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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, 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 November 6, 1995: 69,309,553 shares.
================================================================================
<PAGE>
PHELPS DODGE CORPORATION
Quarterly Report on Form 10-Q
For the Quarter Ended September 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
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
-------------- ------------
1995 1994 1995 1994
---- ---- ---- ----
SALES AND OTHER OPERATING
REVENUES $1,076.7 813.7 3,134.4 2,288.4
-------- ------- ------- -------
OPERATING COSTS AND EXPENSES
Cost of products sold 664.2 586.0 2,033.5 1,700.9
Depreciation, depletion
and amortization 54.9 47.9 166.3 141.4
Selling and general
administrative expense 27.5 25.9 89.1 76.6
Exploration and research
expense 18.7 14.8 50.5 37.3
(Gain) loss on asset
dispositions (see Note 4) -- -- (26.8) 17.5
-------- ------- ------- -------
765.3 674.6 2,312.6 1,973.7
-------- ------- ------- -------
OPERATING INCOME 311.4 139.1 821.8 314.7
Interest expense (19.0) (14.9) (53.8) (40.5)
Capitalized interest 1.3 7.8 2.8 20.0
Miscellaneous income and
expense, net 10.4 4.7 28.8 5.7
-------- ------- ------- -------
INCOME BEFORE TAXES, MINORITY
INTERESTS AND EQUITY IN NET
EARNINGS OF AFFILIATED
COMPANIES 304.1 136.7 799.6 299.9
Provision for taxes on
income (91.2) (42.1) (239.9) (93.0)
Minority interests in
consolidated subsidiaries (3.1) (2.4) (8.4) (5.2)
Equity in net earnings
of affiliated companies 2.0 2.0 5.3 5.7
-------- ------- ------- -------
NET INCOME $ 211.8 94.2 556.6 207.4
======== ======= ======= =======
EARNINGS PER SHARE $ 3.03 1.33 7.92 2.92
======== ======= ======= =======
AVERAGE NUMBER OF SHARES
OUTSTANDING 69.9 71.1 70.3 71.1
BUSINESS SEGMENTS
(Unaudited; in millions)
SALES AND OTHER OPERATING
REVENUES
Phelps Dodge Mining
Company $ 659.9 441.4 1,856.0 1,211.2
Phelps Dodge Industries 416.8 372.3 1,278.4 1,077.2
-------- ------- ------- -------
$1,076.7 813.7 3,134.4 2,288.4
======== ======= ======= =======
OPERATING INCOME (LOSS)
Phelps Dodge Mining
Company $ 266.8 110.9 656.8 226.6
Phelps Dodge Industries 55.4 35.2 193.4 109.8
Corporate and other (10.8) (7.0) (28.4) (21.7)
-------- ------- ------- -------
$ 311.4 139.1 821.8 314.7
======== ======= ======= =======
See Notes to Consolidated Financial Information.
<PAGE>
CONSOLIDATED BALANCE SHEET
(In millions)
September 30, December 31,
1995 1994
---- ----
(unaudited)
ASSETS
Cash and short-term investments, at cost $ 529.7 286.9
Accounts receivable, net 542.6 489.5
Inventories 274.0 266.3
Supplies 124.4 110.7
Prepaid expenses 18.4 15.9
Deferred income taxes 44.4 38.6
-------- -------
Current assets 1,533.5 1,207.9
Investments and long-term
accounts receivable 85.0 82.0
Property, plant and equipment, net 2,660.1 2,566.4
Other assets and deferred charges 279.4 277.5
-------- -------
$4,558.0 4,133.8
======== =======
LIABILITIES
Short-term debt $ 80.8 49.3
Current portion of long-term debt 16.5 25.3
Accounts payable and accrued expenses 503.8 528.5
Income taxes 18.7 46.6
-------- -------
Current liabilities 619.8 649.7
Long-term debt 620.1 622.3
Deferred income taxes 329.3 243.6
Other liabilities and deferred credits 348.2 365.3
-------- -------
1,917.4 1,880.9
-------- -------
MINORITY INTERESTS IN
CONSOLIDATED SUBSIDIARIES 70.0 65.3
-------- -------
COMMON SHAREHOLDERS' EQUITY
Common shares, 69.4 outstanding
(12/31/94 - 70.7) 433.9 441.7
Capital in excess of par value 10.5 84.5
Retained earnings 2,232.5 1,770.3
Cumulative translation adjustments and
other (106.3) (108.9)
-------- -------
2,570.6 2,187.6
-------- -------
$4,558.0 4,133.8
======== =======
See Notes to Consolidated Financial Information.
