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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 September 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 November 4, 1994: 70,716,573 shares.
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<PAGE>
PHELPS DODGE CORPORATION
Quarterly Report on Form 10-Q
For the Quarter Ended September 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
Report of Independent Accountants on Review of Interim Financial Information
Management's Discussion and Analysis
Legal Proceedings
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 Nine
Third Quarter Months
----------------- ------------------
1994 1993 1994 1993
---- ---- ---- ----
SALES AND OTHER OPERATING
REVENUES $813.7 646.7 2,288.4 1,943.2
------ ------- ------- -------
OPERATING COSTS AND EXPENSES
Cost of products sold 586.0 484.0 1,700.9 1,429.3
Depreciation, depletion
and amortization 47.9 46.9 141.4 139.9
Selling and general
administrative expense 25.9 22.7 76.6 77.6
Exploration and research
expense 14.8 16.2 37.3 40.4
Loss on sale of mineral
properties, net -- -- 17.5 --
------ ------- ------- -------
674.6 569.8 1,973.7 1,687.2
------ ------- ------- -------
OPERATING INCOME 139.1 76.9 314.7 256.0
Interest expense less
amount capitalized (7.1) (9.0) (20.5) (28.2)
Miscellaneous income and
expense, net 4.7 6.1 5.7 12.3
------ ------- ------- -------
INCOME BEFORE TAXES, MINORITY
INTERESTS AND EQUITY IN NET
EARNINGS OF AFFILIATED
COMPANIES 136.7 74.0 299.9 240.1
Provision for taxes on
income (42.1) (32.0) (93.0) (84.5)
Minority interests in
consolidated subsidiary
companies (see Note 3) (2.4) (2.4) (5.2) (7.4)
Equity in net earnings
(losses) of affiliated
companies 2.0 0.1 5.7 (1.9)
------ ------- ------- -------
NET INCOME $ 94.2 39.7 207.4 146.3
====== ======= ======= =======
EARNINGS PER SHARE $ 1.33 0.56 2.92 2.07
====== ======= ======= =======
AVERAGE NUMBER OF SHARES
OUTSTANDING 71.1 70.6 71.1 70.6
BUSINESS SEGMENTS
(Unaudited; in millions)
SALES AND OTHER OPERATING
REVENUES
Phelps Dodge Mining
Company $441.4 340.9 1,211.2 1,002.5
Phelps Dodge Industries 372.3 305.8 1,077.2 940.7
------ ------- ------- -------
$813.7 646.7 2,288.4 1,943.2
====== ======= ======= =======
OPERATING INCOME
Phelps Dodge Mining
Company $110.9 54.6 226.6 187.5
Phelps Dodge Industries 35.2 29.0 109.8 91.3
Corporate and other (7.0) (6.7) (21.7) (22.8)
------ ------- ------- -------
$139.1 76.9 314.7 256.0
====== ======= ======= =======
See Notes to Consolidated Financial Information.
<PAGE>
CONSOLIDATED BALANCE SHEET
(In millions)
September 30, December 31,
1994 1993
---- ----
(unaudited)
ASSETS
Cash and short-term investments, at cost $ 194.2 255.8
Receivables, net 459.8 354.4
Inventories 257.1 225.4
Supplies 103.4 103.3
Prepaid expenses 19.7 13.1
Deferred income taxes 37.1 35.4
-------- -------
Current assets 1,071.3 987.4
Investments and long-term receivables 109.6 115.4
Property, plant and equipment, net 2,520.7 2,340.2
Other assets and deferred charges 289.3 277.9
-------- -------
$3,990.9 3,720.9
======== =======
LIABILITIES
Short-term debt $ 75.9 82.7
Current portion of long-term debt 19.1 17.2
Accounts payable and accrued expenses 501.9 425.8
Income taxes 33.8 14.3
-------- -------
Current liabilities 630.7 540.0
Long-term debt 592.5 547.3
Deferred income taxes 283.6 286.0
Other liabilities and deferred credits 263.7 263.3
-------- -------
1,770.5 1,636.6
-------- -------
MINORITY INTERESTS IN SUBSIDIARIES 65.2 62.2
-------- -------
COMMON SHAREHOLDERS' EQUITY
Common shares, 70.7 outstanding
(12/31/93 - 70.5) 441.9 440.8
Capital in excess of par value 83.4 83.1
Retained earnings 1,738.5 1,618.5
Cumulative translation adjustments and
other (108.6) (120.3)
-------- -------
2,155.2 2,022.1
-------- -------
$3,990.9 3,720.9
======== =======
See Notes to Consolidated Financial Information.
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited; in millions)
Nine months
ended
September 30,
--------------------
1994 1993
---- ----
OPERATING ACTIVITIES
Net income $ 207.4 146.3
Adjustments to reconcile net income to
cash flow from operations:
Depreciation, depletion and
amortization 141.4 139.9
Deferred income taxes 9.0 22.2
Equity earnings net of dividends
received (5.6) 2.2
-------- ------
Cash flow from operations 352.2 310.6
Adjustments to reconcile cash flow from
operations to net cash provided by
operating activities:
Changes in current assets and liabilities:
(Increase) decrease in receivables (107.0) (22.2)
(Increase) decrease in inventories (25.9) (4.8)
(Increase) decrease in supplies 6.9 (1.6)
(Increase) decrease in prepaid
expenses (7.2) (10.2)
(Increase) decrease in deferred
income taxes (1.7) (0.9)
Increase (decrease) in interest
payable 2.7 (0.9)
Increase (decrease) in other accounts
payable 57.0 7.2
Increase (decrease) in income taxes 19.4 (9.4)
Increase (decrease) in other accrued
expenses 23.5 8.3
Gain from subsidiary's stock issuance (1.9) --
Other adjustments, net 7.2 (27.8)
------- ------
Net cash provided by operating
activities 325.2 248.3
------- ------
INVESTING ACTIVITIES
Capital outlays (264.1) (263.7)
Capitalized interest (20.0) (12.6)
Investment in subsidiaries (52.2) (3.8)
Proceeds from subsidiary's stock issuance 8.0 --
Other 2.0 3.4
------- ------
Net cash used in investing activities (326.3) (276.7)
------- ------
FINANCING ACTIVITIES
Increase in debt 146.5 279.5
Payment of debt (106.2) (137.1)
Common dividends (87.4) (87.1)
Purchase of common shares (2.1) (5.6)
Debt issue costs (7.1) (23.5)
Other (4.2) 3.1
------- ------
Net cash provided by (used in)
financing activities (60.5) 29.3
------- ------
INCREASE (DECREASE) IN CASH AND
SHORT-TERM INVESTMENTS (61.6) 0.9
CASH AND SHORT-TERM INVESTMENTS AT
BEGINNING OF PERIOD 255.8 251.2
------- ------
CASH AND SHORT-TERM INVESTMENTS AT END
OF PERIOD $ 194.2 252.1
======= ======
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 nine-month periods
ended September 30, 1994, are not necessarily indicative of the results
to be expected for the full year.
