Freeport-McMoRan 2013 Annual Report Download - page 59

MANAGEMENT’S DISCUSSION AND ANALYSIS
2013 ANNUAL REPORT | 57
in July 2013), $1.1 billion in 2012 and $1.4 billion in 2011 (including
$474 million for a supplemental dividend paid in June 2011).
The current annual dividend rate for our common stock is $1.25
per share ($0.3125 per share quarterly). Based on outstanding
common shares of 1.0 billion at December 31, 2013, and the
current dividend rate, our estimated regular common stock
dividend for 2014 approximates $1.3 billion. The declaration of
dividends is at the discretion of the Board and will depend upon
our financial results, cash requirements, future prospects and
other factors deemed relevant by the Board. The Board will
continue to review our financial policy on an ongoing basis.
Cash dividends and other distributions paid to noncontrolling
interests totaled $256 million in 2013, $113 million in 2012 and
$391 million in 2011. Higher noncontrolling interest payments in
2013, compared with 2012, primarily reflected higher dividends to
the noncontrolling interest holders of El Abra and Candelaria.
Lower noncontrolling interest payments in 2012, compared with
2011, primarily reflected lower dividends to the noncontrolling
interest holders of PT-FI as a result of lower production in 2012.
These payments will vary based on the operating results and cash
requirements of our consolidated subsidiaries.
Conversion of MMR’s 8% Convertible Perpetual Preferred Stock
and 5.75% Convertible Perpetual Preferred Stock, Series 1
required cash payments of $228 million during 2013. Refer to Note 2
for further discussion.
CONTRACTUAL OBLIGATIONS
We have contractual and other long-term obligations, including
debt maturities, which we expect to fund with available cash,
projected operating cash flows, availability under our revolving
credit facility or future financing transactions, if necessary.
A summary of these various obligations at December 31, 2013,
follows (in millions):
Acquisitions. In second-quarter 2013, we paid $3.5 billion in cash
(net of $315 million of cash acquired) to acquire PXP and $1.6 billion
in cash (net of $29 million of cash acquired) to acquire MMR.
In first-quarter 2013, we paid $348 million (net of $34 million of
cash acquired) to acquire a cobalt chemical refinery in Kokkola,
Finland, and the related sales and marketing business. The
acquisition was funded 70 percent by us and 30 percent by Lundin
Mining Corporation, our joint venture partner.
Refer to Note 2 for further discussion of these acquisitions.
Financing Activities
Debt Transactions. During 2013, we sold $6.5 billion of senior
notes in four tranches with a weighted-average interest rate of
3.9 percent, and we borrowed $4.0 billion under an unsecured
bank term loan with an interest rate of LIBOR plus 1.50 percent.
Net proceeds from these borrowings were used to fund the
acquisitions of PXP and MMR, repay certain debt of PXP and for
general corporate purposes.
Also in 2013, we redeemed the $299 million of MMR’s
outstanding 11.875% Senior Notes due 2014 and $400 million of
PXP’s 75/8% Senior Notes due 2018 assumed in the acquisitions.
During 2012, we sold $3.0 billion of senior notes in three
tranches with a weighted-average interest rate of approximately
3.0 percent. Net proceeds from this offering, plus cash on hand,
were used to redeem the remaining $3.0 billion of our 8.375%
Senior Notes.
During 2011, we redeemed the remaining $1.1 billion of our
outstanding 8.25% Senior Notes. In addition, we made open-
market purchases of $35 million of our 9.5% Senior Notes and
repaid the remaining $84 million of our 8.75% Senior Notes.
Refer to Note 8 for further discussion of these transactions.
Dividends and Other Equity Transactions. We paid dividends on
our common stock totaling $2.3 billion in 2013 (including
$1.0 billion for a supplemental dividend of $1.00 per share paid
Total 2014 2015 to 2016 2017 to 2018 Thereafter
Debt maturities $ 20,054 $ 312 $ 1,803 $ 4,400 $ 13,539
Scheduled interest payment obligations
a
8,880 852 1,668 1,575 4,785
ARO and environmental obligations
b
7,237 247 449 423 6,118
Take-or-pay contracts
c
4,710 1,379 2,176 828 327
Operating lease obligations 336 45 84 75 132
Total
d
$ 41,217 $ 2,835 $ 6,180 $ 7,301 $ 24,901
a. Scheduled interest payment obligations were calculated using stated coupon rates for fixed-rate debt and interest rates applicable at December 31, 2013, for variable-rate debt.
b. Represents estimated cash payments, on an undiscounted and unescalated basis, associated with ARO and environmental activities (including $1.8 billion for our recently acquired oil and gas
operations). The timing and the amount of these payments could change as a result of changes in regulatory requirements, changes in scope and timing of ARO activities, the settlement of
environmental matters and as actual spending occurs. Refer to Note 12 for additional discussion of environmental and ARO matters.
c. Represents contractual obligations for purchases of goods or service agreements enforceable and legally binding and that specify all significant terms, including minimum commitments for
two deepwater drillships expected to be delivered in late 2014 and early 2015 for the GOM drilling campaign ($1.5 billion), transportation services ($853 million), the procurement of copper
concentrates ($800 million), electricity ($471 million) and deferred premium costs and future interest expected to be accrued on the crude oil derivative contracts ($454 million). Some of our
take-or-pay contracts are settled based on the prevailing market rate for the service or commodity purchased, and in some cases, the amount of the actual obligation may change over time
because of market conditions. Drillship obligations provide for an operating rate over the contractual term upon delivery of the drillship. Transportation obligations are primarily for South
America and PT-FI contracted ocean freight. Obligations for copper concentrates provide for deliveries of specified volumes to Atlantic Copper at market-based prices. Electricity obligations
are primarily for contractual minimum demand at the South America and Tenke mines.
d. This table excludes certain other obligations in our consolidated balance sheets, such as estimated funding for pension obligations as the funding may vary from year to year based on
changes in the fair value of plan assets and actuarial assumptions, accrued liabilities totaling $87 million that relate to unrecognized tax benefits where the timing of settlement is not
determinable, and other less significant amounts.This table also excludes purchase orders for the purchase of inventory and other goods and services, as purchase orders typically represent
authorizations to purchase rather than binding agreements.