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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, 1995
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 4, 1995: 69,658,759 shares.
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<PAGE>
PHELPS DODGE CORPORATION
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 1995
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
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
--------------- ----------------
1995 1994 1995 1994
---- ---- ---- ----
SALES AND OTHER OPERATING
REVENUES $ 1,024.2 780.4 2,057.7 1,474.7
------- ------- ------- -------
OPERATING COSTS AND EXPENSES
Cost of products sold 682.2 585.3 1,369.3 1,114.9
Depreciation, depletion
and amortization 56.9 46.4 111.4 93.5
Selling and general
administrative expense 30.9 25.2 61.6 50.7
Exploration and research
expense 15.1 11.5 31.8 22.5
(Gain) loss on asset
dispositions (see Note 4) - 17.5 (26.8) 17.5
------- ------- ------- -------
785.1 685.9 1,547.3 1,299.1
------- ------- ------- -------
OPERATING INCOME 239.1 94.5 510.4 175.6
Interest expense (19.4) (11.8) (34.8) (25.6)
Capitalized interest 1.1 6.4 1.5 12.2
Miscellaneous income and
expense, net 7.5 1.0 18.4 1.0
------- ------- ------- -------
INCOME BEFORE TAXES, MINORITY
INTERESTS AND EQUITY IN NET
EARNINGS OF AFFILIATED
COMPANIES 228.3 90.1 495.5 163.2
Provision for taxes on
income (68.5) (26.0) (148.7) (50.9)
Minority interests in
consolidated subsidiaries (2.5) (0.9) (5.3) (2.8)
Equity in net earnings
of affiliated companies 2.2 1.4 3.3 3.7
------- ------- ------- -------
NET INCOME $ 159.5 64.6 344.8 113.2
======= ======= ======= =======
EARNINGS PER SHARE $ 2.28 0.91 4.90 1.59
======= ======= ======= =======
AVERAGE NUMBER OF SHARES
OUTSTANDING 69.9 71.0 70.4 71.0
BUSINESS SEGMENTS
(Unaudited; in millions)
SALES AND OTHER OPERATING
REVENUES
Phelps Dodge Mining
Company $ 589.7 414.9 1,196.1 769.8
Phelps Dodge Industries 434.5 365.5 861.6 704.9
------- ------- ------- -------
$ 1,024.2 780.4 2,057.7 1,474.7
======= ======= ======= =======
OPERATING INCOME (LOSS)
Phelps Dodge Mining
Company $ 187.9 63.1 390.0 115.7
Phelps Dodge Industries 60.0 38.5 138.0 74.6
Corporate and other (8.8) (7.1) (17.6) (14.7)
------- ------- ------- -------
$ 239.1 94.5 510.4 175.6
======= ======= ======= =======
See Notes to Consolidated Financial Information.
<PAGE>
CONSOLIDATED BALANCE SHEET
(In millions)
June 30, Dec. 31,
1995 1994
---- ----
(unaudited)
ASSETS
Cash and short-term investments, at cost $ 401.7 286.9
Accounts receivable, net 499.5 489.5
Inventories 289.2 266.3
Supplies 117.6 110.7
Prepaid expenses 19.2 15.9
Deferred income taxes 40.5 38.6
-------- -------
Current assets 1,367.7 1,207.9
Investments and long-term
accounts receivable 85.2 82.0
Property, plant and equipment, net 2,633.5 2,566.4
Other assets and deferred charges 276.9 277.5
-------- -------
$ 4,363.3 4,133.8
======== =======
LIABILITIES
Short-term debt $ 76.7 49.3
Current portion of long-term debt 16.8 25.3
Accounts payable and accrued expenses 504.0 528.5
Income taxes 22.3 46.6
-------- -------
Current liabilities 619.8 649.7
Long-term debt 624.8 622.3
Deferred income taxes 289.9 243.6
Other liabilities and deferred credits 356.0 365.3
-------- -------
1,890.5 1,880.9
-------- -------
MINORITY INTERESTS IN CONSOLIDATED
SUBSIDIARIES 67.3 65.3
-------- -------
COMMON SHAREHOLDERS' EQUITY
Common shares, 69.5 outstanding
(12/31/94 - 70.7) 434.3 441.7
Capital in excess of par value 23.2 84.5
Retained earnings 2,052.0 1,770.3
Cumulative translation adjustments and
other (104.0) (108.9)
-------- -------
2,405.5 2,187.6
-------- -------
$ 4,363.3 4,133.8
======== =======
See Notes to Consolidated Financial Information.
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited; in millions)
Six months
ended
June 30,
----------------
1995 1994
---- ----
OPERATING ACTIVITIES
Net income $ 344.8 113.2
Adjustments to reconcile net income to
cash flow from operations:
Depreciation, depletion and
amortization 111.4 93.5
Deferred income taxes 44.6 6.3
Equity earnings net of dividends
received (3.0) (3.6)
------- -------
Cash flow from operations 497.8 209.4
Adjustments to reconcile cash flow from
operations to net cash provided by
operating activities:
Changes in current assets and liabilities:
(Increase) decrease in accounts
receivable (6.3) (82.2)
(Increase) decrease in inventories (20.9) (13.1)
(Increase) decrease in supplies (8.1) 6.9
(Increase) decrease in prepaid
expenses (3.2) (4.0)
(Increase) decrease in deferred
income taxes (1.8) (2.3)
Increase (decrease) in interest
payable 0.3 -
Increase (decrease) in other accounts
payable (32.1) 40.9
Increase (decrease) in income taxes (24.2) (4.3)
Increase (decrease) in other accrued
expenses 5.0 15.1
(Gain) loss on asset dispositions
(see Note 4) (26.8) 17.5
Other adjustments, net (1.3) (2.3)
------- -------
Net cash provided by operating
activities 378.4 181.6
------- -------
INVESTING ACTIVITIES
Capital outlays (180.3) (171.2)
Capitalized interest (1.5) (12.2)
Proceeds from asset dispositions 39.6 1.4
Investment in subsidiaries - (51.8)
Other - (1.0)
------- -------
Net cash used in investing activities (142.2) (234.8)
------- -------
FINANCING ACTIVITIES
Increase in debt 29.7 121.9
Payment of debt (14.4) (103.0)
Common dividends (63.1) (58.2)
Purchase of common shares (76.4) (2.1)
Debt issue costs - (5.4)
Other 2.8 4.4
------- -------
Net cash used in financing activities (121.4) (42.4)
------- -------
INCREASE (DECREASE) IN CASH AND
SHORT-TERM INVESTMENTS 114.8 (95.6)
CASH AND SHORT-TERM INVESTMENTS AT
BEGINNING OF PERIOD 286.9 255.8
------- -------
CASH AND SHORT-TERM INVESTMENTS AT END
OF PERIOD $ 401.7 160.2
======= =======
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, 1994. 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, 1995, are not necessarily indicative of the results to be
expected for the full year.