3. Prior to 1994, minority interests in the income of consolidated
subsidiaries were 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. Approximately 95 percent
of the Corporation's anticipated copper production for 1995 has been
protected under such arrangements. The Corporation has entered into
contracts with several financial institutions that provide for minimum
quarterly average prices of 80 cents per pound for approximately 640
million pounds of copper cathode, or 47 percent of its anticipated
production for 1995. These contracts are based on the average London
Metal Exchange (LME) price each quarter. In addition, the Corporation
has entered into contracts that provide minimum (approximately 95 cents)
and maximum (approximately $1.33) prices per pound for approximately 650
million pounds of copper cathode, or 48 percent of its anticipated
production for 1995. The minimum prices are based on quarterly average
LME prices for approximately 370 million pounds and on the annual
average LME price for the remainder. The maximum prices are based on the
annual average LME price for all 650 million pounds.
The Corporation also continued to hold contracts entered into in 1993
with several financial institutions that provide for a 1994 fourth
quarter minimum quarterly average price of 75 cents per pound for 64
million pounds of copper cathode. Similar contracts for the first nine
months of 1994 covering approximately 180 million pounds had expired as
of September 30, 1994, without payment to Phelps Dodge.
REVIEW BY INDEPENDENT ACCOUNTANTS
The financial information as of September 30, 1994, and for the
three-month and nine-month periods ended September 30, 1994 and 1993, included
in Part I pursuant to Rule 10-01 of Regulation S-X has been reviewed by Price
Waterhouse LLP (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 LLP
REPORT OF INDEPENDENT ACCOUNTANTS
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 September 30, 1994, the statement of
consolidated operations for the three-month and nine-month periods ended
September 30, 1994 and 1993, and the consolidated statement of cash flows for
the nine-month periods ended September 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 LLP
Phoenix, Arizona
October 19, 1994
</AUDIT-REPORT>
<PAGE>
Item 2. Management's Discussion and Analysis
RESULTS OF OPERATIONS
Phelps Dodge Corporation had consolidated net income of $94.2 million, or
$1.33 per common share, in the third quarter of 1994, compared with $39.7
million, or 56 cents per common share, in the 1993 third quarter. During the
1993 third quarter, the Corporation recognized an after-tax benefit of $13.9
million, or 20 cents per common share, from its 1993 copper price protection
program that was partially offset by an increase in the tax provision of $8.3
million, or 12 cents per common share, related to the Omnibus Budget
Reconciliation Act of 1993 that retroactively raised the maximum corporate
income tax rate. Net income for the nine-month period ended September 30, 1994,
was $207.4 million, or $2.92 per common share, compared with $146.3 million, or
$2.07 per common share, in the corresponding 1993 period.
Earnings in the three-month and nine-month periods ended September 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
30 cents and 12 cents in the third quarter and first nine 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, and its carbon black business in both North America and Europe.
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 share of estimated annual
copper production capacity will increase by approximately 200 million pounds as
a result of the 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 $1.14 in the third quarter and
$1.00 in the first nine months of 1994, compared with 84 cents and 88 cents in
the corresponding periods in 1993. From October 1 to November 4, 1994, the
average price was $1.20, closing at $1.28 on November 4, 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. Approximately 95 percent of the
Corporation's anticipated copper production for 1995 has been protected under
such arrangements. The Corporation has entered into contracts with several
financial institutions that provide for minimum quarterly average prices of 80
cents per pound for approximately 640 million pounds of copper cathode, or 47
percent of its anticipated production for 1995. These contracts are based on the
average London Metal Exchange (LME) price each quarter. In addition, the
Corporation has entered into contracts that provide minimum (approximately 95
cents) and maximum (approximately $1.33) prices per pound for approximately 650
million pounds of copper cathode, or 48 percent of its anticipated production
for 1995. The minimum prices are based on quarterly average LME prices for
approximately 370 million pounds and on the annual average LME price for the
remainder. The maximum prices are based on the annual average LME price for all
650 million pounds.
The Corporation also continued to hold contracts entered into in 1993
with several financial institutions that provide for a 1994 fourth quarter
minimum quarterly average price of 75 cents per pound for 64 million pounds of
copper cathode. Similar contracts for the first nine months of 1994 covering
approximately 180 million pounds had expired as of September 30, 1994, without
payment to Phelps Dodge.
Sales were $813.7 million in the third quarter and $2,288.4 million in
the first nine months of 1994, compared with $646.7 million and $1,943.2 million
in the corresponding 1993 periods. These increases principally resulted from
higher average copper prices and higher sales volumes of copper purchased for
resale, wheels and rims, wire and cable products and carbon black. These
increases also reflected the sales of two recently acquired U.S. magnet wire
plants.
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 fluorspar, silver, lead and zinc operations) and its worldwide
exploration and development programs.
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First Nine
Third Quarter Months
--------------- ---------------
1994 1993 1994 1993
---- ---- ---- ----
Copper from own mines *
(short tons)
Production 134,800 135,200 406,600 404,300
Deliveries 128,800 139,800 393,400 410,600
New York Commodity Exchange
average spot price per
pound - copper cathodes $ 1.14 0.84 1.00 0.88
(in millions)
Sales and other operating
revenues $ 441.4 340.9 1,211.2 1,002.5
Operating income $ 110.9 54.6 226.6 187.5
- -------------------------
* 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 third quarter sales of $441.4 million
were 30 percent higher than in the third quarter of 1993. This increase
principally resulted from a 30 cents per pound increase in average copper prices
and a 20,300 ton increase in the sale of copper purchased for resale, offset in
part by an 11,000 ton decrease in copper sales from mine production. Sales of
$1,211.2 million in the first nine months of 1994 were 21 percent higher than in
the corresponding 1993 period. This increase primarily resulted from a 12 cents
per pound increase in average copper prices and a 78,000 ton increase in the
sale of copper purchased for resale, offset in part by a 17,200 ton decrease in
copper sales from mine production.
During the 1994 third quarter, Phelps Dodge Mining Company recorded
operating income of $110.9 million, a 103 percent increase from the $54.6
million recorded in the corresponding 1993 period. This increase principally
resulted from the higher average copper prices already discussed and lower unit
production costs. The corresponding 1993 period reflected a pre-tax benefit of
$21.0 million from the Corporation's 1993 copper price protection program.
Operating income was $226.6 million in the nine months ended September 30, 1994,
compared with $187.5 million in the corresponding 1993 period. This 21 percent
increase principally resulted from higher average copper prices and lower unit
production costs already discussed. Offsetting this increase in part was a 1994
second quarter loss on the sale of certain gold interests of $17.5 million
before taxes. The 1993 period reflected a pre-tax benefit of $28.0 million from
the Corporation's 1993 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. 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.
In late August 1994, the Corporation initiated start-up procedures at the
Candelaria copper concentrator in Chile, and mill throughput has been steadily
increasing since that time. The Corporation expects that full design production
should be attained by January 1, 1995, and that substantial amounts of
concentrates will be produced in the 1994 fourth quarter as commissioning
activities continue.
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.
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First Nine
Third Quarter Months
---------------- --------------
1994 1993 1994 1993
---- ---- ---- ----
(in millions)
Sales and other operating
revenues $372.3 305.8 1,077.2 940.7
Operating income $ 35.2 29.0 109.8 91.3
================================================================================
Phelps Dodge Industries' 1994 third quarter sales of $372.3 million were
22 percent higher than in the third quarter of 1993. Sales of $1,077.2 million
in the first nine months of 1994 were 15 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, and higher sales volumes in both North American and European markets
for carbon black.
