Freeport-McMoRan 2009 Annual Report Download - page 43

In July 2008, our Board of Directors (the Board) approved an
increase in the open-market share purchase program for up to
30 million shares. During third-quarter 2008, we purchased 6.3 million
shares of our common stock for $500 million ($79.15 per share
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turmoil and the declines in copper and molybdenum prices, in
September 2008, we suspended purchases of our common stock
under the program. There are 23.7 million shares remaining under this
program, and the timing of future purchases of our common stock is
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of our common shares; and general economic and market conditions.
At December 31, 2009, we had 430 million common shares
outstanding; assuming conversion of our 6¾% Mandatory Convertible
Preferred Stock, which automatically converts on May 1, 2010, we
would have between 469 and 477 million common shares
outstanding, depending on the applicable average market price of our
common stock (refer to Note 12 for further discussion).
Total debt approximated $6.3 billion at December 31, 2009, $7.4
billion at December 31, 2008, and $7.2 billion at December 31, 2007.
We have revolving credit facilities available through March 2012,
which are composed of (i) a $1.0 billion revolving credit facility
available to FCX and (ii) a $0.5 billion revolving credit facility available
to both FCX and PT Freeport Indonesia. Interest on the revolving
credit facilities accrues at the London Interbank Offered Rate (LIBOR)
plus 1.00 percent, subject to an increase or decrease in the interest
rate margin based on the credit ratings assigned by Standard &
Poor’s Rating Services and Moody’s Investor Services. At
December 31, 2009, we had no borrowings and $39 million of letters
of credit issued under the facilities, resulting in availability of
approximately $1.5 billion ($961 million of which could be used for
additional letters of credit). The revolving credit facilities contain
restrictions on the amount available for dividend payments,
purchases of our common stock and certain debt prepayments (refer
to Note 10 for further discussion). However, these restrictions do not
apply as long as availability under the revolvers plus domestic cash
exceeds $750 million. At December 31, 2009, we had availability
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revolving credit facility) totaling approximately $3.4 billion.
In addition, the indenture governing our senior notes used to
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incurring debt, making restricted payments and selling assets (refer to
Note 10 for further discussion). In April 2008, Standard & Poor’s
Rating Services and Fitch Ratings raised our corporate credit rating
and the ratings on our unsecured debt to BBB- (investment grade).
As a result of the upgrade of our unsecured debt to investment grade,
these covenants are currently suspended. However, to the extent the
rating is downgraded below investment grade, the covenants would
again become effective.
Investing Activities
Capital Expenditures. Capital expenditures, including capitalized
interest, totaled $1.6 billion in 2009 (including $1.0 billion for major
projects and a property acquisition), $2.7 billion in 2008 (including
$1.6 billion for major projects) and $1.8 billion in 2007 (including
$0.8 billion for major projects). The decrease in capital expenditures
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decision to defer capital spending for several projects, lower capital
spending for the initial Tenke Fungurume development project (for
which construction activities are complete) and reduced spending for
sustaining capital. The increase in capital expenditures in 2008,
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our major development projects.
During fourth-quarter 2009, we announced initiatives to resume
certain project development activities that were deferred in late 2008
(refer to “Current Development Projects” for further discussion of
these projects). Capital spending plans will continue to be reviewed
and adjusted in response to changes in market conditions and other
factors. Refer to “Overview and Outlook” for further discussion of
projected 2010 capital expenditures.
Other Investing Activities. During 2008, our global reclamation and
remediation trusts decreased by $430 million resulting primarily from
reimbursement of previously incurred costs for reclamation and
environmental activities.
On March 19, 2007, we issued 136.9 million shares of common
stock and paid $13.9 billion (net of cash acquired) to acquire Phelps
Dodge (refer to Note 18 for further discussion).
During 2007, we received net proceeds of $597 million associated
with the sale of Phelps Dodge International Corporation (PDIC) (refer
to Note 19 for further discussion), and also received proceeds totaling
$260 million primarily related to sales of marketable securities.
Financing Activities
Equity and Debt Transactions. In February 2009, we completed a
public offering of 26.8 million shares of our common stock at an
average price of $28.00 per share, which generated gross proceeds
of $750 million (net proceeds of approximately $740 million). Net
proceeds were used for general corporate purposes, including the
repayment of amounts outstanding under our revolving credit
facilities, working capital and capital expenditures.
In December 2008, through privately negotiated transactions, we
induced conversion of 0.3 million shares of our 5½% Convertible
Perpetual Preferred Stock into 5.8 million shares of FCX common
stock. To induce conversion of these shares, we issued to the holders
an additional 1.0 million shares of FCX common stock valued at $22
million. In September 2009, we called for the redemption of the
remaining 0.8 million shares of our 5½% Convertible Perpetual
Preferred Stock, which converted into 17.9 million shares of FCX
common stock; the remaining 1,025 shares were redeemed for
approximately $1 million in cash. Refer to Note 12 for further
discussion of these transactions.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FREEPORT- McMoRan COPPER & GOLD INC. 41
2009 Annual Report