3. 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. With respect to 1996
production, as of August 4, 1995, the Corporation had entered into
contracts with several financial institutions that provide for a minimum
1996 first quarter average price of 95 cents per pound for approximately
170 million pounds of copper cathode, and a minimum 1996 second quarter
average price of 95 cents per pound for approximately 90 million pounds of
copper cathode. These contracts are based on the average London Metal
Exchange (LME) price for the quarter. In addition, the Corporation has
entered into contracts that provide minimum (approximately 95 cents) and
maximum (approximately $1.47) prices per pound for the 1996 first quarter
for approximately 170 million pounds of copper cathode, minimum
(approximately 95 cents) and maximum (approximately $1.42) prices per
pound for the 1996 second quarter for approximately 170 million pounds of
copper cathode, and minimum (approximately 90 cents) and maximum
(approximately $1.40) prices per pound for the 1996 third quarter for
approximately 145 million pounds of copper cathode. The minimum and
maximum prices are based on the quarterly average LME price.
With respect to 1995 production, the Corporation has contracts that
provide minimum (approximately 95 cents) and maximum (approximately $1.33)
prices per pound for approximately 650 million pounds of copper cathode.
The minimum prices are based on quarterly average LME prices for 370
million pounds, of which contracts for 185 million pounds have expired
without payment to Phelps Dodge, and on the annual average LME price for
approximately 280 million pounds. The maximum prices are based on the
annual average LME price for all 650 million pounds. In addition, the
Corporation has contracts that provide for minimum quarterly average
prices of 80 cents per pound on a remaining 275 million pounds of copper
cathode based on the average LME price.
4. The Corporation's net income for the first six months of 1995 included a
first quarter after-tax gain of $16.6 million, or 24 cents per common
share, from the sale of Columbian Chemicals Company's MAPICO division
(MAPICO). MAPICO produces synthetic iron oxides at a plant in St. Louis,
Missouri, and was peripheral to Columbian's core business. The gain on the
sale of these assets before taxes was $26.8 million.
The Corporation's net income for the first six months of 1994 included a
second quarter net after-tax loss of $11.2 million, or 16 cents per common
share, from the sale of certain gold interests. Included in that amount
was an after-tax loss of $15.5 million, or 22 cents per common share, from
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 common share,
from 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, 1995, and for the three-month and
six-month periods ended June 30, 1995 and 1994, 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 June 30, 1995, and the consolidated
statements of operations for the three-month and six-month periods ended June
30, 1995 and 1994, and the consolidated statement of cash flows for the
six-month periods ended June 30, 1995 and 1994. 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, 1994, and the related
consolidated statements of operations, of retained earnings and of cash flows
for the year then ended (not presented herein), and in our report dated January
23, 1995 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, 1994 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
July 20, 1995
</AUDIT-REPORT>
<PAGE>
Item 2. Management's Discussion and Analysis
RESULTS OF OPERATIONS
Phelps Dodge Corporation had consolidated net income of $159.5 million,
or $2.28 per common share, in the second quarter of 1995, compared with $64.6
million, or 91 cents per common share, in the 1994 second quarter. Net income
for the six months ended June 30, 1995, was $344.8 million, or $4.90 per common
share, compared with $113.2 million, or $1.59 per common share in the
corresponding 1994 period. Net income in the 1995 six-month period included a
first quarter after-tax gain of $16.6 million, or 24 cents per common share,
from the sale of Columbian Chemicals Company's MAPICO division. Net income in
the 1994 six-month period included a second quarter net after-tax loss of $11.2
million, or 16 cents per common share, from the sale of certain gold interests.
Earnings in the three-month and six-month periods ended June 30, 1995,
were higher than those reported in the corresponding 1994 periods principally as
a result of higher average copper prices. Average spot prices per pound of
cathode copper on the New York Commodity Exchange (COMEX) rose approximately 34
cents and 42 cents in the second quarter and first six months of 1995,
respectively, from the average prices in the corresponding 1994 periods.
Earnings increases in 1995 also reflected improved results in the Corporation's
carbon black, wheel and rim, and wire and cable businesses.
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 present share of annual production is approximately
1.3 billion pounds of copper including about 200 million pounds from Candelaria
which began operations in the 1994 fourth quarter. 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 $13 million. The Corporation's share of
estimated annual copper production capacity will increase 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 the second half
of 1995. This increase in production will add approximately $1.3 million to the
variation in annual pre-tax operating income from each 1 cent per pound change
in average 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 $1.33 in the second quarter and
$1.35 in the first six months of 1995, compared with 99 cents and 93 cents in
the corresponding 1994 periods. From July 1 to August 4, 1995, the COMEX price
averaged $1.38 per pound, closing at $1.39 on August 4, 1995.