During the 1994 third quarter, Phelps Dodge Industries recorded operating
income of $35.2 million, a 21 percent increase over the $29.0 million recorded
in the corresponding 1993 period. Operating income of $109.8 million in the
first nine 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), the wire and cable
business (principally as a result of the recent acquisition of two U.S. magnet
wire facilities) and the carbon black business (both in the United States and
Europe). Improved operating results were offset in part by reduced earnings as a
result of the deterioration of economic conditions in Venezuela and, to a lesser
extent, the unfavorable competitive environment for the telephone cable business
in Mexico.
CHANGES IN FINANCIAL CONDITION
Capital outlays during the first nine months of 1994 were $222.5 million
for Phelps Dodge Mining Company (including $127.3 million for Candelaria) and
$41.1 million for Phelps Dodge Industries. Capital outlays in the corresponding
1993 period were $200.6 million for Phelps Dodge Mining Company (including
$134.8 million for Candelaria) and $62.6 million for Phelps Dodge Industries.
The Corporation expects capital outlays in 1994 to be approximately $300.0
million for Phelps Dodge Mining Company (including $140.0 million for
Candelaria) and approximately $65.0 million for Phelps Dodge Industries.
At September 30, 1994, the Corporation's total debt was $687.5 million,
compared with $647.2 million at year-end 1993. This $40.3 million increase
resulted from borrowings used to fund construction and development of the
Corporation's Candelaria copper project in Chile. The Corporation's ratio of
debt to total capitalization was 23.6 percent at September 30, 1994, compared
with 23.7 percent at December 31, 1993.
On September 8, 1994, the Corporation paid a regular quarterly dividend
of 41.25 cents per share on its common shares for the 1994 third quarter; the
total amount paid was $29.2 million. On November 2, 1994, the Board of Directors
declared a 1994 fourth quarter regular dividend of 45 cents per common share, an
increase of 9 percent from the previous quarterly dividend, to be paid on
December 8, 1994, to shareholders of record at the close of business on November
18, 1994. There were 70,705,000 shares outstanding at September 30, 1994.
During the 1994 first quarter, 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 September 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 the late 1980s, PDI has been served with complaints in
asbestos-related actions filed on behalf of a total of 13,776 claimants. Over
12,500 of those claimants were participants in the Ingalls Shipyard asbestos
litigation filed in Pascagoula, Mississippi. Each claimant in that litigation
sought from $2 million to $20 million in compensatory and punitive damages from
a group of approximately 100 to 150 defendants, which included PDI. During 1993
and 1994, PDI was successful in obtaining dismissal of all claims against it.
In addition, a total of 959 claims filed against PDI in states other than
Mississippi also have been dismissed. The remaining 315 asbestos-related claims
are being defended by PDI in 14 jurisdictions.
During 1994, complaints in 48 new asbestos-related actions have been
filed against PDI in eight states, and PDI has been dismissed from a total of 91
such actions in six states.
In these asbestos-related proceedings, plaintiffs allege bodily injury or
death from exposure to asbestos and claimed damages based on theories of strict
liability and negligence. PDI is vigorously contesting and defending the
remaining cases.
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 September 30, 1994.
<PAGE>
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: November 14, 1994 By: Thomas M. Foster
----------------
Thomas M. Foster
Vice President and Controller
(Principal Accounting Officer)
PHELPS DODGE CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
3.2 By-Laws of the Corporation, as amended effective September 1, 1994.
12 Computation of ratios of total debt to total capitalization.
15 Letter from Price Waterhouse LLP with respect to unaudited interim
financial information.
27 Financial Data Schedule.
Exhibit 3.2
Amended Effective September 1, 1994
B Y - L A W S
PHELPS DODGE CORPORATION
ARTICLE I. NAME, LOCATION and CORPORATE SEAL
Sec. 1. The name of this Corporation is PHELPS DODGE CORPORATION.
Sec. 2. The principal office of the Company shall be in the City of
Phoenix, County of Maricopa, State of Arizona. The Company shall also have such
other offices, either within or without the United States, and may transact its
business at such other places, as the Board of Directors may appoint.
Sec. 3. The corporate seal of the Company shall have inscribed thereon
the name of the corporation, and the year of its creation. It shall be of the
form impressed upon the margin hereof. It shall be in charge of the Secretary. A
duplicate of the seal may be kept and used by the Treasurer or by any Assistant
Secretary or Assistant Treasurer, when so ordered by the Board of Directors.
(Imprint of corporate seal)
ARTICLE II. SHAREHOLDERS
Sec. 1. Annual Meeting. The annual meeting of shareholders shall be held
at 12:00 noon on the first Wednesday in May of each year, or at such other time
on that day or at such time on such other day as the Board of Directors shall
from time to time determine, at the principal office of the Company in the City
of Phoenix, County of Maricopa, State of Arizona, or at such other place within
or without the State of New York as the Board of Directors shall from time to
time determine, for the purpose of electing Directors and for the transaction of
such other business as may properly be brought before the meeting.
The Secretary shall cause to be sent by first class mail not less than
ten nor more than fifty days before the date of such meeting, a notice thereof
addressed to each shareholder of record entitled to vote at such meeting at his
or her address as it appears on the books of the Company. Notice may also be
sent by third class mail not less than twenty-four nor more than fifty days
before the date of such meeting. Any previously scheduled annual meeting of
shareholders may be postponed by resolution of the Board of Directors upon
public announcement of the postponement on or prior to the date previously
scheduled for such annual meeting of shareholders.
Sec. 2. Special Meetings. Special meetings of the shareholders may be
held at the principal office of the Company in the City of Phoenix, County of
Maricopa, State of Arizona, or at such other place within or without the State
of New York as the Board of Directors or the Chairman of the Board shall from
time to time determine, and may be called by vote of a majority of the Board of
Directors, or by the Chairman of the Board. Special meetings of the
shareholders, or of the holders of a particular class or series of shares, shall
also be called when required by the Certificate of Incorporation at the times
and in the manner therein set forth.
Notice of the time, place and purposes of any such special meeting shall
be served personally or sent by first class mail to each shareholder of record
entitled to vote at such meeting, not less than ten nor more than fifty days
before the date of such meeting, at his or her address as it appears on the
books of the Company. Notice may also be sent by third class mail not less than
twenty-four nor more than fifty days before the date of such meeting. A written
waiver of notice of any meeting may be made by any shareholder. Any previously
scheduled special meeting of the shareholders may be postponed by resolution of
the Board of Directors upon public announcement of the postponement on or prior
to the date previously scheduled for such special meeting of shareholders.
Sec. 3. Quorum. At any meeting of shareholders, unless otherwise provided
by law or by the Certificate of Incorporation, the holders of shares (of any
class) aggregating a majority of the total number of shares of all classes of
the Company then issued and outstanding and entitled to vote at the meeting,
present in person or represented by proxy, shall constitute a quorum, provided
that, unless otherwise provided by law or by the Certificate of Incorporation,
when a specified item of business is required to be voted on by any one or more
of a particular class or series of shares, voting as a separate class, the
holders of a majority of the shares so eligible to vote as a separate class
shall constitute a quorum for the transaction of such specified item of
business.