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited; in millions)
Nine months
ended
September 30,
-------------
1995 1994
---- ----
OPERATING ACTIVITIES
Net income $ 556.6 207.4
Adjustments to reconcile net income to
cash flow from operations:
Depreciation, depletion and
amortization 166.3 141.4
Deferred income taxes 79.9 9.0
Equity earnings net of dividends
received (5.1) (5.6)
------- -------
Cash flow from operations 797.7 352.2
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 (51.2) (107.0)
(Increase) decrease in inventories (7.5) (25.9)
(Increase) decrease in supplies (15.1) 6.9
(Increase) decrease in prepaid
expenses (2.8) (7.2)
(Increase) decrease in deferred
income taxes (5.7) (1.7)
Increase (decrease) in interest
payable 3.9 2.7
Increase (decrease) in other accounts
payable (50.6) 57.0
Increase (decrease) in income taxes (27.8) 19.4
Increase (decrease) in other accrued
expenses 25.6 23.5
(Gain) loss on asset dispositions
(see Note 4) (26.8) 17.5
Other adjustments, net 2.6 (12.2)
------- -------
Net cash provided by operating
activities 642.3 325.2
------- -------
INVESTING ACTIVITIES
Capital outlays (273.6) (264.1)
Capitalized interest (2.8) (20.0)
Proceeds from asset dispositions 40.3 3.0
Investment in subsidiaries (0.2) (52.2)
Other -- 7.0
------- -------
Net cash used in investing activities (236.3) (326.3)
------- -------
FINANCING ACTIVITIES
Increase in debt 36.7 146.5
Payment of debt (18.6) (106.2)
Common dividends (94.5) (87.4)
Purchase of common shares (93.7) (2.1)
Debt issue costs -- (7.1)
Other 6.9 (4.2)
------- -------
Net cash used in financing activities (163.2) (60.5)
------- -------
INCREASE (DECREASE) IN CASH AND
SHORT-TERM INVESTMENTS 242.8 (61.6)
CASH AND SHORT-TERM INVESTMENTS AT
BEGINNING OF PERIOD 286.9 255.8
------- -------
CASH AND SHORT-TERM INVESTMENTS AT END
OF PERIOD $ 529.7 194.2
======= =======
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 nine-month periods ended
September 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 November 6, 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, a minimum 1996 second quarter average
price of 95 cents per pound for approximately 90 million pounds of copper
cathode, and a minimum 1996 third quarter average price of 95 cents per
pound for approximately 40 million pounds of copper cathode. 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, 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, and minimum
(approximately 95 cents) and maximum (approximately $1.34) prices per pound
for the 1996 fourth quarter for approximately 120 million pounds of copper
cathode. The minimum and maximum prices are based on the quarterly average
London Metal Exchange (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 277 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.
4. The Corporation's net income for the first nine 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 nine 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 September 30, 1995, and for the three-month
and nine-month periods ended September 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 September 30, 1995, and the statement of
consolidated operations for the three-month and nine-month periods ended
September 30, 1995 and 1994, and the consolidated statement of cash flows for
the nine-month periods ended September 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
October 17, 1995
</AUDIT-REPORT>
<PAGE>
Item 2. Management's Discussion and Analysis
RESULTS OF OPERATIONS
Phelps Dodge Corporation had consolidated net income of $211.8 million, or
$3.03 per common share, in the third quarter of 1995, compared with $94.2
million, or $1.33 per common share, in the 1994 third quarter. Net income for
the nine months ended September 30, 1995, was $556.6 million, or $7.92 per
common share, compared with $207.4 million, or $2.92 per common share, in the
corresponding 1994 period. Net income in the 1995 nine-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 nine-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 nine-month periods ended September 30,
1995, were higher than those reported in the corresponding 1994 periods
principally as a result of higher prices and sales volumes of copper. Average
spot prices per pound of cathode copper on the New York Commodity Exchange
(COMEX) rose approximately 22 cents and 36 cents in the third quarter and first
nine 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
1.4 billion pounds of copper including about 200 million pounds from Candelaria,
which began operations in the 1994 fourth quarter, and about 130 million pounds
from the Southside project at the Corporation's Morenci mine in southeastern
Arizona, which began operations in the third quarter of 1995. 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 $14 million.
The COMEX spot price per pound of copper cathode, upon which the
Corporation bases its selling price, averaged $1.36 in the third quarter and
first nine months of 1995, compared with $1.14 and $1.00 in the corresponding
1994 periods. From October 1 to November 6, 1995, the average price was $1.29,
closing at $1.35 on November 6, 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 4 to Consolidated Financial Information.