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. For further discussion of the
Corporation's price protection arrangements for 1995 and 1996 production, see
Note 3 to Consolidated Financial Information.
Sales were $1,024.2 million in the 1995 second quarter and $2,057.7
million in the first six months of 1995, compared with $780.4 million and
$1,474.7 million in the corresponding 1994 periods. The 1995 increases
principally resulted from higher average copper prices and sales volumes, higher
average carbon black prices and sales volumes, higher sales volumes of wheels
and rims, and higher average selling prices for wire and cable products.
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
mineral exploration and development programs.
================================================================================
First Six
Second Quarter Months
--------------- ---------------
1995 1994 1995 1994
---- ---- ---- ----
Copper from own mines *
(short tons)
Production 173,400 132,600 330,700 271,800
Deliveries 157,700 141,100 315,700 264,600
New York Commodity Exchange
average spot price per
pound - copper cathodes $ 1.33 0.99 1.35 0.93
(in millions)
Sales and other operating
revenues $ 589.7 414.9 1,196.1 769.8
Operating income $ 187.9 63.1 390.0 115.7
-------------------------
* 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., (ii) the one-third partnership
interest in Chino Mines Company in New Mexico held by Heisei Minerals
Corporation, and (iii) the 20 percent interest in Candelaria held by SMMA
Candelaria, Inc., a jointly owned subsidiary of Sumitomo Metal Mining Co.,
Ltd. and Sumitomo Corporation.
================================================================================
Phelps Dodge Mining Company's 1995 second quarter sales of $589.7 million
were 42 percent higher than in the second quarter of 1994. This increase
principally resulted from a 34 cents per pound increase in average copper prices
and a 16,600 ton increase in copper sales from mine production that included
27,700 tons from Candelaria (Candelaria commenced production in the 1994 fourth
quarter). Sales of $1,196.1 million in the first six months of 1995 were 55
percent higher than in the corresponding 1994 period. This increase primarily
resulted from a 42 cents per pound increase in average copper prices and a
51,100 ton increase in copper sales from mine production that included 47,700
tons from Candelaria.
Phelps Dodge Mining Company recorded operating income of $187.9 million in
the 1995 second quarter and $390.0 million in the first six months of 1995,
compared with $63.1 million and $115.7 million in the corresponding 1994
periods. The increases resulted from the higher average copper prices and, to a
lesser extent, the volumes of copper sold from mine production already
discussed, partially offset by higher copper production costs. Increased 1995
unit production costs principally resulted from lower mill throughput at the
Morenci mine, related to harder ores encountered in the Metcalf area of the
mine, and increased mining rates at the Tyrone mine necessary to increase grades
at its solution extraction/electrowinning facilities. In addition, operating
income in 1994 included a net loss of $17.5 million before taxes from the sale
of certain gold interests in the second quarter.
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. 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 operations through Columbian Chemicals
Company and its subsidiaries; its wheel and rim operations through Accuride
Corporation and its subsidiaries; its magnet wire operations through Phelps
Dodge Magnet Wire Company and its subsidiaries; its international wire and cable
manufacturing operations through Phelps Dodge International Corporation; and its
U.S. specialty conductor operations through Hudson International Conductors.
================================================================================
First Six
Second Quarter Months
-------------- -------------
1995 1994 1995 1994
---- ---- ---- ----
(in millions)
Sales and other operating
revenues $ 434.5 365.5 861.6 704.9
Operating income $ 60.0 38.5 138.0 74.6
================================================================================
Phelps Dodge Industries' sales of $434.5 million in the second quarter of
1995 were 19 percent higher than in the second quarter of 1994. Sales of $861.6
million in the first six months of 1995 were 22 percent higher than in the
corresponding 1994 period. These increases primarily resulted from higher sales
in the carbon black business reflecting higher average worldwide prices,
improved sales volumes in North American and European markets and stronger
European currencies against the U.S. dollar (particularly the Deutsche mark and
French franc). Sales volumes of carbon black benefited from increases at
Columbian Chemicals Company's carbon black plant in Hungary that had just
commenced operations in late 1993, and from the acquisition of a Spanish carbon
black facility in December 1994. Increased 1995 sales also reflected higher
sales volumes in the wheel and rim business due to increased truck builds in
North America, and higher average selling prices in the wire and cable
businesses primarily due to higher copper prices.
During the 1995 second quarter, Phelps Dodge Industries recorded operating
income of $60.0 million, a 56 percent increase over the $38.5 million recorded
in the corresponding 1994 period. Operating income of $138.0 million in the
first six months of 1995 included $111.2 million in earnings and a gain of $26.8
million before taxes from the sale of Columbian Chemicals Company's MAPICO
division in the first quarter. Operating income was $74.6 million in the
corresponding 1994 period. Increased 1995 operating income primarily reflected
improved sales volumes and margins in the carbon black, wheel and rim, and wire
and cable businesses already discussed.
OTHER MATTERS RELATING TO THE STATEMENT OF CONSOLIDATED OPERATIONS
The Corporation recorded net interest expense of $18.3 million in the 1995
second quarter and $33.3 million in the first six months of 1995, compared with
$5.4 million and $13.4 million in the corresponding 1994 periods. Increased 1995
net interest expense principally resulted from the cessation of capitalization
of interest costs for the Candelaria copper project in Chile reflecting the
substantial completion of construction and development of the project in the
1994 fourth quarter.
The Corporation's miscellaneous income, net of miscellaneous expense, was
$7.5 million in the 1995 second quarter and $18.4 million in the first six
months of 1995, compared with $1.0 million in both of the corresponding 1994
periods. These increases primarily resulted from higher interest income earned
on cash and short-term investments. Miscellaneous income in the first six months
of 1995 also included an increase of $4.5 million in dividends received from the
Corporation's 16.25 percent minority interest in Southern Peru Copper
Corporation.