The shareholders present at any duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of
sufficient shareholders to constitute the remaining shareholders less than a
quorum. Whether or not a quorum is present at a meeting, the person presiding at
the meeting or the holders of a majority of the shares of all classes of the
Company entitled to vote at the meeting so present or represented may adjourn
the meeting from time to time. At any such adjourned meeting at which a quorum
shall be present, any business may be transacted which might have been
transacted at the meeting as originally called.
Sec. 4. Chairman and Secretary. Meetings of shareholders shall be
presided over by the Chairman of the Board or, if he is not present, by the
President or, if neither of them is present, by a Vice Chairman, or if none of
them is present, by a Vice President or, if neither the Chairman of the Board,
the President, a Vice Chairman nor a Vice President is present, by a person to
be chosen at the meeting. The Secretary of the Company shall act as Secretary at
all meetings of the shareholders, but in the absence of the Secretary the
presiding officer may appoint any person to act as Secretary of the meeting.
Sec. 5. Voting. Except as otherwise provided by law or by the Certificate
of Incorporation, each shareholder entitled to vote at a meeting of shareholders
shall be entitled to one vote, in person or by proxy, for each share having
voting power held by him or her on the record date for such meeting, as appears
on the books of the Company.
Only the person in whose name shares stand on the books of the Company at
the time of closing of the transfer books for such meeting shall be entitled to
vote, in person or by proxy, the shares so standing in his or her name.
The Board of Directors shall have the power and authority to fix a day
not less than ten nor more than fifty days prior to the day of holding any
meeting of shareholders, as the day as of which shareholders entitled to notice
of and to vote at such meeting shall be determined; and all persons who are
holders of record of shares with voting rights on such day, and no others, shall
be entitled to notice of and to vote at such meeting.
Sec. 6. Inspectors of Election. The Board of Directors, in advance of any
shareholders' meeting, may appoint one or more inspectors to act at the meeting
or any adjournment thereof. If inspectors are not so appointed, the person
presiding at a shareholders' meeting may, and on the request of any shareholder
entitled to vote thereat shall, appoint one or more inspectors. In case any
person appointed fails to appear or act, the vacancy may be filled by
appointment made by the Board of Directors in advance of the meeting or at the
meeting by the person presiding thereat. Each inspector, before entering upon
the discharge of his or her duties, shall take and sign an oath faithfully to
execute the duties of inspector at such meeting with strict impartiality and
according to the best of his or her ability. Thereafter each inspector shall
have at such meeting all of the powers and duties provided by law.
Sec. 7. Business Conducted at Meetings. At an annual meeting of
shareholders, only such business may be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting
business must be (a) specified in the notice of meeting (including any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (c) otherwise properly brought before the meeting by a
shareholder of the Company who was a shareholder of record at the time of giving
of notice provided for in this Section 7, who is entitled to vote at the meeting
and who complies with the notice procedures set forth in this Section 7. For
business to be properly brought before an annual meeting by a shareholder, the
shareholder must have given timely notice thereof in writing to the Secretary of
the Company. To be timely, a shareholder's notice must be delivered to or mailed
and received at the principal office of the Company not less than 60 days nor
more than 90 days prior to the meeting; provided, however, that in the event
that the date of the annual meeting is scheduled for a day other than the first
Wednesday in May in such year and less than 70 days' notice or prior public
announcement of the new date of the meeting is given or made to shareholders,
notice by the shareholder to be timely must be so received not later than the
close of business on the 10th day following the day on which such notice of the
new date of the annual meeting was mailed or such public announcement was made.
A shareholder's notice to the Secretary shall set forth as to each matter
the shareholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name and
address of the shareholder proposing such business, as they appear on the
Company's books, and of the beneficial owner, if any, on whose behalf such
notice is being given, (c) the class and number of shares of the Company which
are owned beneficially and of record by such shareholder and by such beneficial
owner, and (d) any material interest in such business of such shareholder or of
such beneficial owner.
At a special meeting of shareholders, only such business may be conducted
as shall have been properly brought before the meeting. To be properly brought
before a special meeting, business must be related to the purpose or purposes
set forth in the notice of the meeting (including any supplement thereto) given
by or at the direction of the Board of Directors or the Chairman of the Board.
Notwithstanding anything in the By-Laws to the contrary, no business
shall be conducted at a meeting of shareholders except in accordance with the
procedures set forth in this Section 7. The chairman of a meeting shall, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of this
Section 7, and if the chairman should so determine, he or she shall declare to
the meeting that any such business not properly brought before the meeting shall
not be transacted. In addition to the provisions of this Section 7, a
shareholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth herein. Nothing in these By-Laws shall be deemed to affect any rights of
shareholders to request inclusion of proposals in the company's proxy statement
pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended
from time to time (the "Exchange Act") and to put before such meeting any
proposals so included in the Company's proxy statement at his or her request.
Sec. 8. Nomination of Directors. Only persons who are nominated in
accordance with the procedures set forth in this Section 8 shall be eligible for
election as Directors at any meeting of shareholders held for the election of
Directors (an "Election Meeting"). Nominations of persons for election to the
Board of Directors of the Company may be made at an Election Meeting by or at
the direction of the Board of Directors or by a shareholder of the Company who
was a shareholder of record at the time of giving of notice provided for in this
Section 8, who is entitled to vote for the election of Directors at such
Election Meeting and who complies with the notice procedures set forth in this
Section 8. Such nominations, other than those made by or at the direction of the
Board of Directors, shall be made pursuant to timely notice in writing to the
Secretary of the Company. To be timely, a shareholder's notice must be delivered
to or mailed and received at the principal office of the Company not less than
60 days nor more than 90 days prior to such Election Meeting; provided, however,
that in the event the date of the Election Meeting is scheduled for a day other
than the first Wednesday in May and less than 70 days' notice or prior public
announcement of the date of such Election Meeting is given or made to
shareholders, notice by the shareholder to be timely must be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of such Election Meeting was mailed or such public
announcement was made. Notwithstanding anything in the foregoing sentence to the
contrary, in the event that the number of Directors to be elected to the Board
of Directors of the Company at such Election Meeting is increased or there is a
vacancy to be filled at such Election Meeting in a class of Directors whose
terms do not expire at such Election Meeting and there is no public announcement
at least 70 days prior to such Election Meeting naming all of the nominees for
Director or specifying the size of the increased Board of Directors or the
number of Directors to be elected, a shareholder's notice required by this
Section 8 shall also be considered timely, but only with respect to nominees for
any positions created by such increase or vacancy, if it shall be delivered to
or mailed and received at the principal office of the Company not later than the
close of business on the 10th day following the day on which such public
announcement is first made by the Company.
Such shareholder's notice to the Secretary shall set forth (a) as to each
person whom the shareholder proposes to nominate for election or re-election as
a Director, (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of the Company which are owned beneficially by such
person and (iv) any other information concerning such person that is required to
be disclosed in connection with the solicitation of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Exchange Act (including without limitation such person's written
consent to being named in the proxy statement as a nominee and to serving as a
Director if elected); and (b) as to the shareholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination is made, (i) the name
and address of such shareholder, as they appear on the Company's books, and of
such beneficial owner and (ii) the class and number of shares of the Company
which are owned beneficially and of record by such shareholder and by such
beneficial owner. At the request of the Board of Directors any person nominated
by the Board of Directors for election as a Director shall furnish to the
Secretary of the Company that information required to be set forth in a
shareholder's notice of nomination which pertains to the nominee.