Sales were $1,076.7 million in the 1995 third quarter, and $3,134.4 million
in the first nine months of 1995, compared with $813.7 million and $2,288.4
million in the corresponding 1994 periods. The 1995 increases resulted primarily
from higher average prices and higher sales volumes for copper, and also from
higher prices and higher sales volumes for carbon black, wire and cable
products, and wheels and rims.
PHELPS DODGE MINING COMPANY
Phelps Dodge Mining Company is an international business comprising a group
of companies involved in vertically integrated copper operations including
mining, concentrating, electro-winning, 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 Nine
Third Quarter Months
------------- -------------
1995 1994 1995 1994
---- ---- ---- ----
Copper from own mines *
(short tons)
Production 182,300 134,800 513,000 406,600
Deliveries 196,600 128,800 512,300 393,400
New York Commodity Exchange
average spot price per
pound - copper cathodes $ 1.36 1.14 1.36 1.00
(in millions)
Sales and other operating
revenues $659.9 441.4 1,856.0 1,211.2
Operating income $266.8 110.9 656.8 226.6
- -------
* 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 third quarter sales of $659.9 million
were 50 percent higher than in the third quarter of 1994. This increase
principally resulted from a 22 cents per pound increase in average copper prices
and a 67,800 ton increase in copper sales from mine production that included
43,600 tons from Candelaria (Candelaria commenced production in the 1994 fourth
quarter). Sales of $1,856.0 million in the first nine months of 1995 were 53
percent higher than in the corresponding 1994 period. This increase primarily
resulted from a 36 cents per pound increase in average copper prices and a
118,900 ton increase in copper sales from mine production that included 91,300
tons from Candelaria.
Phelps Dodge Mining Company recorded operating income of $266.8 million in
the 1995 third quarter and $656.8 million in the first nine months of 1995,
compared with $110.9 million and $226.6 million in the corresponding 1994
periods. The 1995 third quarter increase over the corresponding 1994 period
resulted from the increase in volumes of copper sold from mine production and,
to a lesser extent, the higher average copper prices already discussed. The
increase in operating income in the first nine months of 1995 over the
corresponding 1994 period resulted principally from the higher average copper
prices and, to a lesser extent, the volumes of copper sold from mine production
already discussed, partially offset by a small increase in copper production
costs. This increase in unit production costs primarily resulted from higher
mining costs and certain costs associated with higher copper prices. In
addition, 1994 operating income 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; and its U.S. and international wire and cable
and specialty conductor operations through Phelps Dodge International
Corporation and Phelps Dodge Magnet Wire Company and its subsidiaries.
================================================================================
First Nine
Third Quarter Months
------------- -------------
1995 1994 1995 1994
---- ---- ---- ----
(in millions)
Sales and other operating
revenues $416.8 372.3 1,278.4 1,077.2
Operating income $ 55.4 35.2 193.4 109.8
================================================================================
Phelps Dodge Industries' sales of $416.8 million in the third quarter of
1995 were 12 percent higher than in the third quarter of 1994. Sales of $1,278.4
million in the first nine months of 1995 were 19 percent higher than in the
corresponding 1994 period. These increases resulted primarily from higher sales
in the carbon black business reflecting higher average worldwide prices,
improved sales volumes in North American and European markets (especially from
the new operations in Spain and Hungary) and stronger European currencies
against the U.S. dollar. Increased 1995 sales also reflected higher sales
volumes and prices in the wheel and rim business, due to increased truck builds
in North America, and the wire and cable businesses.
Phelps Dodge Industries recorded operating income of $55.4 million in the
1995 third quarter and $193.4 million in the first nine months of 1995, compared
with $35.2 million and $109.8 million in the corresponding 1994 periods.
Operating income of $193.4 million in the first nine months of 1995 included a
pre-tax gain of $26.8 million from the sale of Columbian Chemicals Company's
MAPICO division in the first quarter. 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 $17.7 million in the 1995
third quarter and $51.0 million in the first nine months of 1995, compared with
$7.1 million and $20.5 million in the corresponding 1994 periods. Increased 1995
net interest expense principally resulted from the cessation of capitalization
of interest costs for the Candelaria project in Chile reflecting the substantial
completion of construction and development in the 1994 fourth quarter. The 1995
increase also reflected interest expense on second half 1994 borrowings at
Candelaria that remain outstanding, and interest expense on increased short-term
borrowings at the Corporation's international wire and cable operations to
finance working capital requirements.