CHANGES IN FINANCIAL CONDITION
Capital outlays during the first six months of 1995 were $154.4 million
for Phelps Dodge Mining Company and $25.5 million for Phelps Dodge Industries.
Capital outlays in the corresponding 1994 period were $139.9 million for Phelps
Dodge Mining Company and $31.1 million for Phelps Dodge Industries. The
Corporation expects capital outlays in 1995 to be approximately $325 million for
Phelps Dodge Mining Company. This amount does not include $40 million for the
potential acquisition of certain mining properties owned by Azco Mining, Inc.,
including the Sanchez property in southeastern Arizona and a 70 percent interest
in the Piedras Verdes property in Mexico. Phelps Dodge Industries is expected to
spend approximately $75 million during the year.
At June 30, 1995, the Corporation's total debt was $718.3 million,
compared with $696.9 million at year-end 1994. The Corporation's ratio of debt
to total capitalization was 22.5 percent at June 30, 1995, compared with 23.6
percent at December 31, 1994. Short-term debt increased from $49.3 million at
December 31, 1994, to $76.7 million at June 30, 1995, primarily as a result of
borrowings to finance working capital requirements at the Corporation's
international wire and cable manufacturing operations.
During the 1995 second quarter, the Corporation's 80 percent owned
subsidiary, Compania Contractual Minera Candelaria, satisfied all operating,
financial, construction and legal tests and conditions as set forth in the
completion agreement associated with the project financing of its Candelaria
mine in Chile. Borrowings under these debt facilities are now non-recourse to
Phelps Dodge.
On June 8, 1995, the Corporation paid a regular quarterly dividend of 45
cents per share on its common shares for the 1995 second quarter. The amount
paid for the second quarter was $31.2 million, bringing total 1995 dividends
paid through June 30 to $63.1 million. On July 28, 1995, the Board of Directors
declared a 1995 third quarter regular dividend of 45 cents per common share to
be paid on September 8, 1995, to shareholders of record at the close of business
on August 18, 1995.
In 1995 through August 4, the Corporation purchased 1,433,000 of its
common shares at a total cost of $78.7 million. These purchases included
1,348,000 shares under a 5 million share buy-back program authorized on March 7,
1995, and 85,000 shares under the superseded program. There were 69,478,400
common shares outstanding on June 30, 1995.
<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, 1994, 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 its 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 over 13,900 claimants. In these
proceedings, plaintiffs have alleged bodily injury or death caused by purported
exposures to asbestos and have claimed damages based on theories of strict
liability and negligence. 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 the dismissal of all but one of the claims against it in Mississippi.
During 1995, PDI has been dismissed from 52 asbestos-related claims, while
143 new claims have been filed against PDI in four states. As of June 30, 1995,
a total of 429 asbestos-related claims were being defended by PDI in 14
jurisdictions.
PDI is vigorously contesting and defending these claims.
Item 4. Submission of Matters to a Vote of Security Holders
The Corporation's annual meeting was held on May 3, 1995. 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:
Edward L. Addison 58,314,541 93,263
Paul Hazen 58,317,143 90,661
Marie L. Knowles 58,314,814 92,990
Gordon R. Parker 58,314,735 93,069
Broker
For Against Abstain Nonvotes
--- ------- ------- --------
Appointment of
Auditors 58,304,219 41,254 62,331 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, 1995.
<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: August 10, 1995 By: Thomas M. Foster
----------------
Thomas M. Foster
Vice President and Controller
(Principal Accounting Officer)
<PAGE>
PHELPS DODGE CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
10.11 Amendment, effective June 7, 1995, to the Corporation's Comprehensive
Executive Nonqualified Retirement and Savings Plan.
10.13 Retirement Agreement dated as of June 20, 1995, between Patrick J. Ryan
and the Corporation.
10.14 Consulting Agreement dated as of June 20, 1995, between Patrick J. Ryan
and the Corporation.
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 for the six months ended June 30, 1995.
Exhibit 10.11
Instrument of Amendment
The Comprehensive Executive Non-qualified Retirement and Savings Plan of
Phelps Dodge Corporation (the "Non-qualified Plan") is hereby amended as set
forth below, with such amendments to be in the form and effective as of a date
approved by Mr. John C. Replogle, Vice President, Human Resources of the
Corporation, as evidenced by his written execution thereof.
1. The Non-qualified Plan is hereby amended to conform various section
references to the revised Phelps Dodge Employee Savings Plan.
2. The Non-qualified Plan is hereby amended to allow the Benefits
Administration Committee, in its sole discretion, to exclude certain foreign
nationals from participation therein.
3. The Non-qualified Plan is hereby amended to allow daily investment fund
transfers.
4. The Non-qualified Plan is hereby amended to include an indemnification
provision substantially similar to the one contained in the amended Phelps Dodge
Pension Plan for Day's-Pay Employees (Western Branches).
Exhibit 10.13
RETIREMENT AGREEMENT
This RETIREMENT AGREEMENT ("Agreement"), dated as of June 20, 1995, is
between PHELPS DODGE CORPORATION, a New York corporation with its principal
place of business at 2600 North Central Avenue, Phoenix, Arizona 85004-3014
("Phelps Dodge") and PATRICK J. RYAN, an individual residing at 5481 E. Lupine
Avenue, Scottsdale, Arizona 85254 ("Ryan").
Ryan serves as a Senior Vice President of Phelps Dodge and Executive Vice
President of Phelps Dodge Mining Company ("PDMC"). He has worked for Phelps
Dodge and its affiliated entities for over 24 years.
Ryan has announced his desire to retire from Phelps Dodge. Phelps Dodge
desires to recognize Ryan's service to it. Phelps Dodge and Ryan both desire
that Ryan's retirement occur in an orderly fashion and that the issues raised by
his retirement are dealt with in a mutually satisfactory manner.
