Freeport-McMoRan 2004 Annual Report Download - page 67

Notes To Consolidated Financial Statements
notes฀with฀a฀face฀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฀extinguish-
ments฀of฀debt.฀In฀July฀2003,฀FCX฀purchased฀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฀extinguish-
ment฀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,฀2004,฀FCX฀had฀outstanding฀$66.5฀million฀of฀its฀
7.50%฀Senior฀Notes฀and฀$4.5฀million฀of฀its฀7.20%฀Senior฀Notes.
During฀the฀first฀quarter฀of฀2004,฀FCX฀completed฀a฀tender฀
offer฀and฀privately฀negotiated฀transactions฀for฀a฀portion฀of฀its฀
remaining฀8฀1 /4%฀Convertible฀Senior฀Notes฀due฀2006฀resulting฀
in฀the฀early฀conversion฀of฀$226.1฀million฀of฀notes฀into฀15.8฀
million฀shares฀of฀FCX฀common฀stock.฀FCX฀recorded฀a฀$10.9฀
million฀charge฀to฀losses฀on฀early฀extinguishment฀and฀conver-
sion฀of฀debt฀in฀the฀first฀quarter฀of฀2004฀in฀connection฀with฀
these฀conversions.฀The฀$10.9฀million฀charge฀included฀$6.4฀
million฀of฀previously฀accrued฀interest฀costs฀that฀were฀reversed,฀
resulting฀in฀an฀equivalent฀reduction฀to฀interest฀expense.฀In฀
June฀2004,฀the฀remaining฀$66.5฀million฀of฀notes฀were฀called฀
for฀redemption฀on฀July฀31,฀2004.฀During฀July,฀all฀of฀these฀
notes฀were฀converted฀into฀4.7฀million฀shares฀of฀FCX’s฀common฀
stock.฀As฀of฀July฀31,฀2004,฀all฀of฀the฀8฀1 /4%฀Convertible฀Notes,฀
which฀totaled฀$603.8฀million฀at฀issuance฀in฀2001,฀had฀been฀
converted฀into฀42.2฀million฀shares฀of฀FCX฀common฀stock.
Redeemable Preferred Stock.฀As฀discussed฀in฀Note฀1,฀
upon฀adoption฀of฀SFAS฀No.฀150฀on฀July฀1,฀2003,฀manda-
torily฀redeemable฀preferred฀stock฀totaling฀$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฀for฀$210.5฀million.฀The฀
mandatory฀redemption฀of฀the฀Gold-Denominated฀Preferred฀
Stock฀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฀repre-
senting฀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฀redeem-
able฀in฀February฀2006฀for฀the฀cash฀value฀of฀0.1฀ounce฀of฀
gold.฀These฀depositary฀shares฀trade฀on฀the฀New฀York฀Stock฀
Exchange฀(NYSE)฀under฀the฀symbol฀“FCX฀PrC.”
FCX฀has฀outstanding฀4.8฀million฀depositary฀shares฀repre-
senting฀29,750฀shares฀of฀its฀Silver-Denominated฀Preferred฀
Stock฀totaling฀$25.0฀million฀at฀December฀31,฀2004,฀and฀had฀
44,625฀shares฀totaling฀$37.5฀million฀at฀December฀31,฀2003.฀
As฀of฀December฀31,฀2004,฀each฀depositary฀share฀has฀a฀cumu-
lative฀quarterly฀cash฀dividend฀equal฀to฀the฀value฀of฀0.01031฀
ounce฀of฀silver,฀which฀will฀decline฀by฀50฀percent฀after฀the฀
next฀scheduled฀redemption฀payment.฀FCX฀made฀six฀annual฀
mandatory฀partial฀redemption฀payments฀on฀the฀underlying฀
Silver-Denominated฀Preferred฀Stock฀through฀August฀2004.฀For฀
each฀of฀the฀partial฀redemptions,฀the฀difference฀between฀FCX’s฀
carrying฀amount฀of฀$12.5฀million฀and฀the฀actual฀redemption฀
payments฀was฀recorded฀in฀revenues฀as฀a฀hedging฀gain฀or฀loss.฀
On฀August฀1,฀2004,฀FCX฀made฀the฀sixth฀of฀eight฀scheduled฀
annual฀redemption฀payments฀on฀its฀Silver-Denominated฀
Preferred฀Stock฀for฀$13.9฀million.฀The฀mandatory฀redemptions฀
resulted฀in฀hedging฀gains฀(losses)฀to฀revenues฀of฀$(1.4)฀
million฀in฀2004,฀$1.7฀million฀in฀2003฀and฀$0.8฀million฀in฀
2002.฀Two฀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฀based฀on฀the฀amounts฀and฀terms฀
outstanding฀at฀December฀31,฀2004,฀totaled฀$78.2฀million฀in฀
2005,฀$296.9฀million฀in฀2006,฀$45.9฀million฀in฀2007,฀$49.6฀
million฀in฀2008,฀$47.7฀million฀in฀2009฀and฀$1,433.6฀million฀
thereafter.฀Capitalized฀interest฀totaled฀$2.9฀million฀in฀2004,฀
$3.0฀million฀in฀2003฀and฀$12.2฀million฀in฀2002.
Note 6. Accrued Postretirement Benefits
and Other Liabilites
The฀following฀is฀a฀detail฀of฀FCX’s฀accrued฀postretirement฀
benefits฀and฀other฀liabilities฀(in฀thousands):
฀ ฀ 2004฀ 2003
Atlantic฀Copper฀contractual฀obligation฀to฀insurance฀company฀(Note฀9)฀ ฀ ฀ $฀ 69,767฀ $฀ 68,013
Pension฀and฀long-term฀incentive฀compensation฀(Note฀9)฀ ฀ ฀ ฀ 76,009฀ ฀ 53,641
Asset฀retirement฀obligations฀(Note฀10)฀ ฀ ฀ ฀ 22,848฀ ฀ 26,486
Reserve฀for฀non-income฀taxes฀(Note฀10)฀ ฀ ฀ ฀ 18,910฀ ฀ 19,000
Other฀long-term฀liabilities฀and฀reserves฀ ฀ ฀ ฀ 12,694฀ ฀ 12,697
Total฀accrued฀postretirement฀benefits฀and฀other฀liabilities฀ ฀ ฀ $฀200,228฀ $฀179,837
฀ ฀
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