Freeport-McMoRan 2008 Annual Report Download - page 88

Download and view the complete annual report

Please find page 88 of the 2008 Freeport-McMoRan annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 114

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114

Notes to Consolidated Financial Statements
86 FREEPORT-McMoRan COPPER & GOLD INC. 2008 Annual Report
The weighted-average assumptions used to determine net
periodic benefit cost and the components of net periodic benefit
cost for FCX’s pension plans (including FMC’s plans for the
year ended December 31, 2008, and the period March 20, 2007,
through December 31, 2007; FCX’s SERP, director and excess
benefits plans; and FM Services Company’s plans) for the years
ended December 31, 2008, 2007 and 2006, follow:
2008 2007 2006
Weighted-average assumptions:
Discount rate
FCX SERP 4.00% 4.00% 6.00%
FMC plans 6.30% 5.78% N/A
Expected return on plan assets
a
8.50% 8.50% N/A
Rate of compensation increase
a
4.25% 4.25% N/A
Service cost $ 29 $ 24 $ –
Interest cost 80 62 2
Expected return on plan assets (118) (90) –
Amortization of prior service cost 4 4 4
Special retirement benefits
b
39 – –
Net periodic benefit cost $ 34 $ – $ 6
a. The assumptions shown only relate to the FMC plans.
b. Resulted from revised mine operating plans and reductions in the workforce (see
Note 2 for further discussion).
The weighted-average assumptions used to determine net
periodic benefit cost and the components of net periodic benefit
cost for PT Freeport Indonesia’s and Atlantic Copper’s
pension plans for the years ended December 31, 2008, 2007 and
2006, follow:
PT Freeport Indonesia
2008 2007 2006
Weighted-average assumptions:
Discount rate
10.25% 10.50% 12.00%
Expected return on plan assets 9.00% 10.00% 10.00%
Rate of compensation increase 8.00% 9.00% 10.00%
Service cost $ 6 $ 5 $ 4
Interest cost 6 5 5
Expected return on plan assets (3) (3) (3)
Amortization of prior service cost 1 1 1
Amortization of net actuarial loss 1 1 1
Net periodic benefit cost $ 11 $ 9 $ 8
Atlantic Copper
2008 2007 2006
Weighted-average assumption:
Discount rate 6.77% 6.77% 6.77%
Interest cost $ 4 $ 5 $ 5
Amortization of net actuarial loss 2 – 1
Net periodic benefit cost $ 6 $ 5 $ 6
Included in accumulated other comprehensive income (loss) are
the following amounts that have not been recognized in net
periodic pension cost: unrecognized prior service credits of $3
million ($2 million net of tax and minority interest share) and
unrecognized actuarial losses of $470 million ($305 million net of
tax and minority interest share) at December 31, 2008; and
unrecognized prior service costs of $9 million ($7 million net of
tax and minority interest share) and unrecognized actuarial gains
of $75 million ($44 million net of tax and minority interest share)
at December 31, 2007. The amounts expected to be recognized in
net periodic pension cost for 2009 are less than $1 million for prior
service credits and $33 million ($20 million net of tax and minority
interest share) for actuarial losses.
FCX does not expect to have any plan assets returned to it in
2009. The pension plan weighted-average asset allocations for
the FCX and PT Freeport Indonesia plans at December 31, 2008
and 2007, follow:
PT Freeport
FCX Indonesia
2008 2007 2008 2007
Equity securities 45% 55% 9% 19%
Fixed income 43 35 91 74
Real estate 8 7 – –
Other 4 3 – 7
Total 100% 100% 100% 100%
Atlantic Copper’s plan is administered by a third-party insurance
company, and Atlantic Copper is not provided asset allocations.
The expected benefit payments for FCX’s (including FMC’s
plans, and FCX’s SERP, director and excess benefits plans),
PT Freeport Indonesia’s and Atlantic Copper’s pension plans
follow:
PT Freeport Atlantic
FCX Indonesia
a
Copper
b
2009 $ 87 $ 3 $ 8
2010 85 11 8
2011 85 6 8
2012 136 7 8
2013 88 8 8
2014 through 2018 477 52 42
a. Based on a December 31, 2008, exchange rate of 10,850 Indonesian rupiah to one
U.S. dollar.
b. Based on a December 31, 2008, exchange rate of $1.39 per euro.
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.
As a result of the acquisition of Phelps Dodge, FCX acquired
postretirement obligations with a fair value of $82 million
(representing a benefit obligation of $255 million less the fair
value of plan assets of $173 million). Assets for these plans
consisted of two VEBA trusts. One trust was dedicated to
funding postretirement medical obligations and the other to
funding postretirement life insurance obligations for eligible U.S.