STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

FCX’s authorized shares of capital stock total 3.05 billion shares, consisting of 3 billion shares of common stock and 50 million shares of preferred stock.

Common Stock. In November 2016, FCX completed a $1.5 billion registered at-the-market equity offering of common stock that was announced on July 27, 2016. FCX sold 116.5 million shares of its common stock at an average price of $12.87 per share, which generated gross proceeds of $1.5 billion (net proceeds of $1.48 billion after $15 million of commissions and expenses).

During 2016, FCX issued 48.1 million shares of its common stock (with a value of $540 million, excluding $5 million of commissions paid by FCX) in connection with the settlement of two drilling rig contracts.

Also during 2016, FCX negotiated private exchange transactions exempt from registration under the Securities Act of 1933, as amended, whereby 27.7 million shares of FCX’s common stock were issued (with an aggregate value of $311 million), in exchange for $369 million principal amount of FCX’s senior notes.

In September 2015, FCX completed a $1.0 billion at-the-market equity program and announced an additional $1.0 billion at-the-market equity program. Through December 31, 2015, FCX sold 205.7 million shares of its common stock at an average price of $9.53 per share under these programs, which generated gross proceeds of $1.96 billion (net proceeds of $1.94 billion after $20 million of commissions and expenses). From January 1, 2016, through January 5, 2016, FCX sold 4.3 million shares of its common stock, which generated proceeds of $29 million (after $0.3 million of commissions and expenses). FCX used the proceeds to repay indebtedness.

The Board of Directors (the Board) declared a one-time special cash dividend of $0.1105 per share related to the settlement of the shareholder derivative litigation, which was paid in August 2015. In response to the impact of lower commodity prices, the Board authorized a decrease in the cash dividend on FCX’s common stock from an annual rate of $1.25 per share to an annual rate of $0.20 per share in March 2015, and then suspended the cash dividend in December 2015. Refer to Note 18 for discussion of the reinstated cash dividend on FCX’s common stock. The declaration of dividends is at the discretion of the Board and will depend on FCX’s financial results, cash requirements, future prospects and other factors deemed relevant by the Board.

Accumulated Other Comprehensive Loss. A summary of changes in the balances of each component of accumulated other comprehensive loss, net of tax, follows:



	Defined Benefit Plans			Unrealized Losses on Securities			Translation Adjustment		Total
Balance at January 1, 2015	$	(548	)	$	(6	)	$	10	$	(544	)
Amounts arising during the period^a,b	3			—			—		3
Amounts reclassified^c	38			—			—		38
Balance at December 31, 2015	(507		)	(6		)	10		(503		)
Amounts arising during the period^a,b	(91		)	2			—		(89		)
Amounts reclassified^c	44			—			—		44
Balance at December 31, 2016	(554		)	(4		)	10		(548		)
Amounts arising during the period^a,b	7			1			—		8
Amounts reclassified^c	53			—			—		53
Balance at December 31, 2017	$	(494	)	$	(3	)	$	10	$	(487	)


a.	Includes net actuarial (losses) gains, net of noncontrolling interest, totaling $(7) million for 2015, $(79) million for 2016 and $52 million for 2017.


b.	Includes tax benefits (provision) totaling $2 million for 2015, $(11) million for 2016 and $(45) million for 2017.


c.	Includes amortization primarily related to actuarial losses, net of taxes of $16 million for 2015, $4 million for 2016 and $5 million for 2017.

Stock Award Plans. FCX currently has awards outstanding under various stock-based compensation plans. The stockholder-approved 2016 Stock Incentive Plan (the 2016 Plan) provides for the issuance of stock options, SARs, restricted stock, RSUs, PSUs and other stock-based awards for up to 72 million common shares. As of December 31, 2017, 64.7 million shares were available for grant under the 2016 Plan, and no shares were available under other plans.

Stock-Based Compensation Cost. Compensation cost charged against earnings for stock-based awards for the years ended December 31 follows:



	2017				2016				2015
Selling, general and administrative expenses	$	55			$	69			$	67
Production and delivery	16				16				17
Capitalized costs	—				4				11
Total stock-based compensation	71				89				95
Less capitalized costs	—				(4		)		(11		)
Tax benefit and noncontrolling interests’ share	(4		)	^a	(3		)	^a	(31		)
Impact on net income (loss) from continuing operations	$	67			$	82			$	53

a. Charges in the U.S. are not expected to generate a future tax benefit.

