Freeport-McMoRan 2013 Annual Report Download - page 107

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2013 ANNUAL REPORT | 105
stock-settled RSUs expected to be recognized over 2.1 years.
Cash-Settled RSUs. Cash-settled RSUs are similar to stock-
settled RSUs, but are settled in cash rather than in shares of
common stock and are classified as liability awards. These
cash-settled RSUs generally vest over periods ranging from three
to five years of service. The fair value of these awards is
remeasured each reporting period until the vesting dates.
A summary of outstanding cash-settled RSUs as of December 31,
2013, and activity from June 1, 2013, to December 31, 2013, follows:
Weighted-
Weighted- Average
Number of Average Remaining Aggregate
Cash-Settled Grant-Date Contractual Intrinsic
RSUs Fair Value Term (years) Value
Conversion of PXP RSUs 2,259,708 $ 31.05
Granted 1,430 32.94
Vested (1,430) 31.05
Forfeited (39,896) 31.05
Balance at December 31 2,219,812 31.05 1.9 $ 84
The total fair value of PXP awards that were converted to FCX
cash-settled RSUs was $70 million at the acquisition date. As of
December 31, 2013, the accrued liability associated with cash-
settled RSUs consisted of a current portion of $17 million (included
in accounts payable and accrued liabilities) and a long-term
portion of $19 million (included in other liabilities).
Other Information. The following table includes amounts
related to exercises of stock options and vesting of RSUs during
the years ended December 31:
2013 2012 2011
FCX shares tendered to pay the
exercise price and/or the
minimum required taxes
a
3,294,624 515,558 936,811
Cash received from stock option
exercises $ 8 $ 15 $ 48
Actual tax benefit realized for tax
deductions $ 8 $ 16 $ 45
Amounts FCX paid for employee taxes $ 105 $ 16 $ 45
a. Under terms of the related plans, upon exercise of stock options and vesting of RSUs,
employees may tender existing FCX shares to FCX to pay the exercise price and/or the
minimum required taxes.
NOTE 11. INCOME TAXES
Geographic sources of income before income taxes and equity in
affiliated companies’ net earnings for the years ended December 31
consist of the following:
2013 2012 2011
United States $ 1,104 $ 1,5 39 $ 2,112
Foreign 3,809 3,948 6,706
Total $ 4,913 $ 5, 4 8 7 $ 8, 818
generated, as performance of services commenced in the
calendar year preceding the date of grant. In February 2012, the
terms of RSU awards under the annual incentive plan were
revised. For grants in 2012 and 2013, the level of RSUs granted
continued to be based on FCX’s consolidated operating cash flows
adjusted for changes in working capital and other tax payments
for the preceding year, but the award will vest after three years,
subject to FCX attaining a five-year average return on investment
(a performance condition defined in the award agreement) of at
least six percent. The awards will also be subject to a 20 percent
reduction if FCX performs below a group of its peers as defined in
the award agreement. The fair value of the awards is estimated
using an appropriate valuation model. The awards continue to
vest after the recipients’ retirement or death; therefore, since all of
FCX’s executive officers are retirement eligible, FCX charges the
cost of these awards to expense in the year the cash flows are
generated, as performance of services is only required in the
calendar year preceding the date of grant.
In February 2013, FCX granted RSUs to key employees that
cliff-vest at the end of three years. The fair value of the RSUs is
amortized ratably over the three-year vesting period.
FCX also grants other RSUs that vest over a period of four years
to its directors. The plans and award agreements provide for
accelerated vesting of all RSUs if there is a change of control (as
defined in the plans). The fair value of the RSUs is amortized over
the four-year vesting period or the period until the director
becomes retirement eligible, whichever is shorter. Upon a
director’s retirement, all of their unvested RSUs immediately vest.
For retirement-eligible directors, the fair value of RSUs is
recognized in earnings on the date of grant.
Dividends and interest on most RSUs accrue and are paid
if the award vests. A summary of outstanding stock-settled RSUs
as of December 31, 2013, and activity during the year ended
December 31, 2013, follows:
Weighted-
Weighted- Average
Number of Average Remaining Aggregate
Stock-Settled Grant-Date Contractual Intrinsic
RSUs Fair Value Term (years) Value
Balance at January 1 889,698 $ 44.35
Granted 2,492,600 34.84
Conversion of PXP and
MMR RSUs 1,252,185 31.05
Vested (356,275) 41.96
Forfeited (22,732) 31.92
Balance at December 31 4,255,476 35.13 4.1 $ 161
The total fair value of stock-settled RSUs granted during the year
ended December 31, 2013, was $125 million, including $38 million
for PXP awards that were converted to FCX stock-settled RSUs based
on the acquisition-date fair value. The total intrinsic value of RSUs
vested was $12 million during 2013, $28 million during 2012 and
$69 million during 2011. As of December 31, 2013, FCX had $38 million
of total unrecognized compensation cost related to unvested