No person shall be eligible for election as a Director of the Company
unless nominated in accordance with the procedures set forth in this Section 8.
In the event that a person is validly designated as a nominee in accordance with
the foregoing and shall thereafter become unable or unwilling to stand for
election to the Board of Directors, the Board of Directors or the shareholder
who proposed such nominee, as the case may be, may designate a substitute
nominee. The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
provisions of this Section 8, and if the chairman should so determine, he or she
shall declare to the meeting that the defective nomination shall be disregarded.
In addition to the provisions of this Section 8, a shareholder shall also comply
with all applicable requirements of the Exchange Act and the rules and
regulations thereunder with respect to the matters set forth herein.
Sec. 9. Public Announcement. For purposes of this Article II, "public
announcement" shall mean disclosure in a communication sent by first class mail
to shareholders, in a press release reported by the Dow Jones News Service,
Reuters Information Services, Inc., Associated Press or comparable national news
service or in a document filed by the Company with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
ARTICLE III. DIRECTORS
Sec. 1. Number; Classification of Board; Newly Created Directorships and
Vacancies. The business of the Company shall be managed under the direction of
its Board of Directors, which shall consist of not less than nine nor more than
fifteen Directors, provided that whenever the holders of any one or more series
of Preferred Shares of the Company become entitled to elect one or more
Directors to the Board of Directors in accordance with any applicable provisions
of the Certificate of Incorporation, such maximum number of Directors shall be
increased automatically by the number of Directors such holders are so entitled
to elect. Such increase shall remain in effect until the right of such holders
to elect such Director or Directors shall cease and until the Director or
Directors elected by such holders shall no longer hold office. The exact number
of Directors within the foregoing minimum and maximum limitations shall be
determined from time to time by resolution adopted by the affirmative vote of a
majority of the entire Board.
Except as otherwise provided in any applicable provisions of the
Certificate of Incorporation relating to Preferred Shares of the Company, the
Directors shall be divided into three classes, designated Class I, Class II and
Class III. All classes shall be as nearly equal in number as possible. The terms
of office of the Directors initially classified shall be as follows: at the 1988
annual meeting of shareholders, Class I Directors shall be elected for a
one-year term expiring at the 1989 annual meeting of shareholders, Class II
Directors for a two-year term expiring at the 1990 annual meeting of
shareholders, and Class III Directors for a three-year term expiring at the 1991
annual meeting of shareholders. At each annual meeting of shareholders after the
1988 annual meeting, Directors so classified who are elected to replace those
whose terms expire at such annual meeting shall be elected to hold office until
the third succeeding annual meeting. Each Director so classified shall hold
office until the expiration of his term and until his successor has been elected
and qualified.
Except as otherwise provided in any applicable provisions of the
Certificate of Incorporation relating to Preferred Shares of the Company, (a)
newly created directorships resulting from an increase in the number of
Directors and vacancies occurring on the Board of Directors for any reason may
be filled by vote of the Directors (including a majority of Directors then in
office if less than a quorum exists), and (b) if the number of Directors is
changed, (i) any newly created directorships or any decrease in directorships
shall be apportioned by the Board among the classes so as to make all classes as
nearly equal as possible, and (ii) when the number of Directors is increased by
the Board and any newly created directorships are filled by the Board, there
shall be no classification of the additional Directors until the next annual
meeting of shareholders. Any Director elected by the Board to fill a newly
created directorship or a vacancy shall hold office until the next annual
meeting of shareholders and until his successor, classified in accordance with
these By-Laws, has been elected and qualified. No decrease in the number of
Directors constituting the Board shall shorten the term of any incumbent
Director.
Sec. 2. Quorum. One-third, but in any event not fewer than five (5)
members of the Board of Directors, shall constitute a quorum for transacting
business at all meetings. In the event of a quorum not being present, a lesser
number may adjourn the meeting to a time not more than twenty (20) days later.
Sec. 3. Place of Meetings. The Directors may hold their meetings either
within or without the State of New York.
Sec. 4. Meetings. Regular and special meetings of the Board of Directors
shall be held whenever called by the Chairman of the Board, any Vice Chairman,
the President, any Vice President, or any Director, and shall be held at such
time and place as the notice of the meeting shall specify. Notice of any such
meeting shall be given to each Director (a) personally (either orally or in
writing) not less than 12 hours in advance of such meeting, (b) by telex or
similar method of communication dispatched to his usual place of business not
less than 24 hours in advance of such meeting, or (c) by mail or telegram
dispatched to his address on file at the Company for such purpose not less than
two days in advance of such meeting. Such notice shall be given by the Secretary
or, if the Secretary is not available, by the individual calling the meeting
and, in the case of special meetings, shall also specify the object of the
meeting. At any such meeting held without notice at which every member of the
Board shall be present or shall waive notice in writing before or after the
meeting, any business may be transacted which might have been transacted if
notice of the meeting had been duly given.
Regular meetings may also be held at such times and places as the Board
may designate from time to time, and no notice shall be required for any such
regular meeting when held as so designated.
Any one or more members of the Board may participate in a meeting of the
Board by means of a conference telephone or similar communications equipment
allowing all persons participating in the meeting to hear each other at the same
time. Participation by such means shall constitute presence in person at the
meeting.
Sec. 5. Removal. Any officer elected or appointed by the Board of
Directors, may be removed at any time by the affirmative vote of a majority of
the whole Board.
Sec. 6 Compensation. Each Director of the Company who is not an officer
or employee of the Company or of a subsidiary of the Company shall receive an
annual retainer of Twenty-Five Thousand Dollars ($25,000) plus a fee of One
Thousand Dollars ($1,000) per meeting for attendance at any regular or special
meeting of the Board or as a member or by invitation at any regular or special
meeting of any committee of the Board. Each such Director also shall receive a
fee of One Thousand Dollars ($1,000) for each day (prorated for part of a day)
that such Director renders service to the company in excess of that required by
such Director's usual responsibilities either as a member of the Board of
Directors of the Company or as a member of a committee thereof.
Sec. 7. Indemnification--Third Party and Derivative Actions.
(a) The Company shall indemnify any person made, or threatened to be
made, a party to an action or proceeding other than one by or in the right of
the Company to procure a judgment in its favor, whether civil or criminal,
including an action by or in the right of any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise, which any Director or officer of the Company
served in any capacity at the request of the Company, by reason of the fact that
he, his testator or intestate, is or was a Director or officer of the Company,
or is or was serving such other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise in any capacity, against judgments,
fines, amounts paid in settlement and expenses (including attorneys' fees)
incurred in connection with such action or proceeding, or any appeal therein,
provided that no indemnification may be made to or on behalf of such person if
(i) his acts were committed in bad faith or were the result of his active and
deliberate dishonesty and were material to such action or proceeding or (ii) he
personally gained in fact a financial profit or other advantage to which he was
not legally entitled.