Therefore, in consideration of their mutual promises contained in this
Agreement, the parties agree as follows:
1. Retirement. Ryan will retire from employment with Phelps Dodge at the
close of business on June 30, 1995 (his "Retirement Date"). Ryan will resign
from all positions he holds with Phelps Dodge and with each of Phelps Dodge's
subsidiaries and affiliated entities on his Retirement Date. At the request of
Phelps Dodge, Ryan agrees to execute any documents to effectuate or to
facilitate his retirement and resignations.
2. Service Recognition Payment. In recognition of his years of service to
Phelps Dodge, Ryan shall receive a payment in the gross amount of $155,500, less
all applicable withholding taxes and other deductions. This payment will be made
to Ryan within 10 calendar days after his Retirement Date or within 10 calendar
days after the effective date of this Agreement, whichever is later.
3. Bonus. Ryan shall be eligible to receive a pro rata bonus for calendar
year 1995 based on the period he was an active full-time employee in accordance
with the terms of the Annual Incentive Compensation Plan (the "AICP") and the
goals that have been established by the AICP. With respect to the individual
portion of the AICP award, Ryan will receive an award at the target level
subject to the approval of the Compensation and Management Development
Committee. The AICP bonus shall be paid to Ryan within 15 calendar days after
the Compensation and Management Development Committee sets the award for active
employees.
4. Profit Sharing. Ryan shall receive a pro rata profit sharing
contribution that is otherwise payable to Ryan with respect to 1995 performance.
This profit sharing contribution shall be made at the same time and generally
subject to the same terms and conditions as are applicable to other similarly
situated employees of Phelps Dodge.
5. Stock Options. Any unvested stock options held by Ryan under Phelps
Dodge's 1987 Stock Option and Restricted Stock Plan and 1993 Stock Option and
Restricted Stock Plan (the "Stock Plans") will vest as of July 1, 1995, subject
to the approval of the Compensation and Management Development Committee. Ryan
will then have until July 1, 2000 to exercise those stock options, subject to
the approval of the Compensation and Management Development Committee. Except to
the extent modified by this paragraph 5, all of the terms and conditions of the
Stock Plans and the stock option grants made thereunder to Ryan shall continue
to be applicable.
6. Restricted Stock. Subject to the approval of the Compensation and
Management Development Committee, the transfer restrictions shall lapse with
respect to all outstanding restricted common shares previously awarded to Ryan
and those shares shall become fully vested as of July 1, 1995.
7. Monthly Retirement Benefits. In addition to the $2,033 monthly benefit
Ryan is entitled to receive under the provisions of the Phelps Dodge Retirement
Plan for Salaried Employees, Phelps Dodge will provide him with a nonqualified
monthly retirement benefit of $14,247. Phelps Dodge also will provide Ryan with
a special, nonqualified, monthly supplemental retirement benefit of $130 until
Ryan reaches age 65. Monthly payments of these retirement benefits will start in
July 1995. (The monthly benefits set forth in this section are based on a single
life annuity.)
8. Additional Benefits.
(a) Continuation of Medical and Dental Benefits. Until Ryan reaches age
65, and subject to his making those contributions, if any, required of employees
generally to receive these benefits, Phelps Dodge will continue the
participation of Ryan and his eligible dependents in its medical and dental
benefit plans for active employees as they are in effect on the Retirement Date
on the same terms and conditions as generally apply to similarly situated
employees. When Ryan attains age 65, he and his eligible dependents will become
eligible for retiree medical benefits. If he elects to receive retiree medical
benefits, he will be required to contribute the applicable percentage of the
premium cost of those benefits that is in effect at the time, subject to the
provisions of the retiree medical plan.
(b) Accrued Benefits. Except as provided in this Agreement, Ryan also
shall receive all of the benefits that have accrued and that have become vested
on or prior to the Retirement Date under the terms of Phelps Dodge's generally
applicable employee benefit plans.
9. Confidentiality. Ryan agrees that he will maintain the confidentiality
of this Agreement, and that he will not communicate or disclose any information
concerning this Agreement to anyone, except to his immediate family, his
attorney and his accountant, and such persons will be advised of, and bound by,
this confidentiality provision.
10. General Release.
(a) Ryan agrees not to bring any suit or claim against Phelps Dodge or
any of its related entities or individuals with respect to any matter, including
those relating to his employment with Phelps Dodge or his retirement from that
employment. Therefore, Ryan, and his heirs, executors, administrators and
assigns, forever release Phelps Dodge and its parents, subsidiaries and related
entities, and their officers, directors, agents, employees, attorneys and
representatives from all claims, liabilities, suits, charges and actions,
whether known or unknown, accrued or not accrued, as of the date Ryan signs this
Agreement. The items released include, but are not limited to, matters relating
to or arising out of his employment or retirement from employment. Some examples
of the items released are claims under federal, state or local laws, such as the
Age Discrimination in Employment Act, as amended, Title VII of the Civil Rights
Act of 1964, as amended, the Americans with Disabilities Act, the Family and
Medical Leave Act, the Arizona Civil Rights Act, and any common law, tort, or
contract claims. This provision of course does not affect Ryan's rights to
vested benefits under Phelps Dodge's benefit plans.
(b) Ryan acknowledges that he has been advised by Phelps Dodge to consult
with an attorney of his choice prior to executing this Agreement and that he has
had an opportunity to do so, and that he has been given a period of at least 21
days within which to consider this Agreement.
(c) Ryan understands that the special benefits he will receive by this
Agreement are not required by the policies of Phelps Dodge. Ryan also
understands that if he and Phelps Dodge did not have this Agreement, he would
not be receiving these valuable special benefits.
(d) Ryan has carefully read this Agreement, and he has had an opportunity
to ask questions about it, he understands it, and he agrees to all of its
provisions. Ryan understands that by signing this Agreement, he agrees not to
sue or bring any claim against Phelps Dodge or any other entity or person he has
released from claims. Ryan has made this Agreement voluntarily and without any
duress.
11. Indemnification. Phelps Dodge or one of its subsidiaries (including,
without limitation, PDMC), as appropriate, shall indemnify Ryan for any claim
arising out of or in connection with Ryan's service as an officer and employee
of Phelps Dodge, or a subsidiary or affiliated entity of Phelps Dodge, in the
same manner and to the same extent as Phelps Dodge or such subsidiary, as the
case may be, indemnifies its then current officers or employees. Phelps Dodge
shall continue coverage of Ryan under its directors' and officers' liability
insurance policy to the same extent as its then current officers or employees
are covered.
12. Withholding. All cash payments to be made under this Agreement shall be
made net of all applicable income and employment taxes required to be withheld
from such payments. To the extent any compensation is payable to Ryan in
accordance with this Agreement other than as a payment in cash, Ryan shall be
required to pay Phelps Dodge an amount equal to all applicable income and
employment taxes required to be withheld with respect thereto.
13. Amendment. This Agreement may be amended only by a written instrument
signed by Phelps Dodge and Ryan.
14. Entire Agreement. Except to the extent that other agreements between
Phelps Dodge and Ryan govern Ryan's rights with respect to outstanding awards
under the Stock Plans, or Phelps Dodge's plans and programs that govern Ryan's
accrued vested benefits, or the Consulting Agreement between Phelps Dodge and
Ryan, this Agreement shall constitute the entire Agreement between Phelps Dodge
and Ryan with respect to the subject matter hereof. Any other agreement or
understanding between Phelps Dodge and Ryan (including, without limitation, any
agreement to provide Ryan with benefits in the event his employment ends),
whether written or oral, with respect to any matter addressed or described in
this Agreement is hereby superseded and revoked and rendered void and without
effect.
15. Effective Date. Ryan may revoke this Agreement during the 7 calendar
days after he signs it. The Agreement will not become effective until the eighth
calendar day after Ryan signs it. If Ryan wishes to revoke the Agreement, he
must do so in writing, and his written notice of revocation must be sent to Mr.
John C. Replogle ("Replogle"), Vice President-Human Resources, Phelps Dodge
Corporation, 2600 North Central Avenue, Phoenix, Arizona 85004. To be effective,
the revocation must be received by Replogle during the 7 calendar days after the
day Ryan signs this Agreement.
16. Assignment. No rights or obligations under this Agreement may be
assigned or transferred by Ryan except that Ryan's rights to receive any payment
in respect to the compensation and benefits provided hereunder shall, in the
event of death, pass to his estate, or to his designated beneficiary, and may be
transferred by will or operation of law; provided that nothing in this section
shall be construed to require Phelps Dodge to pay any survivor or death benefits
with respect to the retirement benefits described in paragraph 7 other than
those, if any, that are payable in accordance with the form of benefit payment
elected by Ryan.
17. Resolution of Disputes. Any disputes arising under or in connection
with this Agreement shall be resolved by binding arbitration, to be held in
Phoenix, Arizona, in accordance with the rules and procedures of the American
Arbitration Association. Judgment upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction of the matter. Costs of the
arbitration shall be borne equally by the parties. Unless the arbitrator
otherwise determines, the party that does not prevail in any such action shall
reimburse the other party for his or its reasonable attorneys' fees incurred
with respect to such arbitration.
18. Governing Law. This Agreement shall be governed by the laws of the
State of Arizona.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the day first written above.
PHELPS DODGE CORPORATION Patrick J. Ryan
By______________________ _____________________
John C. Replogle
Vice President-Human Resources Date:_______________
Date:___________________
Exhibit 10.14
CONSULTING AGREEMENT
This CONSULTING AGREEMENT ("Agreement"), dated as of June 20, 1995, is
between PHELPS DODGE CORPORATION, a New York corporation, with its principal
place of business at 2600 North Central Avenue, Phoenix, Arizona 85004-3014
("Phelps Dodge") and PATRICK J. RYAN, an individual residing at 5481 E. Lupine
Avenue, Scottsdale, Arizona, 85254 ("Ryan").
Ryan has served as the Senior Vice President of Phelps Dodge and the
Executive Vice President of Phelps Dodge Mining Company ("PDMC"). Ryan has
announced that he is retiring from Phelps Dodge at the close of business on June
30, 1995. Phelps Dodge wishes to continue to benefit from the experience and
expertise Ryan developed in his more than 24 years of service with Phelps Dodge
and its subsidiaries and affiliated entities. Ryan desires to provide his
services to Phelps Dodge on a consulting basis.
Phelps Dodge and Ryan enter into this Agreement to set forth the terms and
conditions pursuant to which Ryan will provide consulting services to Phelps
Dodge following his retirement.
Therefore, in consideration of their mutual promises contained in this
Agreement, Phelps Dodge and Ryan agree as follows:
1. Services. Ryan will provide consulting services relating to projects
identified by Phelps Dodge on a case-by-case basis.
2. Conferences and Meetings. Ryan will attend conferences and meetings when
requested to do so by Phelps Dodge. Phelps Dodge agrees to provide Ryan with
reasonable notice of the conferences and meetings it wants Ryan to attend. If a
conflict arises between Ryan's schedule and a meeting or conference at which
Phelps Dodge desires his attendance, Phelps Dodge and Ryan will cooperate with
each other in attempting to arrange their respective schedules in order to
facilitate Ryan's attendance at the meeting or conference.
3. Compensation. In addition to the special pay and benefits contained in
the Retirement Agreement between Ryan and Phelps Dodge, Phelps Dodge shall pay
Ryan an annual gross fee of $75,000 for his consulting services. Ryan will work
at the Company's request for up to 60 days per year for this amount. For each
day in a year in excess of 60 days that Ryan works at the request of Phelps
Dodge, he will be paid the gross sum of $1,300. Phelps Dodge shall not be
responsible for providing Ryan any benefits that it normally provides its
employees, except for those benefits provided by the Retirement Agreement
between Ryan and Phelps Dodge.
4. Payment. Phelps Dodge shall pay Ryan on a quarterly basis, and the
payments will be made within 10 calendar days after the end of each calendar
quarter. The annual fee of $75,000 will be paid in installments of a gross
amount of $18,750 for each calendar quarter. Any additional amounts due for
consulting services in excess of 60 days in a year will normally be paid within
10 calendar days after the end of the calendar quarter in which Ryan rendered
the additional consulting services. Phelps Dodge will reimburse Ryan for his
reasonable out-of-pocket expenses including, but not limited to, travel,
accommodations, and meals necessarily incurred by Ryan in performing his
consulting services under this Agreement. The general nature of these expenses
will be approved by Phelps Dodge before the expenses are incurred. When
traveling in the course of performing his consulting services under this
Agreement, Ryan will be covered under Phelps Dodge's business travel accident
insurance plan in the same manner as other similarly situated consultants.
5. Term. This Agreement will be for a term of three years from July 1, 1995
through June 30, 1998, unless sooner terminated pursuant to paragraph 15.
6. Non-Competition. Ryan acknowledges that in the course of his employment
and his independent consulting relationship with Phelps Dodge, he had and will
have direct or indirect contact with existing and prospective customers and
others having business dealings with Phelps Dodge and thereby will have the
opportunity to meet and develop on behalf of Phelps Dodge, its subsidiaries and
affiliated entities, goodwill and working relationships with these persons,
firms, or other entities. Ryan acknowledges that such goodwill and relationships
are valuable assets of Phelps Dodge, and he understands and agrees that, because
of the nature of the business of Phelps Dodge, its subsidiaries, and affiliated
entities, it is necessary to afford fair protection to Phelps Dodge for those
assets. Therefore, during the term of this Agreement, Ryan shall not engage,
directly or indirectly, in, or become employed by, serve as an agent or
consultant to, become a partner, principal, or stockholder of any partnership,
corporation or other entity (a "Competitor") which is engaged in any business in
direct competition with Phelps Dodge or any of its subsidiaries or affiliated
entities unless he obtains prior written approval from Phelps Dodge, which
approval will not be unreasonably withheld. During the term of this Agreement,
Ryan shall not develop and sell any found minerals to other persons or entities
without first presenting the opportunity to Phelps Dodge and obtaining its prior
written consent to develop and sell the found minerals to others if Phelps Dodge
is not interested in the opportunity. Phelps Dodge will respond expeditiously to
the opportunities presented to it by Ryan. Ryan acknowledges and agrees that the
geographic scope of this provision has not been limited because Phelps Dodge's
business and customers are worldwide and Phelps Dodge has a legitimate
protectable business interest in its goodwill and relationships with its
customers and in preventing the solicitation of its customers regardless of the
geographical location of its customers or where Ryan is employed if and when he
attempts such solicitation. Ryan's ownership of less than one percent of the
issued and outstanding stock of any corporation whose stock is traded on an
established securities market shall not constitute a violation of this
paragraph.
7. Non-Solicitation. Ryan acknowledges that the employees of Phelps Dodge
are an integral part of the business of Phelps Dodge, and he understands and
agrees that, because of the nature of the business of Phelps Dodge, it is
necessary to afford fair protection to Phelps Dodge from the loss of any such
employees. Therefore, during the term of this Agreement and for two years after
the date that this Agreement terminates (or until June 30, 2000 if Ryan
terminates this Agreement pursuant to paragraph 15), Ryan will not solicit or
otherwise induce any employee of Phelps Dodge, or any of its respective
subsidiaries or affiliated entities, to leave the employ of Phelps Dodge or any
of its subsidiaries or affiliated entities or to become associated, whether as
an employee, officer, parent, director, consultant or otherwise, with any
business organization, including, but not limited to, a Competitor.
8. Non-Disclosure. Ryan acknowledges that the information, observations and
data obtained by him during the course of his employment with Phelps Dodge, and
to be obtained by him during the period of this Agreement, concerning the
business or affairs of Phelps Dodge or any of its subsidiaries or any affiliated
entities are confidential and are the property of Phelps Dodge. Therefore, Ryan
will not at any time disclose to any unauthorized person or use for his own
account any of such information, observations or data without the written
authorization of Phelps Dodge, unless such information, observations or data
have previously been disclosed to the public by Phelps Dodge or have become
public knowledge other than by reason of the actions of Ryan. The provisions of
this paragraph 8 shall survive the term of this Agreement.
9. Remedies. Ryan understands and agrees that Phelps Dodge may suffer
irreparable harm in the event that he breaches any of his material obligations
under this Agreement and that monetary damages will be inadequate to compensate
Phelps Dodge for such breach. Accordingly, Ryan agrees that, in the event of his
material breach or threatened material breach of any of the provisions of this
Agreement, Phelps Dodge, in addition to and not in limitation of any other
rights, remedies or damages available to Phelps Dodge at law or in equity, shall
be entitled to a temporary restraining order, preliminary injunction and
permanent injunction in order to prevent or to restrain any such breach by Ryan
or any or all of his partners, co-venturers, employers, employees, servants,
agents, representatives and any other persons directly or indirectly acting for,
or on behalf of, or with him.
10. Reasonableness; Severability. Ryan has carefully considered his
obligations as stated in this Agreement and agrees that the restrictions
contained in this Agreement are fair and reasonable and are reasonably required
for Phelps Dodge's protection. If, however, the time, geographic, occupational
or other scope of any restrictions of this Agreement should ever be deemed to
exceed that permitted by applicable law or be otherwise over-broad, Ryan agrees
that a court of competent jurisdiction shall enforce that restriction to the
maximum scope permitted by law under the circumstances.
