Freeport-McMoRan 2013 Annual Report Download - page 92

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
90 | FREEPORT-McMoRan
together with borrowings under a $4.0 billion unsecured
five-year bank term loan, to fund the cash portion of the merger
consideration for both transactions, to repay certain
indebtedness of PXP and for general corporate purposes.
In the PXP acquisition, FCX acquired PXP for per-share
consideration equivalent to 0.6531 shares of FCX common stock
and $25.00 in cash. PXP stockholders had the right to elect to
receive merger consideration in the form of cash or shares of FCX
common stock, subject to the proration provisions in the merger
agreement. Based on the final results of the merger consideration
elections and as set forth in the merger agreement, FCX issued
91 million shares of its common stock and paid $3.8 billion in
cash (which includes $411 million for the value of the $3 per share
special dividend paid to PXP stockholders on May 31, 2013).
Following is a summary of the $6.6 billion purchase price for PXP:
Number of shares of PXP common stock acquired (millions) 132.280
Exchange ratio of FCX common stock for each PXP share 0.6531
86.392
Shares of FCX common stock issued for certain PXP
equity awards (millions) 4.769
Total shares of FCX common stock issued (millions) 91.161
Closing share price of FCX common stock at May 31, 2013 $ 31.05
FCX stock consideration $ 2,831
Cash consideration 3,725
a
Employee stock-based awards, primarily cash-settled
stock-based awards 83
Total purchase price $ 6,639
a. Cash consideration included the payment of $25.00 in cash for each PXP share
($3.3 billion), cash paid in lieu of any fractional shares of FCX common stock, cash paid
for certain equity awards ($7 million), and the value of the $3 per share PXP special
cash dividend ($411 million) paid on May 31, 2013.
Outstanding stock options with exercise prices greater than the
average market price of FCX’s common stock during the year are
excluded from the computation of diluted net income per share
of common stock. Excluded stock options totaled 30 million with a
weighted-average exercise price of $40.23 per option in 2013;
17 million with a weighted-average exercise price of $44.73 per
option in 2012; and 4 million with a weighted-average exercise
price of $53.91 per option in 2011.
Reclassifications. For comparative purposes, primarily the
revision to FCX’s presentation of its business segments, certain
prior year amounts have been reclassified to conform with the
current year presentation.
NOTE 2. ACQUISITIONS
Oil and Gas. FCX acquired PXP on May 31, 2013, and MMR on
June 3, 2013. These acquisitions added a portfolio of oil and gas
assets to FCX’s global mining business, creating a U.S.-based
natural resources company. The portfolio of oil and gas assets
includes oil production facilities and growth potential in the
Deepwater Gulf of Mexico (GOM), oil production from the
onshore Eagle Ford shale play in Texas, oil production facilities
onshore and offshore California, onshore natural gas resources
in the Haynesville shale play in Louisiana, natural gas production
from the Madden area in central Wyoming, and a position in
the emerging shallow-water Inboard Lower Tertiary/Cretaceous
natural gas trend on the Shelf of the GOM and onshore in
South Louisiana (previously referred to as the ultra-deep gas
trend). The acquisitions have been accounted for under the
acquisition method, with FCX as the acquirer. As further discussed
in Note 8, FCX issued $6.5 billion of unsecured senior notes
in March 2013 for net proceeds of $6.4 billion, which was used,
2013 2012 2011
Net income $ 3,441 $ 3,980 $ 5,747
Net income attributable to noncontrolling interests (761) (939) (1,187)
Preferred dividends on redeemable noncontrolling interest (22) — —
Net income attributable to FCX common stockholders $ 2,658 $ 3,041 $ 4,560
Weighted-average shares of common stock outstanding (millions) 1,002 949 947
Add shares issuable upon exercise or vesting of dilutive stock options and
restricted stock units (millions) 4
a
5
a
8
a
Weighted-average shares of common stock outstanding for purposes of calculating
diluted net income per share (millions) 1,006 954 955
Diluted net income per share attributable to FCX common stockholders $ 2.64 $ 3.19 $ 4.78
a. Excluded shares of common stock associated with outstanding stock options with exercise prices less than the average market price of FCX’s common stock that were anti-dilutive based on
the treasury stock method totaled approximately one million for the years ended December 31, 2013 and 2012, and two million for the year ended December 31, 2011.
final vesting date of the awards if actual forfeitures differ from
those estimates. FCX has elected to recognize compensation costs
for stock option awards and SARs that vest over several years
on a straight-line basis over the vesting period, and for RSUs on
the graded-vesting method over the vesting period. Refer to
Note 10 for further discussion.
Earnings Per Share. FCX’s basic net income per share of
common stock was calculated by dividing net income attributable
to FCX common stockholders by the weighted-average shares
of common stock outstanding during the year. A reconciliation of
net income and weighted-average shares of common stock
outstanding for purposes of calculating diluted net income per
share for the years ended December 31 follows: