Convertible Senior
Notes), $121.4 million in 2007, $81.5 million in
2008 and $1,130.6 million thereafter. Capitalized
interest totaled $3.0 million in 2003, $12.2 million
in 2002 and $9.4 million in 2001.
NOTE 6. STOCKHOLDERS’ EQUITY
Common Stock. FCX has 473.6 million authorized
shares of capital stock consisting of 423.6 million
shares of common stock and 50.0 million shares of
preferred stock. At the 2002 annual shareholder meet-
ing, FCX’s shareholders approved the conversion of
each outstanding share of Class A common stock into
one share of Class B common stock. FCX now has
only one class of common stock. The conversion cre-
ated a new measurement date for FCX’s Class A stock
options that were converted to Class B stock
options. Under accounting rules followed by
FCX for stock-based compensation, the in-the-money
value of these stock options on the new measurement
date ($8.8 million) must be charged to earnings over
the remaining vesting period of the options, which
extends through January 2006. The related charge
to general and administrative expenses totaled
$2.3 million in 2003 and $1.6 million in 2002.
Preferred Stock. In December 2003, FCX called
for redemption the depositary shares representing its
Step-Up Convertible Preferred Stock. Of the 14.0 mil-
lion depositary shares outstanding at the time
of call, 13.8 million depositary shares converted into
11.5 million shares of FCX’s common stock.
The remaining depositary shares outstanding are
being redeemed for approximately $7 million in cash.
These depositary shares traded on the NYSE under
the symbol “FCX PrA.”
Stock Award Plans. FCX currently has five stock-
based compensation plans. FCX’s Adjusted Stock
Award Plan provided for the issuance of certain
stock awards to employees, officers and directors of
Freeport-McMoRan Inc. (FTX), the former parent of
FCX, in connection with FTX’s distribution of FCX
shares to its shareholders in 1995. Under this plan,
FCX made a one-time grant of awards to purchase
up to 10.7 million common shares, including stock
appreciation rights (SARs), at prices equivalent to
the original FTX price at date of grant as adjusted
for the proportionate market value of FCX shares at
the time of the distribution. All options granted
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS