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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1994
Commission file number 1-82
PHELPS DODGE CORPORATION
(a New York corporation)
13-1808503
(I.R.S. Employer Identification No.)
2600 N. Central Avenue, Phoenix, AZ 85004-3089
Registrant's telephone number: (602) 234-8100
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes / X / No / /.
Number of Common Shares outstanding at August 5, 1994: 70,675,790 shares.
================================================================================
<PAGE>
PHELPS DODGE CORPORATION
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 1994
TABLE OF CONTENTS
Statement of Consolidated Operations
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Information
Review by Independent Accountants
Accountant's Report on Review of Interim Financial Information
Management's Discussion and Analysis
Legal Proceedings
Submission of Matters to a Vote of Security Holders
Exhibits and Reports on Form 8-K
Signatures
Index to Exhibits
<PAGE>
PHELPS DODGE CORPORATION AND SUBSIDIARIES
Part I. Financial Information
Item 1. Financial Statements
STATEMENT OF CONSOLIDATED OPERATIONS
(Unaudited; in millions except per share data)
First Six
Second Quarter Months
-------------- -------------
1994 1993 1994 1993
---- ---- ---- ----
SALES AND OTHER OPERATING
REVENUES $780.4 629.8 1,474.7 1,296.5
------ ------- ------- -------
OPERATING COSTS AND EXPENSES
Cost of products sold 585.3 460.6 1,114.9 945.3
Depreciation, depletion
and amortization 46.4 47.3 93.5 93.0
Selling and general
administrative expense 25.2 28.0 50.7 54.9
Exploration and research
expense 11.5 12.9 22.5 24.2
Loss on sale of mineral
properties, net 17.5 -- 17.5 --
------ ------- ------- -------
685.9 548.8 1,299.1 1,117.4
------ ------- ------- -------
OPERATING INCOME 94.5 81.0 175.6 179.1
Interest expense less
amount capitalized (5.4) (9.8) (13.4) (19.2)
Miscellaneous income and
expense, net 1.0 3.4 1.0 6.2
------ ------- ------- -------
INCOME BEFORE TAXES, MINORITY
INTERESTS AND EQUITY IN NET
EARNINGS OF AFFILIATED
COMPANIES 90.1 74.6 163.2 166.1
Provision for taxes on
income (26.0) (24.2) (50.9) (52.5)
Minority interest in
consolidated subsidiary
companies (see Note 3) (0.9) (2.6) (2.8) (5.0)
Equity in net earnings
(losses) of affiliated
companies 1.4 (1.5) 3.7 (2.0)
------ ------- ------- -------
NET INCOME $ 64.6 46.3 113.2 106.6
====== ======= ======= =======
EARNINGS PER SHARE $ 0.91 0.66 1.59 1.51
====== ======= ======= =======
AVERAGE NUMBER OF SHARES
OUTSTANDING 71.0 70.6 71.0 70.7
BUSINESS SEGMENTS
(Unaudited; in millions)
SALES AND OTHER OPERATING
REVENUES
Phelps Dodge Mining
Company $414.9 305.0 769.8 661.6
Phelps Dodge Industries 365.5 324.8 704.9 634.9
------ ------- ------- -------
$780.4 629.8 1,474.7 1,296.5
====== ======= ======= =======
OPERATING INCOME
Phelps Dodge Mining
Company $ 63.1 52.9 115.7 132.9
Phelps Dodge Industries 38.5 36.2 74.6 62.3
Corporate and other (7.1) (8.1) (14.7) (16.1)
------ ------- ------- -------
$ 94.5 81.0 175.6 179.1
====== ======= ======= =======
See Notes to Consolidated Financial Information.
