Freeport-McMoRan 2005 Annual Report Download - page 80

฀77฀|฀2005฀ANNUAL฀REPORT฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION฀77฀|฀2005฀ANNUAL฀REPORT฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION
14.2฀million฀shares฀remain฀available.฀No฀other฀shares฀were฀
purchased฀through฀February฀28,฀2006.฀The฀timing฀of฀future฀
purchases฀of฀FCX’s฀common฀stock฀is฀dependent฀upon฀a฀
number฀of฀factors฀including฀the฀price฀of฀FCX’s฀common฀
shares,฀FCX’s฀cash฀flows฀and฀financial฀position,฀copper฀฀฀฀฀฀฀฀฀฀
and฀gold฀prices฀and฀general฀economic฀and฀market฀conditions.
฀Preferred฀Stock.฀In฀December฀2003,฀FCX฀called฀for฀
redemption฀the฀depositary฀shares฀representing฀its฀Step-Up฀
Convertible฀Preferred฀Stock.฀Of฀the฀14.0฀million฀depositary฀
shares฀outstanding฀at฀the฀time฀of฀call,฀13.8฀million฀depositary฀
shares฀converted฀into฀11.5฀million฀shares฀of฀FCX฀common฀
stock.฀The฀remaining฀depositary฀shares฀outstanding฀were฀
redeemed฀for฀approximately฀$7฀million฀in฀cash.
฀ In฀March฀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.฀Each฀share฀of฀฀
preferred฀stock฀was฀initially฀convertible฀into฀18.8019฀shares฀฀฀฀฀฀฀
of฀FCX฀common฀stock,฀equivalent฀to฀a฀conversion฀price฀of฀
approximately฀$53.19฀per฀common฀share.฀The฀conversion฀rate฀
is฀adjustable฀upon฀the฀occurrence฀of฀certain฀events,฀including฀
any฀quarter฀that฀FCX’s฀common฀stock฀dividend฀exceeds฀฀฀฀฀฀฀
$0.20฀per฀share.฀In฀October฀2004,฀FCX’s฀Board฀of฀Directors฀
increased฀the฀annual฀common฀stock฀dividend฀rate฀to฀฀฀฀฀฀฀฀฀฀฀฀฀
$1.00฀per฀share฀($0.25฀per฀share฀quarterly).฀FCX฀paid฀a฀
supplemental฀dividend฀of฀$0.25฀per฀share฀on฀December฀29,฀
2004,฀and฀paid฀three฀$0.50฀per฀share฀supplemental฀dividends฀
on฀March฀31,฀2005,฀September฀30,฀2005฀and฀December฀30,฀
2005.฀In฀November฀2005,฀FCX’s฀Board฀of฀Directors฀authorized฀
an฀increase฀in฀the฀annual฀common฀stock฀dividend฀to฀$1.25฀฀
per฀share฀from฀$1.00฀per฀share.฀The฀increased฀quarterly฀
dividend฀payments฀and฀the฀supplemental฀dividends฀resulted฀
in฀adjustments฀to฀the฀conversion฀rate.฀After฀FCX’s฀February฀
2006฀quarterly฀dividend,฀each฀share฀of฀preferred฀stock฀is฀now฀
convertible฀into฀19.7273฀shares฀of฀FCX฀common฀stock,฀
equivalent฀to฀a฀conversion฀price฀of฀approximately฀$50.69฀per฀
common฀share.฀Beginning฀March฀30,฀2009,฀FCX฀may฀redeem฀
shares฀of฀the฀preferred฀stock฀by฀paying฀cash,฀FCX฀common฀
stock฀or฀any฀combination฀thereof฀for฀$1,000฀per฀share฀plus฀
unpaid฀dividends,฀but฀only฀if฀FCX’s฀common฀stock฀price฀has฀
exceeded฀130฀percent฀of฀the฀conversion฀price฀for฀at฀least฀฀฀฀฀฀
20฀trading฀days฀within฀a฀period฀of฀30฀consecutive฀trading฀days฀
immediately฀preceding฀the฀notice฀of฀redemption.฀FCX฀used฀฀฀฀฀฀฀฀
a฀portion฀of฀the฀proceeds฀from฀the฀sale฀to฀purchase฀23.9฀million฀
shares฀of฀FCX฀common฀stock฀owned฀by฀Rio฀Tinto฀for฀฀฀฀฀฀฀
$881.9฀million฀(approximately฀$36.85฀per฀share)฀and฀used฀the฀
remainder฀for฀general฀corporate฀purposes.
