Freeport-McMoRan 2014 Annual Report Download - page 98

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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dividends not currently declared or paid, but which are payable
under the redemption features. Future mark-to-market
adjustments to the redemption value, subject to a minimum
balance of the original recorded value ($708 million) on May 31,
2013, shall be reflected in retained earnings and earnings per
share. Changes in the redemption value above the original
recorded value are accreted over the period from the date FCX
acquired PXP to the earliest redemption date. The redemption
value has not exceeded the original recorded value; therefore, no
amounts have been accreted.
Redeemable Noncontrolling Interest — MMR. Following FCX’s
acquisition of MMR, MMR’s 8% Convertible Perpetual Preferred
Stock and 5.75% Convertible Perpetual Preferred Stock, Series 1
(totaling $259 million) converted during 2013 primarily at the
make-whole conversion rates for which holders received cash of
$228 million and 17.7 million royalty trust units with a fair value of
$31 million at the acquisition date.
Unaudited Pro Forma Consolidated Financial Information. The
following unaudited pro forma financial information has been
prepared to reflect the acquisitions of PXP and MMR. The
unaudited pro forma financial information combines the historical
statements of income of FCX, PXP and MMR (including the pro
forma effects of PXP’s GOM acquisition that was completed on
November 30, 2012) for the years ended December 31, 2013 and
2012, giving effect to the mergers as if they had occurred on
January 1, 2012. The historical consolidated financial information
has been adjusted to reflect factually supportable items that are
directly attributable to the acquisitions.
Years Ended December 31, 2013 2012
Re ven ues $ 23 , 0 7 5 $ 2 2 , 713
Operating income 6,267 6,815
Income from continuing operations 3,626 4,277
Net income attributable to FCX
common stockholders 2,825 3,301
Net income per share attributable to FCX
common stockholders:
Basic $ 2.71 $ 3.17
Diluted 2.70 3.16
The above unaudited pro forma consolidated information has
been prepared for illustrative purposes only and is not intended to
be indicative of the results of operations that actually would have
occurred, or the results of operations expected in future periods,
had the events reflected herein occurred on the date indicated.
The most significant pro forma adjustments to income from
continuing operations for the year ended December 31, 2013, were
to exclude $519 million of acquisition-related costs, the net tax
benefit of $199 million of acquisition-related adjustments and the
$128 million gain on the investment in MMR and to include them
in the year ended December 31, 2012. Additionally, for the year
ended December 31, 2013, the pro forma consolidated information
excluded a $77 million gain on the sale of oil and gas properties
reflected in MMR’s results of operations prior to the acquisition
because of the application of the full cost accounting method.
Cobalt Chemical Refinery Business. On March 29, 2013, FCX,
through a newly formed consolidated joint venture, completed the
acquisition of a cobalt chemical refinery in Kokkola, Finland, and
the related sales and marketing business. The acquisition
provides direct end-market access for the cobalt hydroxide
production at Tenke. The joint venture operates under the name
Freeport Cobalt, and FCX is the operator with an effective
56 percent ownership interest. The remaining effective ownership
interest is held by FCX’s partners in TFM, including 24 percent
by Lundin and 20 percent by La Générale des Carrières et des
Mines (Gécamines). Consideration paid was $382 million,
which included $34 million for cash acquired, and was funded
70 percent by FCX and 30 percent by Lundin. Under the terms of
the acquisition agreement, there is also the potential for
additional consideration of up to $110 million over a period of
three years, contingent upon the achievement of revenue-based
performance targets. As of December 31, 2014, no amount was
recorded for this contingency because these targets are not
expected to be achieved.
NOTE 3. OWNERSHIP IN SUBSIDIARIES
AND JOINT VENTURES
Ownership in Subsidiaries. FMC is a fully integrated producer of
copper and molybdenum, with mines in North America, South
America and the Tenke minerals district in the Democratic Republic
of Congo (DRC). At December 31, 2014, FMC’s operating mines in
North America were Morenci, Bagdad, Safford, Sierrita and Miami
located in Arizona; Tyrone and Chino located in New Mexico; and
Henderson and Climax located in Colorado. FCX has an 85 percent
interest in Morenci (refer to “Joint Ventures — Sumitomo“)
and owns 100 percent of the other North America mines. At
December 31, 2014, operating mines in South America were Cerro
Verde (53.56 percent owned) located in Peru and El Abra
(51 percent owned) located in Chile. At December 31, 2014, FMC
owned an effective 56 percent interest in the Tenke minerals district
in the DRC (refer to Note 13 for discussion of the change in
ownership interest in 2012). At December 31, 2014, FMC’s net assets
totaled $19.6 billion and its accumulated deficit totaled $9.7 billion.
FCX had no loans outstanding to FMC at December 31, 2014.
FCX’s direct ownership in PT-FI totals 81.28 percent.
PT Indocopper Investama, an Indonesian company, owns 9.36
percent of PT-FI, and FCX owns 100 percent of PT Indocopper
Investama. Refer to “Joint Ventures — Rio Tinto“ for discussion of
the unincorporated joint ventures. At December 31, 2014, PT-FI’s
net assets totaled $5.4 billion and its retained earnings totaled
$5.2 billion. FCX had $213 million in intercompany loans
outstanding to PT-FI at December 31, 2014.
FCX owns 100 percent of the outstanding Atlantic Copper
common stock. At December 31, 2014, Atlantic Copper’s net
liabilities totaled $145 million and its accumulated deficit totaled