<PAGE>
CONSOLIDATED BALANCE SHEET
(In millions)
June 30, December 31,
1994 1993
---- ----
(unaudited)
ASSETS
Cash and short-term investments, at cost $ 160.2 255.8
Receivables, net 428.6 354.4
Inventories 242.1 225.4
Supplies 97.9 103.3
Prepaid expenses 16.7 13.1
Deferred income taxes 37.7 35.4
-------- -------
Current assets 983.2 987.4
Investments and long-term receivables 106.1 115.4
Property, plant and equipment, net 2,471.3 2,340.2
Other assets and deferred charges 285.8 277.9
-------- -------
$3,846.4 3,720.9
======== =======
LIABILITIES
Short-term debt $ 77.8 82.7
Current portion of long-term debt 19.7 17.2
Accounts payable and accrued expenses 467.4 425.8
Income taxes 10.1 14.3
-------- -------
Current liabilities 575.0 540.0
Long-term debt 571.0 547.3
Deferred income taxes 284.4 286.0
Other liabilities and deferred credits 267.3 263.3
-------- -------
1,697.7 1,636.6
-------- -------
MINORITY INTEREST IN SUBSIDIARIES 62.9 62.2
-------- -------
COMMON SHAREHOLDERS' EQUITY
Common shares, 70.6 outstanding
(1993 - 70.5) 441.5 440.8
Capital in excess of par value 83.9 83.1
Retained earnings 1,673.5 1,618.5
Cumulative translation adjustments and
other (113.1) (120.3)
-------- -------
2,085.8 2,022.1
-------- -------
$3,846.4 3,720.9
======== =======
See Notes to Consolidated Financial Information.
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited; in millions)
Six months
ended
June 30,
-----------------
1994 1993
---- ----
OPERATING ACTIVITIES
Net income $ 113.2 106.6
Adjustments to reconcile net income to
cash flow from operations:
Depreciation, depletion and
amortization 93.5 93.0
Deferred income taxes 6.3 11.1
Equity earnings net of dividends
received (3.6) 2.0
------- -----
Cash flow from operations 209.4 212.7
Adjustments to reconcile cash flow from
operations to net cash provided by
operating activities:
Changes in current assets and liabilities:
(Increase) decrease in receivables (82.2) (26.2)
(Increase) decrease in inventories (13.1) (0.5)
(Increase) decrease in supplies 6.9 (1.7)
(Increase) decrease in prepaid
expenses (4.0) (8.0)
(Increase) decrease in deferred
income taxes (2.3) (0.6)
Increase (decrease) in interest
payable -- 1.8
Increase (decrease) in other accounts
payable 40.9 15.6
Increase (decrease) in income taxes (4.3) (17.6)
Increase (decrease) in other accrued
expenses 15.1 5.4
Other adjustments, net 15.2 (24.7)
------- -----
Net cash provided by operating
activities 181.6 156.2
------- -----
INVESTING ACTIVITIES
Capital outlays (171.2) (182.6)
Capitalized interest (12.2) (7.6)
Investment in subsidiaries (51.8) (2.6)
Other 0.4 1.9
------- -----
Net cash used in investing activities (234.8) (190.9)
------- -----
FINANCING ACTIVITIES
Increase in debt 121.9 210.4
Payment of debt (103.0) (122.9)
Common dividends (58.2) (58.1)
Purchase of common shares (2.1) (4.1)
Other (1.0) --
------- -----
Net cash provided by (used in)
financing activities (42.4) 25.3
------- -----
DECREASE IN CASH AND
SHORT-TERM INVESTMENTS (95.6) (9.4)
CASH AND SHORT-TERM INVESTMENTS AT
BEGINNING OF PERIOD 255.8 251.2
------- -----
CASH AND SHORT-TERM INVESTMENTS AT END
OF PERIOD $ 160.2 241.8
======= =====
See Notes to Consolidated Financial Information.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
1. The unaudited consolidated financial information presented herein has
been prepared in accordance with the instructions to Form 10-Q and does
not include all of the information and note disclosures required by
generally accepted accounting principles. Therefore, this information
should be read in conjunction with the consolidated financial
statements and notes thereto included in the Corporation's Form 10-K
for the year ended December 31, 1993. This information reflects all
adjustments that are, in the opinion of management, necessary to a fair
statement of the results for the interim periods reported.
2. The results of operations for the three-month and six-month periods
ended June 30, 1994, are not necessarily indicative of the results to
be expected for the full year.
3. Prior to 1994, minority interest in the income of consolidated
subsidiaries was included in cost of products sold. For comparative
purposes, prior period amounts have been reclassified in this report to
conform with the current year presentation.
4. The Corporation enters into price protection arrangements from time to
time, depending on market circumstances, to ensure a minimum price for
a portion of its expected future mine production. The Corporation has
contracts with several financial institutions that provide for minimum
quarterly average prices of 75 cents per pound for 127 million pounds
of copper cathode, approximately 20 percent of its anticipated
production for the second half of 1994. These contracts are based on
the average London Metal Exchange (LME) price each quarter. Similar
contracts for the first half of 1994 covering approximately 117 million
pounds had expired as of June 30, 1994, without payment to Phelps
Dodge.
The Corporation also has entered into contracts for 1995 that provide
for minimum quarterly average LME prices of approximately 80 cents per
pound for 640 million pounds of copper cathode, approximately 45
percent of its anticipated production for 1995. In addition, the
Corporation has entered into contracts that provide for minimum
(approximately 95 cents) and maximum (approximately $1.33) average
prices per pound for approximately 385 million pounds of copper
cathode, approximately 30 percent of its anticipated production for
1995. These contracts are based primarily on average LME prices for the
year 1995.
5. The Corporation's 1994 second quarter net income included an after-tax
loss of $11.2 million, or 16 cents per share, on the sale of certain
gold interests. Included in that amount was an after-tax loss of $15.5
million, or 22 cents per share, on the sale of the Corporation's Santa
Gertrudis property in Mexico, offset in part by an after-tax gain of
$4.3 million, or 6 cents per share, on the sale of its Olinghouse gold
interest in Nevada. The combined net loss on the sale of these
interests before taxes was $17.5 million.
REVIEW BY INDEPENDENT ACCOUNTANTS
The financial information as of June 30, 1994, and for the three-month
and six-month periods ended June 30, 1994 and 1993, included in Part I pursuant
to Rule 10-01 of Regulation S-X has been reviewed by Price Waterhouse, the
Corporation's independent accountants, in accordance with standards established
by the American Institute of Certified Public Accountants. Price Waterhouse's
report is included in this quarterly report.
Price Waterhouse does not carry out any significant or additional audit
tests beyond those that would have been necessary if its report had not been
included in this quarterly report. Accordingly, such report is not a "report" or
"part of a registration statement" within the meaning of Sections 7 and 11 of
the Securities Act of 1933 and the liability provisions of Section 11 of such
Act do not apply.
<PAGE>
<AUDIT-REPORT>
PRICE WATERHOUSE
INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors and Shareholders of
Phelps Dodge Corporation
We have reviewed the accompanying consolidated balance sheet of Phelps Dodge
Corporation and its subsidiaries as of June 30, 1994 and the consolidated
statement of operations for the three-month and six-month periods ended June 30,
1994 and 1993 and the consolidated statement of cash flows for the six-month
periods ended June 30, 1994 and 1993. These financial statements are the
responsibility of the Corporation's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We previously audited, in accordance with generally accepted auditing standards,
the consolidated balance sheet as of December 31, 1993, and the related
consolidated statements of operations, retained earnings and cash flows for the
year then ended (not presented herein), and in our report dated January 24, 1994
we expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying consolidated
balance sheet as of December 31, 1993 is fairly stated in all material respects
in relation to the consolidated balance sheet from which it has been derived.
Price Waterhouse
Phoenix, Arizona
July 20, 1994
</AUDIT-REPORT>
<PAGE>
Item 2. Management's Discussion and Analysis
RESULTS OF OPERATIONS
Phelps Dodge Corporation had consolidated net income of $64.6 million,
or 91 cents per common share, in the second quarter of 1994, compared with $46.3
million, or 66 cents per common share, in the 1993 second quarter. The
Corporation's 1994 second quarter net income included a net after-tax loss of
$11.2 million, or 16 cents per common share, on the sale of its Santa Gertrudis
gold property in Mexico, offset in part by a gain on the sale of another gold
interest in Nevada. During the 1993 second quarter, the Corporation recognized
an after-tax benefit of $4.7 million, or 7 cents per common share, from its
copper price protection program. Net income for the six-month period ended June
30, 1994, was $113.2 million, or $1.59 per common share, compared with $106.6
million, or $1.51 per common share, in the corresponding 1993 period.