The Corporation's miscellaneous income, net of miscellaneous expense, was
$10.4 million in the 1995 third quarter and $28.8 million in the first nine
months of 1995, compared with $4.7 million and $5.7 million in the corresponding
1994 periods. These increases primarily resulted from higher interest income
earned on cash and short-term investments. Miscellaneous income in the first
nine months of 1995 also included an increase of $6.8 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 nine months of 1995 were $218.5 million
for Phelps Dodge Mining Company and $54.4 million for Phelps Dodge Industries.
Capital outlays in the corresponding 1994 period were $222.5 million for Phelps
Dodge Mining Company and $41.1 million for Phelps Dodge Industries. The
Corporation expects capital outlays in 1995 to be approximately $325.0 million
for Phelps Dodge Mining Company. This amount does not include $40 million for
the potential acquisition of certain mining properties owned by Azco Mines,
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 September 30, 1995, the Corporation's total debt was $717.4 million,
compared with $696.9 million at December 31, 1994. The Corporation's ratio of
debt to total capitalization was 21.4 percent at September 30, 1995, compared
with 23.6 percent at December 31, 1994. Short-term debt increased from $49.3
million at December 31, 1994, to $80.8 million at September 30, 1995, primarily
as a result of borrowings to finance working capital requirements at the
Corporation's international wire and cable manufacturing operations.
On September 8, 1995, the Corporation paid a regular quarterly dividend of
45 cents per share on its common shares for the 1995 third quarter. The amount
paid for the third quarter was $31.4 million, bringing total 1995 dividends paid
through September 30 to $94.5 million. On November 1, 1995, the Board of
Directors declared a 1995 fourth quarter regular dividend of 45 cents per common
share to be paid on December 8, 1995, to shareholders of record at the close of
business on November 17, 1995.
In 1995 through November 6, the Corporation purchased 1,790,000 of its
common shares at a total cost of $101.1 million. These purchases included
1,705,000 shares under a new share buyback program authorized on March 7, 1995,
and 85,000 shares under the superseded program. There were 69,424,900 common
shares outstanding on September 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 14,800 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. Since the beginning of 1993, PDI has obtained
dismissals of all but two of the claims brought against it in Mississippi.
During 1995, PDI has been dismissed from 188 asbestos-related claims, while
1,033 new claims have been filed against PDI in nine states. As of September 30,
1995, a total of 1,183 asbestos-related claims were being defended by PDI in 15
jurisdictions. PDI is vigorously contesting and defending these claims.
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, 1995.
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 9, 1995 By: Thomas M. Foster
-------------------
Thomas M. Foster
Vice President and Controller
(Principal Accounting Officer)
<PAGE>
PHELPS DODGE CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
12 Computation of ratios of total debt to total capitalization.
15 Letter from Price Waterhouse LLP with respect to unaudited interim
financial information.
27 Financial Data Schedule for the nine months ended September 30, 1995.
PHELPS DODGE CORPORATION AND SUBSIDIARIES
Exhibit 12
COMPUTATION OF TOTAL DEBT TO TOTAL CAPITALIZATION
(Dollars in thousands)
Sept. 30, December 31,
1995 1994
---- ----
(unaudited)
Short-term debt $ 80,800 49,300
Current portion of long-term debt 16,500 25,300
Long-term debt 620,100 622,300
----------- -----------
Total debt 717,400 696,900
Minority interests in subsidiaries 70,000 65,300
Common shareholders' equity 2,570,600 2,187,600
----------- -----------
Total capitalization $ 3,358,000 2,949,800
=========== ===========
Ratio of total debt to total
capitalization 21.4% 23.6%
=========== ===========
Exhibit 15
PRICE WATERHOUSE LLP
November 6, 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 October 17, 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 and
33-62486). We are also aware of our responsibilities under the Securities Act of
1933.
Yours very truly,
Price Waterhouse LLP
Phoenix, Arizona
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1995 AND
THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS AND OF CASH
FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 529,700
<SECURITIES> 0
<RECEIVABLES> 542,600
<ALLOWANCES> 0
<INVENTORY> 274,000
<CURRENT-ASSETS> 1,533,500
<PP&E> 2,660,100
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,558,000
<CURRENT-LIABILITIES> 619,800
<BONDS> 620,100
<COMMON> 433,900
0
0
<OTHER-SE> 2,136,700
<TOTAL-LIABILITY-AND-EQUITY> 4,558,000
<SALES> 3,134,400
<TOTAL-REVENUES> 3,134,400
<CGS> 2,033,500
<TOTAL-COSTS> 2,033,500
<OTHER-EXPENSES> 190,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,000
<INCOME-PRETAX> 799,600
<INCOME-TAX> 239,900
<INCOME-CONTINUING> 556,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 556,600
<EPS-PRIMARY> 7.92
<EPS-DILUTED> 7.92
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