฀Stock฀Award฀Plans.฀FCX฀currently฀has฀six฀stock-based฀
compensation฀plans.฀As฀of฀December฀31,฀2005,฀only฀three฀of฀
the฀plans,฀which฀are฀discussed฀below,฀have฀awards฀available฀
for฀grant.฀FCX’s฀1999฀Stock฀Incentive฀Plan฀(the฀1999฀Plan)฀
and฀2003฀Stock฀Incentive฀Plan฀(the฀2003฀Plan)฀provide฀for฀฀
the฀issuance฀of฀stock฀options,฀SARs,฀restricted฀stock฀units฀and฀
other฀stock-based฀awards.฀Each฀plan฀allows฀FCX฀to฀grant฀
awards฀for฀up฀to฀8.0฀million฀common฀shares฀to฀eligible฀
participants฀and฀also฀allows฀FCX฀senior฀executives฀to฀elect฀to฀
receive฀restricted฀stock฀units฀in฀place฀of฀all฀or฀part฀of฀their฀
cash฀incentive฀compensation.฀Restricted฀stock฀unit฀grants฀vest฀
over฀three฀years฀and฀are฀valued฀on฀the฀date฀of฀grant฀at฀50฀
percent฀above฀the฀cash฀incentive฀compensation฀they฀replace.฀
FCX฀granted฀0.1฀million฀restricted฀stock฀units฀in฀2005,฀฀
0.2฀million฀in฀2004฀and฀0.1฀million฀in฀2003.
฀ In฀May฀2004,฀FCX’s฀shareholders฀approved฀the฀2004฀
Director฀Compensation฀Plan฀(the฀2004฀Plan).฀The฀2004฀Plan฀
authorizes฀awards฀of฀options฀and฀restricted฀stock฀units฀for฀฀฀฀฀฀฀
up฀to฀1.0฀million฀shares฀and฀the฀one-time฀grant฀of฀66,882฀SARs.
฀ Awards฀granted฀under฀all฀of฀the฀plans฀generally฀expire฀฀฀฀฀฀฀฀฀
10฀years฀after฀the฀date฀of฀grant฀and฀vest฀in฀25฀percent฀annual฀
increments฀beginning฀one฀year฀from฀the฀date฀of฀grant.฀Awards฀
for฀0.6฀million฀shares฀under฀the฀2004฀Plan,฀2.4฀million฀shares฀
under฀the฀2003฀Plan฀and฀0.1฀million฀shares฀under฀the฀1999฀
Plan฀were฀available฀for฀new฀grants฀as฀of฀December฀31,฀2005.฀A฀
summary฀of฀stock฀options฀outstanding,฀including฀0.2฀million฀
SARs,฀follows:
Notes to Consolidated Financial Statements
฀2005฀ 2004฀ 2003
฀ ฀ Weighted฀ ฀ Weighted฀ ฀ Weighted
฀Number฀of฀ Average฀ Number฀of฀ Average฀ Number฀of฀ Average
฀Options฀ Option฀Price฀ Options฀ Option฀Price฀ Options฀ Option฀Price
Balance฀at฀January฀1฀ 6,866,805฀ $฀23.20฀ ฀ 10,327,745฀ $฀19.38฀ ฀ 15,944,087฀ $฀17.82
฀ Granted฀ 4,490,750฀ ฀37.03฀ ฀ 1,472,399฀ ฀34.74฀ ฀ 1,315,172฀ ฀20.09
฀ Exercised฀ (3,838,554)฀ ฀23.24฀ ฀ (4,581,273)฀ ฀18.42฀ ฀ (6,625,475)฀ ฀15.75
฀ Expired/Forfeited฀ (163,389)฀ ฀31.51฀ ฀ (352,066)฀ ฀21.65฀ ฀ (306,039)฀ ฀19.93
Balance฀at฀December฀31฀ 7,355,612฀ ฀31.43฀ ฀ 6,866,805฀ ฀23.20฀ ฀ 10,327,745฀ ฀19.38
฀