Earnings in the three-month and six-month periods ended June 30, 1994,
were higher than those reported in the corresponding 1993 periods principally as
a result of higher copper prices. Average spot prices per pound of cathode
copper on the New York Commodity Exchange (COMEX) rose approximately 16 cents
and 2 cents in the second quarter and first six months of 1994, respectively,
from the average prices in the corresponding 1993 periods. Also contributing to
the increases in earnings in both 1994 periods were improved results in the
Corporation's wheel and rim and wire and cable businesses in North America.
Any material change in the price the Corporation receives for copper,
or in its unit production costs, has a significant effect on the Corporation's
results. The Corporation's share of annual production presently is approximately
1.1 billion pounds of copper. Accordingly, each 1 cent per pound change in the
average annual copper price received by the Corporation, or in average annual
unit production costs, causes a variation in annual operating income before
taxes of approximately $11 million. The Corporation's estimated annual copper
production capacity will increase by approximately 200 million pounds as a
result of the La Candelaria project in Chile, scheduled to begin operations in
the 1994 fourth quarter, and by approximately 130 million pounds as a result of
the Southside expansion at the Corporation's Morenci mine in southeastern
Arizona, with startup scheduled in late 1995. These increases will add more than
$3.0 million to the variation in annual pre-tax operating income from each 1
cent per pound change in realized copper prices or average unit production
costs.
The COMEX spot price per pound of copper cathode, upon which the
Corporation bases its selling price, averaged 99 cents in the second quarter and
93 cents in the first six months of 1994, compared with 83 cents and 91 cents in
the corresponding periods in 1993. From July 1 to August 5, 1994, the average
price was $1.11, closing at $1.07 on August 5, 1994.
The Corporation enters into price protection arrangements from time to
time, depending on market circumstances, to ensure a minimum price for a portion
of its expected future mine production. The Corporation has contracts with
several financial institutions that provide for minimum quarterly average prices
of 75 cents per pound for 127 million pounds of copper cathode, approximately 20
percent of its anticipated production for the second half of 1994. These
contracts are based on the average London Metal Exchange (LME) price each
quarter. Similar contracts for the first half of 1994 covering approximately 117
million pounds had expired as of June 30, 1994, without payment to Phelps Dodge.
The Corporation also has entered into contracts for 1995 that provide
for minimum quarterly average LME prices of approximately 80 cents per pound for
640 million pounds of copper cathode, approximately 45 percent of its
anticipated production for 1995. In addition, the Corporation has entered into
contracts that provide for minimum (approximately 95 cents) and maximum
(approximately $1.33) average prices per pound for approximately 385 million
pounds of copper cathode, approximately 30 percent of its anticipated production
for 1995. These contracts are based primarily on average LME prices for the year
1995.
Sales were $780.4 million in the second quarter of 1994, compared with
$629.8 million in the 1993 second quarter. This increase resulted from higher
average copper prices and sales volumes (including copper purchased for resale),
and higher sales volumes of wire and cable products, wheels and rims, and carbon
black. Sales were $1,474.7 million in the first six months of 1994, compared
with $1,296.5 million in the corresponding 1993 period. This increase
principally resulted from higher sales volumes of copper purchased for resale,
wire and cable products, and wheels and rims.
PHELPS DODGE MINING COMPANY
Phelps Dodge Mining Company is an international business comprising a
group of companies involved in vertically integrated copper operations including
mining, concentrating, electrowinning, smelting and refining, rod production,
marketing and sales, and related activities. Copper is sold primarily to others
as rod, cathode or concentrates, and to the Phelps Dodge Industries segment. In
addition, Phelps Dodge Mining Company at times smelts and refines copper and
produces copper rod for others on a toll basis. Phelps Dodge Mining Company also
produces gold, silver, molybdenum and copper chemicals, principally as
by-products, and sulfuric acid from its air quality control facilities. This
segment also includes the Corporation's other mining operations and investments
(including gold, fluorspar, silver, lead and zinc operations) and its worldwide
exploration and development programs.
================================================================================
First Six
Second Quarter Months
--------------- ---------------
1994 1993 1994 1993
---- ---- ---- ----
Copper from own mines *
(short tons)
Production 132,600 134,800 271,800 269,100
Deliveries 141,100 130,400 264,600 270,800
New York Commodity Exchange
average spot price per
pound - copper cathodes $ 0.99 0.83 0.93 0.91
(in millions)
Sales and other operating
revenues $414.9 305.0 769.8 661.6
Operating income $ 63.1 52.9 115.7 132.9
- - -------------------------
* The Corporation's worldwide copper production and deliveries shown in
the above table exclude the amounts attributable to (i) the 15 percent
undivided interest in the Morenci, Arizona, copper mining complex held
by Sumitomo Metal Mining Arizona, Inc. and (ii) the one-third
partnership interest in Chino Mines Company in New Mexico held by
Heisei Minerals Corporation.
================================================================================
Phelps Dodge Mining Company's 1994 second quarter sales of $414.9
million were 36 percent higher than in the second quarter of 1993. This increase
principally resulted from a 16 cents per pound increase in average copper
prices, a 10,700 ton increase in copper sales from mine production and a 23,000
ton increase in the sale of copper purchased for resale. Sales of $769.8 million
in the first six months of 1994 were 16 percent higher than in the corresponding
1993 period. This increase primarily resulted from a 57,700 ton increase in the
sale of copper purchased for resale, offset in part by a 6,200 ton decrease in
copper sales from mine production. The increase in the 1994 six-month period
also reflected increased average copper prices.
During the 1994 second quarter, Phelps Dodge Mining Company recorded
operating income of $63.1 million, a 19 percent increase from the $52.9 million
recorded in the corresponding 1993 period. This increase principally resulted
from the higher average copper prices already discussed and, to a lesser extent,
the increased copper sales from mine production. Operating income was $115.7
million in the six months ended June 30, 1994, compared with $132.9 million in
the corresponding 1993 period. This 13 percent decrease included a 1994 second
quarter loss on the sale of certain gold interests of $17.5 million before
taxes. Offsetting this loss in part were slightly higher average copper prices
and lower unit production costs. The 1993 period reflected a $7.0 million
pre-tax benefit from the Corporation's copper price protection program.
During the 1994 second quarter, Phelps Dodge Mining Company announced a
$200 million expansion (the Corporation's share will be $170 million with the
remainder provided by its partner, Sumitomo Metal Mining Arizona, Inc.) of its
Morenci mine in southeastern Arizona. This project, which will increase Phelps
Dodge's share of annual electrowon copper production capacity by approximately
130 million pounds, is expected to be in production by late 1995 pending the
approval of any necessary environmental permits. The expansion involves the
development of Southside, a mineral deposit adjacent to the existing open-pit
mine at Morenci. The expansion will include the construction of an
electrowinning tankhouse, the expansion of existing solvent extraction plants,
the upgrading of infrastructure systems and the purchase of mining equipment.
The Corporation also announced recently that it has been notified by
Echo Bay Exploration Inc. that Echo Bay is terminating the contract under which,
together with CR Montana Corporation, Echo Bay had agreed to purchase Phelps
Dodge's 72.25 percent interest in the Seven-Up Pete Joint Venture in Lincoln,
Montana, for $150 million. The Seven-Up Pete Joint Venture controls 32 square
miles of mineral and surface rights east of Lincoln including the proposed
McDonald gold mine which recently completed a positive feasibility study. Phelps
Dodge disagrees with the content of Echo Bay's notice, disputes the right of
Echo Bay to terminate the contract and intends to pursue its contractual
remedies in order to enforce the contract.
PHELPS DODGE INDUSTRIES
Phelps Dodge Industries is a business segment comprising a group of
international companies that manufacture engineered products principally for the
transportation and electrical sectors worldwide. Its operations are
characterized by products with significant market share, internationally
competitive cost and quality, and specialized engineering capabilities. This
business segment includes the Corporation's carbon black and synthetic iron
oxide operations through Columbian Chemicals Company and its subsidiaries, its
truck wheel and rim operations through Accuride Corporation and its
subsidiaries, its magnet wire operations through Phelps Dodge Magnet Wire
Company and its subsidiaries, its U.S. specialty conductor operations through
Hudson International Conductors, and its international wire and cable
manufacturers through Phelps Dodge International Corporation.
================================================================================
First Six
Second Quarter Months
------------------ -------------
1994 1993 1994 1993
---- ---- ---- ----
(in millions)
Sales and other operating
revenues $365.5 324.8 704.9 634.9
Operating income $ 38.5 36.2 74.6 62.3
================================================================================
Phelps Dodge Industries' 1994 second quarter sales of $365.5 million
were 13 percent higher than in the second quarter of 1993. Sales of $704.9
million in the first six months of 1994 were 11 percent higher than in the
corresponding 1993 period. These increases principally resulted from higher
sales volumes in North American markets for wheels and rims and wire and cable
products.
During the 1994 second quarter, Phelps Dodge Industries recorded
operating income of $38.5 million, a 6 percent increase over the $36.2 million
recorded in the corresponding 1993 period. Operating income of $74.6 million in
the first six months of 1994 was 20 percent higher than in the corresponding
1993 period. These increases reflected improved sales volumes in the wheel and
rim business (due to increased truck builds in North America) and the wire and
cable business (principally as a result of the recent acquisition of two U.S.
magnet wire facilities). These improvements were partially offset by reduced
earnings at certain international wire and cable operations, particularly in
Venezuela where the local banking industry is experiencing significant
difficulties and the government has recently imposed price and foreign exchange
controls.
CHANGES IN FINANCIAL CONDITION
Capital outlays during the first six months of 1994 were $139.9 million
for Phelps Dodge Mining Company (including $83.6 million for La Candelaria) and
$31.1 million for Phelps Dodge Industries. Capital outlays in the corresponding
1993 period were $146.1 million for Phelps Dodge Mining Company (including
$101.5 million for La Candelaria) and $36.1 million for Phelps Dodge Industries.
The Corporation expects capital outlays in 1994 to be approximately $280.0
million for Phelps Dodge Mining Company (including $120.0 million for La
Candelaria) and approximately $70.0 million for Phelps Dodge Industries.
At June 30, 1994, the Corporation's total debt was $668.5 million,
compared with $647.2 million at year-end 1993. This $21.3 million increase
primarily resulted from borrowings used to fund construction and development of
the Corporation's La Candelaria copper-gold project in Chile. The Corporation's
ratio of debt to total capitalization was 23.7 percent at June 30, 1994, the
same as at December 31, 1993.
On June 8, 1994, the Corporation paid a regular quarterly dividend of
41.25 cents per common share for the 1994 second quarter; the total amount paid
was $29.1 million. On July 29, 1994, the Board of Directors declared a 1994
third quarter regular dividend of 41.25 cents per common share to be paid on
September 8, 1994, to shareholders of record at the close of business on August
19, 1994. There were 70,637,000 shares outstanding at June 30, 1994.
During the first half of 1994, the Corporation purchased 43,000 of its
common shares in connection with an odd-lot buy-back program under the current 4
million common share buy-back program initiated in September 1989. Under this
program, the Corporation from time to time makes purchases in the open market
and also considers purchasing its common shares in negotiated transactions. As
of June 30, 1994, 1,584,000 shares remained authorized for purchase under the
program.
