Freeport-McMoRan 2004 Annual Report Download - page 62

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Notes To Consolidated Financial Statements
Earnings Per Share.฀FCX’s฀basic฀net฀income฀per฀share฀of฀
common฀stock฀was฀calculated฀by฀dividing฀net฀income฀appli-
cable฀to฀common฀stock฀by฀the฀weighted-average฀number฀of฀
common฀shares฀outstanding฀during฀the฀year.฀The฀following฀is฀
a฀reconciliation฀of฀net฀income฀and฀weighted-average฀common฀
shares฀outstanding฀for฀purposes฀of฀calculating฀diluted฀net฀
income฀per฀share฀(in฀thousands,฀except฀per฀share฀amounts):
฀2004฀ 2003฀ 2002
Fair฀value฀per฀stock฀option฀฀ $฀15.15฀ $฀10.30฀ $฀7.89
Risk-free฀interest฀rate฀ ฀ 3.7%฀ ฀ 3.8%฀ ฀ 5.0%
Expected฀volatility฀rate฀ ฀ 49%฀ ฀ 47%฀ ฀ 47%
Expected฀life฀of฀options฀(in฀years)฀ ฀ 6฀ ฀ 7฀ ฀ 7
Assumed฀annual฀dividend฀ $฀ 0.80฀ $฀ 0.36a฀ ฀ —
฀
a.฀Assumed฀annual฀dividend฀for฀2003฀only฀applied฀to฀grants฀made฀after฀February฀5,฀2003.
Outstanding฀stock฀options฀with฀exercise฀prices฀greater฀than฀
the฀average฀market฀price฀of฀FCX’s฀common฀stock฀during฀
the฀year฀are฀excluded฀from฀the฀computation฀of฀diluted฀net฀
income฀per฀share฀of฀common฀stock.฀In฀addition,฀certain฀
convertible฀instruments฀(see฀Notes฀5฀and฀7)฀are฀excluded฀
because฀including฀the฀conversion฀of฀these฀instruments฀would฀
have฀increased฀reported฀diluted฀net฀income฀per฀share.฀A฀
recap฀of฀the฀excluded฀amounts฀follows฀(in฀thousands,฀except฀
exercise฀prices):
฀2004฀ 2003฀ 2002
Net฀income฀before฀preferred฀dividends฀and฀cumulative฀effect฀of฀changes฀in฀accounting฀principles฀ $฀202,267฀ $฀197,253฀ $฀167,703
Preferred฀dividends฀ ฀(45,491)฀ ฀(27,441)฀ ฀(37,604)
Net฀income฀before฀cumulative฀effect฀ ฀156,776฀ ฀169,812฀ ฀130,099
Cumulative฀effect฀of฀changes฀in฀accounting฀principles฀ ฀ —฀ ฀(15,593)฀ ฀ (3,049)
Net฀income฀applicable฀to฀common฀stock฀ $฀156,776฀ $฀154,219฀ $฀127,050
Weighted฀average฀common฀shares฀outstanding฀ ฀182,272฀ ฀155,805฀ ฀144,649
Add:฀Dilutive฀stock฀options฀(see฀Note฀7)฀ ฀ 2,197฀ ฀ 3,094฀ ฀ 1,498
฀ ฀ Restricted฀stock฀(see฀Note฀7)฀ ฀ 454฀ ฀ 203฀ ฀ 271
Weighted฀average฀common฀shares฀outstanding฀for฀purposes฀of฀calculating฀diluted฀
฀ ฀net฀income฀per฀share฀ ฀184,923฀ ฀159,102฀ ฀146,418
Diluted฀net฀income฀per฀share฀of฀common฀stock:
฀ Before฀cumulative฀effect฀ $฀ 0.85฀ $฀ 1.07฀ $฀ 0.89
฀ Cumulative฀effect฀ ฀ —฀ ฀ (0.10)฀ ฀ (0.02)
฀ Net฀income฀per฀share฀of฀common฀stock฀ $฀ 0.85฀ $฀ 0.97฀ $฀ 0.87
฀2004฀ 2003฀ 2002
Weighted฀average฀outstanding฀options฀ ฀ —฀ ฀ 1,718฀ ฀ 7,878
Weighted฀average฀exercise฀price฀ ฀ —฀ $฀ 30.37฀ $฀ 22.73
Interest฀on฀7%฀Convertible฀Senior฀Notes,฀net฀of฀taxesa฀$฀ 41,430฀ $฀ 36,873฀ ฀ N/A
Weighted฀average฀shares฀issuable฀upon฀conversiona฀฀ 18,625฀ ฀ 16,463฀ ฀ N/A
Dividends฀on฀5฀1
/2%฀Convertible฀Perpetual฀Preferred฀Stockb฀$฀ 45,491฀ ฀ N/A฀ ฀ N/A
Weighted฀average฀shares฀issuable฀upon฀conversionb฀฀ 15,632฀ ฀ N/A฀ ฀ N/A
Interest฀on฀8฀1
/4%฀Convertible฀Senior฀Notes,฀net฀of฀taxesc฀$฀ 3,829฀ $฀ 39,902฀ $฀ 50,488
Weighted฀average฀shares฀issuable฀upon฀conversionc฀ ฀ 3,073฀ ฀ 33,992฀ ฀ 42,220
Dividends฀on฀Step-Up฀Convertible฀Preferred฀Stockd฀ ฀ N/A฀ $฀ 20,532฀ $฀ 24,499
Weighted฀average฀shares฀issuable฀upon฀conversiond฀ ฀ N/A฀ ฀ 11,424฀ ฀ 11,690
a.฀ FCX’s฀7%฀Convertible฀Senior฀Notes฀were฀issued฀on฀February฀11,฀2003,฀and฀are฀convertible฀into฀18.6฀million฀shares฀of฀common฀stock฀(see฀Note฀5).
b.฀ On฀March฀30,฀2004,฀FCX฀sold฀1.1฀million฀shares฀of฀5฀1
/2%฀Convertible฀Perpetual฀Preferred฀Stock฀for฀$1.1฀billion,฀with฀net฀proceeds฀totaling฀$1.067฀billion฀(see฀Note฀7).
c.฀ 51.5฀percent฀of฀FCX’s฀8฀1
/4%฀Convertible฀Senior฀Notes฀converted฀to฀FCX฀common฀stock฀in฀August฀2003.฀In฀January฀2004,฀approximately฀37฀percent฀converted฀to฀FCX฀common฀
stock฀and฀the฀remaining฀notes฀converted฀to฀FCX฀common฀stock฀in฀July฀2004฀(see฀Note฀5).
d.฀ FCX’s฀Step-Up฀Convertible฀Preferred฀Stock฀was฀redeemed฀in฀December฀2003฀(see฀Note฀7).
60฀| FREEPORT-McMoRan COPPER & GOLD INC.