Stock Options and SARs. Stock options granted under the plans generally expire 10 years after the date of grant and vest in 25 percent annual increments beginning one year from the date of grant. The award agreements provide that participants will receive the following year’s vesting upon retirement. Therefore, on the date of grant, FCX accelerates one year of amortization for retirement-eligible employees. Stock options provide for accelerated vesting only upon certain qualifying terminations of employment within one year following a change of control. SARs generally expire within five years after the date of grant and vest in one-third annual increments beginning one year from the date of grant. SARs are similar to stock options, but are settled in cash rather than in shares of common stock and are classified as liability awards.

A summary of options and SARs outstanding as of December 31, 2017, including 716,469 SARs, and activity during the year ended December 31, 2017, follows:



	Number of Options and SARs		Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Balance at January 1	53,794,235		$	30.25
Granted	3,861,000		15.52
Exercised	(647,941	)	7.64
Expired/Forfeited	(8,992,606	)	34.24
Balance at December 31	48,014,688		28.63		4.8	$	129

Vested and exercisable at December 31	39,725,053		32.26		4.0	$	62

The fair value of each stock option is estimated on the date of grant using the Black-Scholes-Merton option valuation model. The fair value of each SAR is determined using the Black-Scholes-Merton option valuation model and remeasured at each reporting date until the date of settlement. Expected volatility is based on implied volatilities from traded options on FCX’s common stock and historical volatility of FCX’s common stock. FCX uses historical data to estimate future option and SAR exercises, forfeitures and expected life. When appropriate, separate groups of employees who have similar historical exercise behavior are considered separately for valuation purposes. The expected dividend rate is calculated using the annual dividend (excluding supplemental dividends) at the date of grant. The risk-free interest rate is based on Federal Reserve rates in effect for bonds with maturity dates equal to the expected term of the option or SAR.

Information related to stock options during the years ended December 31 follows:



	2017			2016				2015
Weighted-average assumptions used to value stock option awards:
Expected volatility	51.4		%	71.6		%		37.9		%
Expected life of options (in years)	5.70			5.34				5.17
Expected dividend rate	—			—				4.5		%
Risk-free interest rate	2.0		%	1.3		%		1.7		%
Weighted-average grant-date fair value (per share)	$	7.61		$	2.64			$	4.30
Intrinsic value of options exercised	$	5		$	—		^a	$	1
Fair value of options vested	$	25		$	43			$	50

a. Rounds to less than $1 million.

As of December 31, 2017, FCX had $24 million of total unrecognized compensation cost related to unvested stock options expected to be recognized over a weighted-average period of approximately 2.0 years.

Stock-Settled PSUs and RSUs. Beginning in 2014, FCX’s executive officers were granted PSUs that vest after three years. For the PSUs granted to the executive officers in 2015, the final number of shares to be issued to the executive officers is based on FCX’s total shareholder return compared to the total shareholder return of a peer group. The total grant date target shares related to the PSU grants were 755 thousand in 2015, and executive officers received no shares at maturity based on FCX’s total shareholder return compared to its peers. For the PSUs granted in 2017 and 2016, the final number of shares to be issued to the executive officers will be determined based on (i) FCX’s achievement of certain financial and operational performance metrics and (ii) FCX’s total shareholder return compared to the shareholder return of a peer group. The total grant date target shares related to the PSU grants were 0.6 million for 2017 and 1.5 million for 2016, of which the executive officers will earn (i) between 0 percent and 175 percent of the target shares based on achievement of financial and operating metrics and (ii) +/- 25 percent of the target shares based on FCX’s total shareholder return compared to the peer group.

All of FCX’s executive officers are retirement eligible, and their PSU awards are therefore non-forfeitable. As such, FCX charges the estimated fair value of the PSU awards to expense at the time the financial and operational metrics are established.

FCX grants RSUs that vest over a period of three years to certain employees. FCX also grants RSUs to its directors. Beginning in December 2015, RSUs granted to directors vest on the first anniversary of the grant. Prior to December 2015, RSUs granted to directors generally vest over a period of four years. The fair value of the RSUs is amortized over the 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.

The award agreements provide for accelerated vesting of all RSUs held by directors if there is a change of control (as defined in the award agreements) and for accelerated vesting of all RSUs held by employees if they experience a qualifying termination within one year following a change of control.

Dividends attributable to RSUs and PSUs accrue and are paid if the award vests. A summary of outstanding stock-settled RSUs and PSUs as of December 31, 2017, and activity during the year ended December 31, 2017, follows:



	Number of Awards			Weighted-Average Grant-Date Fair Value Per Award		Aggregate Intrinsic Value
Balance at January 1	7,218,227			$	18.08
Granted	2,062,067		^a	15.37
Vested	(3,175,437	)		15.45
Forfeited	(554,233	)		11.23
Balance at December 31	5,550,624			19.27		$	105

a. Excludes 374 thousand PSUs related to 2017 grants and 497 thousand PSUs related to 2016 grants for which the performance metrics have not yet been established.

The total fair value of stock-settled RSUs and PSUs granted was $32 million during 2017, $37 million during 2016 and $46 million during 2015. The total intrinsic value of stock-settled RSUs vested was $45 million during 2017, and $22 million during both 2016 and 2015. As of December 31, 2017, FCX had $6 million of total unrecognized compensation cost related to unvested stock-settled RSUs expected to be recognized over approximately 1.4 years.

Cash-Settled RSUs and PSUs. Cash-settled RSUs are similar to stock-settled RSUs, but are settled in cash rather than in shares of common stock. These cash-settled RSUs generally vest over periods ranging from three to five years of service. The award agreements for cash-settled RSUs provide for accelerated vesting upon certain qualifying terminations of employment within one year following a change of control (as defined in the award agreements).

In 2015, certain members of FM O&G’s senior management were granted cash-settled PSUs that vest over three years. The total grant date target shares related to the 2015 cash-settled PSU grants were 582 thousand shares, of which FM O&G’s senior management earned a total of 487 thousand shares at maturity based on the achievement of applicable performance goals.

The cash-settled PSUs and RSUs are classified as liability awards, and the fair value of these awards is remeasured each reporting period until the vesting dates.

Dividends attributable to cash-settled RSUs and PSUs accrue and are paid if the award vests. A summary of outstanding cash-settled RSUs and PSUs as of December 31, 2017, and activity during the year ended December 31, 2017, follows:



	Number of Awards		Weighted-Average Grant-Date Fair Value Per Award		Aggregate Intrinsic Value
Balance at January 1	2,531,744		$	19.30
Granted	622,907		15.26
Vested	(1,796,288	)	22.43
Forfeited	(51,128	)	12.96
Balance at December 31	1,307,235		13.32		$	25

The total grant-date fair value of cash-settled RSUs was $10 million during 2017, $4 million during 2016 and $44 million during 2015. The intrinsic value of cash-settled RSUs vested was $27 million during 2017 and $15 million during 2016. The accrued liability associated with cash-settled RSUs and PSUs consisted of a current portion of $11 million (included in accounts payable and accrued liabilities) and a long-term portion of $5 million (included in other liabilities) at December 31, 2017, and a current portion of $23 million and a long-term portion of $4 million at December 31, 2016.

Other Information. The following table includes amounts related to exercises of stock options and vesting of RSUs during the years ended December 31:



	2017		2016			2015
FCX shares tendered to pay the exercise price
and/or the minimum required taxes^a	1,041,937		906,120			349,122
Cash received from stock option exercises	$	5	$	—	^b	$	3
Actual tax benefit realized for tax deductions	$	1	$	—	^b	$	11
Amounts FCX paid for employee taxes	$	15	$	6		$	7


a.	Under terms of the related plans, upon exercise of stock options and vesting of stock-settled RSUs, employees may tender FCX shares to pay the exercise price and/or the minimum required taxes.


b.	Rounds to less than $1 million.