(b) The Company shall indemnify any person made, or threatened to be
made, a party to an action by or in the right of the Company to procure a
judgment in its favor by reason of the fact that he, his testator or intestate,
is or was a Director or officer of the Company, or is or was serving at the
request of the Company as a Director or officer of any other corporation of any
type or kind, domestic or foreign, or of any partnership, joint venture, trust,
employee benefit plan or other enterprise, against judgments, amounts paid in
settlement and expenses (including attorneys' fees) incurred in connection with
such action, or any appeal therein, provided that no indemnification may be made
to or on behalf of such person if (i) his acts were committed in bad faith or
were the result of his active and deliberate dishonesty and were material to
such action or (ii) he personally gained in fact a financial profit or other
advantage to which he was not legally entitled.
(c) For the purpose of this Section 7, the Company shall be deemed
to have requested a person to serve an employee benefit plan where the
performance by such person of his duties to the Company also imposes duties on,
or otherwise involves services by, such person to the plan or participants or
beneficiaries of the plan; excise taxes assessed on a person with respect to an
employee benefit plan pursuant to applicable law shall be considered fines.
(d) The termination of any civil or criminal action or proceeding by
judgment, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not in itself create a presumption that any such Director or
officer has not met the standard of conduct set forth in this Section 7.
However, no Director or officer shall be entitled to indemnification under this
Section 7 if a judgement or other final adjudication adverse to the Director or
officer establishes (i) that his acts were committed in bad faith or were the
result of active and deliberate dishonesty and were material to the cause of
action so adjudicated, or (ii) that he personally gained in fact a financial
profit or other advantage to which he was not legally entitled.
Sec. 8. Payment of Indemnification; Repayment.
(a) A person who has been successful, on the merits or otherwise, in
the defense of a civil or criminal action or proceeding of the character
described in Section 7 of this Article shall be entitled to indemnification as
authorized in such Section.
(b) Except as provided in Section 8(a), any indemnification under
Section 7 of this Article, unless ordered by a court, shall be made by the
Company only if authorized in the specific case:
(1) by the Board of Directors acting by a quorum consisting
of Directors who are not parties to the action or proceeding giving rise to the
indemnity claim upon a finding that the Director or officer has met the standard
of conduct set forth in Section 7 of this Article; or
(2) if a quorum under the foregoing clause (1) is not
obtainable or, even if obtainable, a quorum of disinterested Directors so
directs:
(i) by the Board of Directors upon the opinion in
writing of independent legal counsel (i.e., a reputable lawyer or law firm not
under regular retainer from the Company or any subsidiary corporation) that
indemnification is proper in the circumstances because the standard of conduct
set forth in Section 7 of this Article has been met by such Director or officer,
or
(ii) by the holders of the Common Shares of the
Company upon a finding that the Director or officer has met such standard of
conduct.
(c) Expenses incurred by a Director or officer in defending a civil
or criminal action or proceeding shall be paid by the Company in advance of the
final disposition of such action or proceeding upon receipt of an undertaking by
or on behalf of such Director or officer to repay such amount in case he is
ultimately found, in accordance with this Article, not to be entitled to
indemnification or, where indemnity is granted, to the extent the expenses so
paid exceed the indemnification to which he is entitled.
(d) Any indemnification of a Director or officer of the Company
under Section 7 of this Article, or advance of expenses under Section 8(c) of
this Article, shall be made promptly, and in any event within 60 days, upon the
written request of the Director or officer.
Sec. 9. Enforcement; Defenses. The right to indemnification or advances
as granted by this Article shall be enforceable by the Director or officer in
any court of competent jurisdiction if the Company denies such request, in whole
or in part, or if no disposition thereof is made within 60 days. Such person's
expenses incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the Company. It shall be a defense to any such action (other than
an action brought to enforce a claim for the advance of expenses under Section
8(c) of this Article where the required undertaking, if any, has been received
by the Company) that the claimant has not met the standard of conduct set forth
in Section 7 of this Article, but the burden of proving such defense shall be on
the Company. Neither the failure of the Company (including its Board of
Directors, its independent legal counsel, and the holders of its Common Shares),
to have made a determination that indemnification of the claimant is proper in
the circumstances nor the fact that there has been an actual determination by
the Company (including its Board of Directors, its independent legal counsel,
and the holders of its Common Shares) that indemnification of the claimant is
not proper in the circumstances, shall be a defense to the action or create a
presumption that the claimant is not entitled to indemnification.
Sec. 10. Contract; Savings Clause; Preservation of Other Rights.
(a) The foregoing indemnification provisions shall be deemed to be a
contract between the Company and each Director and officer who serves in such
capacity at any time while these provisions as well as the relevant provisions
of the New York Business Corporation Law are in effect and any repeal or
modification thereof shall not affect any right or obligation then existing with
respect to any state of facts then or previously existing or any action or
proceeding previously or thereafter brought or threatened based in whole or in
part upon any such state of facts. Such a contract right may not be modified
retroactively without the consent of such Director or officer.
(b) If this Article or any portion hereof shall be invalidated on
any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify each Director or officer of the Company against
judgments, fines, amounts paid in settlement and expenses (including attorneys'
fees) incurred in connection with any actual or threatened action or proceeding,
whether civil or criminal, including an actual or threatened action by or in the
right of the Company, or any appeal therein, to the full extent permitted by any
applicable portion of this Article that shall not have been invalidated and to
the full extent permitted by applicable law.
(c) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any by-law, agreement, vote of shareholders or Directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
Director or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. The Company is hereby authorized to provide
further indemnification if it deems it advisable by resolution of shareholders
or Directors or by agreement.
Sec. 11. Indemnification of Persons Not Directors or Officers of the
Company. The Company may, by resolution adopted by the Board of Directors of the
Company, indemnify any person not a Director or officer of the Company, who is
made, or threatened to be made, a party to an action or proceeding, whether
civil or criminal, by reason of the fact that he, his testator or intestate, is
or was an employee or other agent of the Company, against judgments, fines,
amounts paid in settlement and expenses (including attorneys' fees) incurred in
connection with such action or proceeding, or any appeal therein, provided that
no indemnification may be made to or on behalf of such person if (i) his acts
were committed in bad faith or were the result of active and deliberate
dishonesty and were material to such action or proceeding, or (ii) he personally
gained in fact a financial profit or other advantage to which he was not legally
entitled.
ARTICLE IV. EXECUTIVE AND OTHER COMMITTEES
Sec. 1. The Board of Directors shall, by an affirmative vote of a
majority of the whole Board, appoint from the Directors an Executive Committee
not more than nine and not less than three, of which one-third (but not less
than two) shall constitute a quorum. Should it be impracticable at any time, due
to absence or illness of members or other cause, to obtain a quorum of the
members so appointed for any desired meeting, the Secretary, or, if the
Secretary is not available, the member calling the meeting, may call upon any
other Director or Directors, not members of such Executive Committee but who
have been designated by the Board as alternate members of the Executive
Committee, to make up a quorum for that particular meeting, which other Director
or Directors shall for the time being be members of said Executive Committee,
and the acts and proceedings of the Committee as so constituted for such meeting
shall have the same force and effect as the acts and proceedings of meetings
where a quorum of the regular committee is in attendance.
The Board of Directors may from among their number also, by a similar
vote, appoint any other committees.
The Board of Directors shall fill vacancies in the Executive Committee by
election from Directors; and at all times it shall be the duty of the Board of
Directors to keep the membership of the Executive Committee up to the required
number.