11. Independent Contractor. In providing the consulting services called for
by this Agreement, Ryan will serve as an independent contractor. Nothing
contained in this Agreement shall be construed to constitute Ryan as an officer,
employee, or agent of Phelps Dodge, nor shall either party have the authority to
bind the other in any respect. Ryan will be responsible for his own actions.
Subject to paragraph 6, Ryan may perform services for other businesses, entities
and/or individuals in addition to Phelps Dodge. Phelps Dodge shall not be
required to withhold any federal or state income taxes, FICA or FUTA from the
annual gross fee paid to Ryan for his consulting services. Ryan shall be
responsible for maintaining his own books and records and for the filing of any
taxes or other information returns with any federal or state agencies. Further,
Phelps Dodge will not be responsible for providing Ryan any benefits that it
provides to its employees, including, without limitation, health and life
insurance, disability insurance, and qualified or nonqualified deferred
compensation arrangements of any nature other than those benefits covered by the
Retirement Agreement between Ryan and Phelps Dodge.
12. Office and Materials. Except as provided for in paragraph 4, Ryan is
responsible for all expenses incurred during the performance of his work under
this Agreement. Ryan is to provide the necessary materials, tools, equipment,
and labor to perform the job. Phelps Dodge shall not be required to provide any
office space, equipment, materials, supplies or personnel to Ryan. Ryan is
responsible for hiring, supervising, and paying all support staff necessary to
provide the services called for by this Agreement. Ryan acknowledges that he is
not acting as a representative or agent of Phelps Dodge when he hires,
supervises, or pays his staff or assistants.
13. Working Arrangements. Phelps Dodge does not have the right to and will
not exercise any control or direction over the method by which Ryan chooses to
perform the consulting services called for by this Agreement. Ryan will devote
such time as is required to perform the consulting services. Ryan may use any of
his employees or consultants that he deems necessary to complete the consulting
services. Ryan shall choose the time and manner for performing the consulting
services according to his own routines and schedules. Ryan shall set his own
hours of work. Ryan has no obligation to submit reports relating to the method
in which consulting services are rendered under this Agreement. No training will
be provided by Phelps Dodge to Ryan. Ryan acknowledges that he is not in need of
any training by Phelps Dodge to perform the consulting services called for by
this Agreement.
14. Assignment. Phelps Dodge is retaining the services of Ryan based on his
specific experience and expertise. Therefore, there shall be no assignment of
this Agreement by Ryan without Phelps Dodge's written consent.
15. Termination. Either Phelps Dodge or Ryan may terminate this Agreement
for good cause upon thirty days written notice to the other party. Neither party
shall have the right to terminate this Agreement without good cause, and good
cause will mean a serious breach of the spirit and intent of the Agreement.
16. Resolution of Disputes. Any disputes arising under or in connection
with this Agreement, other than disputes arising under paragraphs 6, 7, 8, 9 and
10, shall be resolved by binding arbitration to be held in Phoenix, Arizona in
accordance with the rules and procedures of the American Arbitration
Association. Judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction of the matter. Costs of the arbitration
shall be borne equally by the parties. Unless the arbitrator otherwise
determines, the party that does not prevail in any such action shall reimburse
the other party for his or its reasonable attorneys' fees incurred with respect
to such arbitration.
17. Governing Law. This Agreement shall be governed by the laws of the
State of Arizona.
18. Entire Agreement. This Agreement contains the entire agreement of the
parties. It may not be changed orally, but only by a written agreement signed by
the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the day first written above.
PHELPS DODGE CORPORATION, Patrick J. Ryan
a New York corporation
By________________ _________________
John C. Replogle
Vice President,
Human Resources Date:_____________
Date:______________
PHELPS DODGE CORPORATION AND SUBSIDIARIES
Exhibit 12
COMPUTATION OF TOTAL DEBT TO TOTAL CAPITALIZATION
(Dollars in thousands)
June 30, December 31,
1995 1994
---- ----
(unaudited)
Short-term debt $ 76,700 49,300
Current portion of long-term debt 16,800 25,300
Long-term debt 624,800 622,300
----------- -----------
Total debt 718,300 696,900
Minority interests in subsidiaries 67,300 65,300
Common shareholders' equity 2,405,500 2,187,600
----------- -----------
Total capitalization $ 3,191,100 2,949,800
=========== ===========
Ratio of total debt to total
capitalization 22.5% 23.6%
=========== ===========
Exhibit 15
Price Waterhouse LLP
August 10, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We are aware that Phelps Dodge Corporation has incorporated by reference our
report dated July 20, 1995 (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, 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 JUNE 30, 1995 AND THE
RELATED CONSOLIDATED STATEMENTS OF OPERATIONS AND OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 OF PHELPS DODGE
CORPORATION AND ITS SUBSIDIARIES AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 401,700
<SECURITIES> 0
<RECEIVABLES> 499,500
<ALLOWANCES> 0
<INVENTORY> 289,200
<CURRENT-ASSETS> 1,367,700
<PP&E> 2,633,500
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,363,300
<CURRENT-LIABILITIES> 619,800
<BONDS> 624,800
<COMMON> 434,300
0
0
<OTHER-SE> 1,971,200
<TOTAL-LIABILITY-AND-EQUITY> 4,363,300
<SALES> 2,057,700
<TOTAL-REVENUES> 2,057,700
<CGS> 1,369,300
<TOTAL-COSTS> 1,369,300
<OTHER-EXPENSES> 146,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,300
<INCOME-PRETAX> 495,500
<INCOME-TAX> 148,700
<INCOME-CONTINUING> 344,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 344,800
<EPS-PRIMARY> 4.90
<EPS-DILUTED> 4.90
</TABLE>