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
Reference is made to Paragraph III. of Item 3. Legal Proceedings of the
Corporation's Form 10-K for the year ended December 31, 1993, regarding the
proceedings described below.
Prior to the mid-1960s, a predecessor of Phelps Dodge Industries, Inc.
(PDI), a subsidiary of the Corporation, manufactured and sold some cable and
wire products that were insulated with material containing asbestos. PDI
believes that the use of these products did not result in significant releases
of airborne asbestos fibers. PDI and the Corporation are collectively referred
to below as PDI.
Since October 1991, PDI has been served with 27 complaints naming it as
a defendant in the Ingalls Shipyard asbestos litigation pending in Pascagoula,
Mississippi. These cases involved about 12,603 claimants, each seeking from $2
million to $20 million in compensatory and punitive damages from approximately
100 to 150 defendants. In 1993, 9,806 of these claims against PDI were
dismissed. During 1994, 2,697 additional claims against PDI in Mississippi were
dismissed. In addition, PDI has been dismissed from a total of 78 other actions
in California, Delaware, Maryland, New Jersey and Pennsylvania since January 1,
1994.
PDI has been served with 26 new actions in Delaware, Michigan,
Mississippi, New Jersey, New York, Pennsylvania and Texas during 1994.
Currently, a total of 301 claims are being defended in 14 jurisdictions. In
these various proceedings, plaintiffs allege bodily injury or death from
exposure to asbestos and claim damages based on theories of strict liability and
negligence. PDI is vigorously contesting and defending these cases.
Item 4. Submission of Matters to a Vote of Security Holders
The Corporation's annual meeting was held on May 4, 1994. Set forth
below is a description of the matters voted upon at such meeting and a summary
of the voting regarding each such matter:
For Withheld
--- --------
Election of Directors:
Robert N. Burt 56,494,695 151,677
Robert D. Krebs 56,492,581 153,791
George L. Shinn 56,448,821 197,551
Douglas C. Yearley 56,495,615 150,757
Broker
For Against Abstain Nonvotes
--- ------- ------- --------
Appointment of
Auditors 56,279,956 75,688 290,728 0
Item 6. Exhibits and Reports on Form 8-K
(a) Any exhibits required to be filed by the Corporation are listed
in the Index to Exhibits.
(b) No reports on Form 8-K were filed by the Corporation during the
quarter ended June 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Corporation has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PHELPS DODGE CORPORATION
------------------------
(Corporation or Registrant)
Date: August 12, 1994 By: Thomas M. Foster
----------------
Thomas M. Foster
Vice President and Controller
(Principal Accounting Officer)
<PAGE>
PHELPS DODGE CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
12 Computation of ratios of total debt to total capitalization.
15 Letter from Price Waterhouse with respect to unaudited interim
financial information.
PHELPS DODGE CORPORATION AND SUBSIDIARIES
Exhibit 12
COMPUTATION OF TOTAL DEBT TO TOTAL CAPITALIZATION
(Dollars in thousands)
June 30, December 31,
1994 1993
---- ----
(unaudited)
Short-term debt $ 77,786 82,718
Current portion of long-term debt 19,666 17,210
Long-term debt 571,049 547,285
---------- ---------
Total debt 668,501 647,213
Minority interest in subsidiaries 62,936 62,217
Common shareholders' equity 2,085,737 2,022,099
---------- ---------
Total capitalization $2,817,174 2,731,529
========== =========
Ratio of total debt to total
capitalization 23.7% 23.7%
========== =========
Exhibit 15
August 9, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We are aware that Phelps Dodge Corporation has incorporated by reference our
report dated July 20, 1994 (issued pursuant to the provisions of Statements on
Auditing Standards Nos. 71 and 42) in the Prospectus constituting part of its
Registration Statements on Form S-3 (No. 33-44380) and Form S-8 (Nos. 33-26442,
33-6141, 33-26443, 33-29144, 33-19012, 2-67317, 33-34363, 33-34362 and
33-62486). We are also aware of our responsibilities under the Securities Act of
1933.
Yours very truly,
Price Waterhouse
Phoenix, Arizona