Any member of the Executive Committee who shall cease to be a Director
shall ipso facto cease to be a member of the Committee.
All action by the Executive Committee, or by other committees appointed
by the Board of Directors, shall be reported to said Board at its meeting next
succeeding such action, and, except to the extent stated in the second sentence
of the first paragraph of Section 2 of this Article, shall be subject to
revision, alteration, or approval by the Board of Directors.
The Executive and other committees shall each fix its own rules of
procedure and arrange its own place of meeting; but in every case (except in the
case of the Executive Committee) a majority of such committee shall be necessary
to constitute a quorum, and in every case (except in the case of the Executive
Committee) the affirmative vote of a majority of the members of each of such
committees shall be necessary for its adoption of any resolution. Any one or
more members of the Executive or any other committee may participate in a
meeting of such committee by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time. Participation by such means shall constitute
presence in person at the meeting.
Meetings of the Executive Committee shall be held whenever called by the
Chairman of the Board, any Vice Chairman, the President, any Vice President or
any member of that Committee and shall be held at such time and place as the
notice of the meeting shall specify. Notice of any such meeting shall be given
to each member of the Committee (a) personally (either orally or in writing) not
less than 12 hours in advance of such meeting, (b) by telex or similar method of
communication dispatched to his usual place of business not less than 24 hours
in advance of such meeting, or (c) by mail or telegram dispatched to his address
on file at the Company for such purpose not less than two days in advance of
such meeting. Such notice shall be given by the Secretary or, if the Secretary
is not available, by the individual calling the meeting and shall also specify
the object of the meeting.
The Executive Committee shall keep regular minutes and cause them to be
recorded in a book to be kept in the principal office of the Company for that
purpose.
Sec. 2. Powers of Committees. The Executive Committee shall, whenever the
Board of Directors is not in session, direct the management of the affairs of
the Company in all cases in which specific directions to the contrary shall not
have been given, or specific action of the Board of Directors is required by
law. Notwithstanding anything to the contrary stated in the fifth paragraph of
Section 1 of this Article, the rights of third persons acquired in reliance on
an Executive Committee resolution prior to receiving notice of action by the
Board of Directors shall not be prejudiced by action by the Board of Directors.
Other committees appointed by the Board of Directors shall have such
powers as the Board may delegate by resolution.
Sec. 3. Compensation. The members of the Executive Committee and the
members of any other committee appointed by the Board of Directors shall receive
such compensation for their services as from time to time shall be fixed by the
Board of Directors.
ARTICLE V. OFFICERS AND THEIR DUTIES
Sec. 1. Officers. The officers of the Company shall be: Chairman of the
Board of Directors, President, Treasurer, Secretary, and Controller, and such
Vice Chairmen, such Vice Presidents (one or more of whom may be designated
Executive Vice President or Senior Vice President), and such Assistant Vice
Presidents, Assistant Treasurers, Assistant Secretaries, and Assistant
Controllers as the Board of Directors in its discretion may elect or appoint. No
officer other than the Chairman of the Board need be a member of the Board of
Directors. Any number of offices may be held by the same person, except that the
same person shall not be (i) Treasurer and Controller or (ii) Chairman of the
Board or President and Secretary.
Officers shall be elected annually at the first meeting of the Board of
Directors following the annual meeting of shareholders, subject to the power of
the Board of Directors to fill vacancies at any time. All officers shall serve
at the pleasure of the Board of Directors and may be removed as provided in
Article III, Section 5 of these By-Laws.
Sec. 2. Chairman of the Board. The Chairman of the Board of Directors
shall be the chief executive officer of the Company and shall be responsible to
the Board of Directors for the administration and operations of the Company. He
shall preside at all meetings of the Board of Directors and at all meetings of
shareholders. By virtue of his office he shall be a member of the Executive
Committee of the Board of Directors and shall preside at meetings of the
Executive Committee. He shall have such other powers and perform such other
duties as from time to time may be assigned to him by, and shall be responsible
solely to, the Board of Directors. He may sign, with the Treasurer, all
promissory notes of the Company and any guarantees of the Company in respect of
borrowed money, and, with the Secretary when the corporate seal is to be
affixed, all share certificates, bonds, mortgages and other contracts of the
Company.
Sec. 2-A. Vice Chairmen. Each Vice Chairman shall have such powers and
perform such duties as from time to time may be assigned to him by the Board of
Directors or the Chairman of the Board. Any Vice Chairman may sign, with the
Treasurer, all promissory notes of the Company and any guarantees of the Company
in respect of borrowed money, and, with the Secretary when the corporate seal is
to be affixed, all share certificates, bonds, mortgages, and other contracts of
the Company.
Sec. 3. President. The President shall have such powers and perform such
duties as from time to time may be assigned to him by the Board of Directors or
by the Chairman of the Board. He may sign, with the Treasurer, all promissory
notes of the Company and any guarantees of the Company in respect of borrowed
money, and, with the Secretary when the corporate seal is to be affixed, all
share certificates, bonds, mortgages, and other contracts of the Company.
Sec. 3-A. Vice Presidents. Each Vice President shall have such powers and
perform such duties as from time to time may be assigned to him by the Board of
Directors, the Chairman of the Board, any Vice Chairman, or the President. Any
Vice President may sign, with the Treasurer, all promissory notes of the Company
and any guarantees of the Company in respect of borrowed money, and, with the
Secretary when the corporate seal is to be affixed, all share certificates,
bonds, mortgages, and other contracts of the Company.
Sec. 4. Assistant Vice Presidents. The Board of Directors may elect or
appoint one or more Assistant Vice Presidents, each of whom shall have such
powers and perform such duties as from time to time may be assigned to him by
the Board of Directors, the Chairman of the Board, any Vice Chairman, the
President, or any Vice President.
Sec. 5. Secretary. The Secretary shall keep a record of all proceedings
of the Board of Directors, and of all meetings of the shareholders, and of the
Executive Committee and of all other committees, in books provided for that
purpose, and he shall attend to giving and serving all notices of the Company.
The Secretary shall keep in safe custody the seal of the Company and he shall
affix such seal on all share certificates, bonds, mortgages, and other contracts
of the Company executed under such seal. He shall have charge of the records of
shareholders of the Company, including transfer books, and share ledgers, and
such other books and papers as the Board of Directors shall direct, and in
general shall perform all the duties incident to the office of Secretary.
Sec. 6. Assistant Secretaries. The Board of Directors may appoint one or
more Assistant Secretaries, who shall have power to sign, with the Chairman of
the Board, any Vice Chairman, the President, or any Vice President, share
certificates of the Company. In the absence of the Secretary, the Assistant
Secretaries shall be vested with the powers of, and any one of them may perform
the duties of, the Secretary. Each Assistant Secretary shall perform such other
duties as from time to time may be assigned to him by the Board of Directors,
the Chairman of the Board, any Vice Chairman, the President, or any Vice
President.
Sec. 7. Treasurer. The Treasurer shall have in his charge all the funds
and securities of the Company. When necessary or proper, he, or such other
officer or officers of the Company as may be so duly authorized by the Board of
Directors, shall endorse on behalf of the Company for collection checks, notes
or other obligations and shall deposit the same to the credit of the Company in
such bank or banks or depositories as the Board of Directors may designate. He,
or such other officers or employees of the Company or any of its subsidiaries,
acting individually unless otherwise provided, as may from time to time be
designated by the Board of Directors or be designated in writing by any officer
or officers of the Company duly authorized by the Board of Directors to make
such designations, shall sign all receipts and vouchers for payments made to the
Company, and shall sign all checks, drafts or bills of exchange, provided that
the Board of Directors from time to time may designate other persons as
authorized signatories of the Company or authorize other persons to make such
designations on behalf of the Company. The Treasurer jointly with the Chairman
of the Board, any Vice Chairman, the President, or any Vice President shall sign
all promissory notes of the Company and any guarantees of the Company in respect
of borrowed money, and shall pay out and dispose of the same under the direction
of the Board; he shall keep a complete set of books, showing the financial
transactions of the Company, and shall exhibit his books to any Director upon
application at the office of the Company, during business hours; he shall make
such reports as the Board of Directors or the Executive Committee may from time
to time request; and he shall perform all acts incidental to the office of
Treasurer, subject, nevertheless, to the control of the Board of Directors.
He shall give such bonds for the faithful discharge of his duties as
Treasurer as the Board of Directors may require.
Sec. 8. Assistant Treasurers. The Board of Directors may appoint one or
more Assistant Treasurers. In the absence of the Treasurer, the Assistant
Treasurers shall be vested with the powers of, and any one of them may perform
the duties of, the Treasurer. Each Assistant Treasurer shall perform such other
duties as from time to time may be assigned to him by the Board of Directors,
the Chairman of the Board, any Vice Chairman, the President, or any Vice
President.
Sec. 9. Controller. The Controller shall have supervision and direction
of all accounts of the Company, and shall see that the system of accounts is
duly enforced and maintained.
There shall be kept in his office a general set of books containing a
complete set of all the business transactions of the Company, and he shall, as
often as necessary, make an examination of the accounts of any officer, agent or
employee entrusted with the handling or care of money of the Company.
It shall be the duty of the Controller to know that all money belonging
to the Company, collected from any source by any officer, agent or employee, is
properly accounted for and promptly paid into the treasury, and that all
accounts of the Company are properly and promptly settled.
It shall be the duty of the Controller to know that all bonds required of
officers, agents and employees for the faithful performance of their duties are
given. Such bonds shall be transmitted to the Controller for safe custody and
shall be released only upon a complete and satisfactory settlement of the
accounts covered by them, unless otherwise ordered by the Board.
Sec. 10. Additional Officers; Division Officers. In addition to the above
officers, the Board of Directors may also appoint one or more general counsel
and one or more auditors and such other officers as they may deem wise and
advisable for the best interests of the Company, who shall perform such duties
as from time to time may be assigned to them by the Board of Directors. If the
Board of Directors establishes divisions of the Corporation, the Board may also
establish such division offices and appoint such division officers as the Board
deems appropriate. Such division officers shall have such powers and perform
such duties as from time to time may be assigned to them by the Board of
Directors. The Board of Directors shall fix salaries for all officers of the
Company, or may delegate, to any committee of the Board or to the Chairman of
the Board, the power to fix salaries of officers of the Company in cases where
the Board deems it appropriate to so delegate.
Sec. 11. Voting upon Stocks. Unless otherwise ordered by the Board of
Directors, the Chairman of the Board, any Vice Chairman, the President or any
Vice President shall have full power and authority on behalf of the Company to
attend, act and vote, or in the name of the Company to execute proxies
appointing any person or persons to attend, act and vote on behalf of the
Company, at any meeting of stockholders of any corporation in which the Company
may hold stock, and at any such meeting such officer or person or persons
appointed in any such proxy, as the case may be, shall possess and may exercise
on behalf of the Company any and all rights, powers and privileges incident to
the ownership of such stock. The Board of Directors may by resolution from time
to time confer like powers upon any other person or persons.
Sec. 12. Sales of Stock. Neither the corporation of Phelps Dodge
Corporation nor any subsidiary company by it controlled, shall speculate in the
stock either of Phelps Dodge Corporation or of any subsidiary company, or shall
buy or sell same except in the regular course of legitimate business of such
company or for the purpose of retirement and this provision shall be unalterable
save by the vote of the holders of a majority of the stock of the company voting
thereon at a meeting called, as provided by these By-Laws.
ARTICLE VI. SHARE CERTIFICATES AND TRANSFERS
Sec. 1. Certificates for Shares. The Board of Directors shall prepare, in
form according to law, and approve, certificates evidencing shares of the
Company.
No certificate shall be valid unless it is signed by the Chairman of the
Board, any Vice Chairman, the President or any Vice President; and also by the
Secretary or an Assistant Secretary. The signatures of the officers upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent or registered by a registrar other than the Company itself or its
employee.
Sec. 2. Transfer of Shares. Shares of the Company shall be transferred
only on the books of the Company by the holder thereof in person or by his or
her attorney duly authorized thereto in writing, and by cancellation and
surrender of certificates for a like number of shares.
ARTICLE VII. AMENDMENTS
These By-Laws, with the exception of Section 12 of Article V, may be
amended or repealed by a vote of a majority of all the Directors at any regular
or special meeting of the Board.
ARTICLE VIII.
The Company expressly elects not to be governed by Article 2, Chapter 6,
Title 10 of the Arizona Revised Statutes.
PHELPS DODGE CORPORATION AND SUBSIDIARIES
EXHIBIT 12
COMPUTATION OF TOTAL DEBT TO TOTAL CAPITALIZATION
(Dollars in thousands)
Sept. 30, December 31,
1994 1993
---- ----
(unaudited)
Short-term debt $ 75,853 82,718
Current portion of long-term debt 19,113 17,210
Long-term debt 592,544 547,285
----------- ---------
Total debt 687,510 647,213
Minority interest in subsidiaries 65,208 62,217
Common shareholders' equity 2,155,194 2,022,099
----------- ---------
Total capitalization $ 2,907,912 2,731,529
=========== =========
Ratio of total debt to total
capitalization 23.6% 23.7%
=========== =========
EXHIBIT 15
PRICE WATERHOUSE LLP
November 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 October 19, 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 LLP
Phoenix, Arizona
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1994 AND THE RELATED
CONSOLIDATED STATEMENTS OF OPERATIONS AND OF CASH FLOWS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1994 OF PHELPS DODGE CORPORATION AND ITS
SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<EXCHANGE-RATE> 1
<CASH> 194,200
<SECURITIES> 0
<RECEIVABLES> 459,800
<ALLOWANCES> 0
<INVENTORY> 257,100
<CURRENT-ASSETS> 1,071,300
<PP&E> 2,520,700
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,990,900
<CURRENT-LIABILITIES> 630,700
<BONDS> 592,500
<COMMON> 441,900
0
0
<OTHER-SE> 1,713,300
<TOTAL-LIABILITY-AND-EQUITY> 3,990,900
<SALES> 2,288,400
<TOTAL-REVENUES> 2,288,400
<CGS> 1,700,900
<TOTAL-COSTS> 1,700,900
<OTHER-EXPENSES> 272,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,500
<INCOME-PRETAX> 299,900
<INCOME-TAX> 93,000
<INCOME-CONTINUING> 207,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 207,400
<EPS-PRIMARY> 2.92
<EPS-DILUTED> 2.92
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