<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: December 30, 1999 (Date of earliest event reported)
Phelps Dodge Corporation
(Exact name of registrant as specified in its charter)
New York 1-82 13-1808503
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
2600 North Central Avenue, Phoenix, AZ 85004-3089
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (602) 234-8100
Not Applicable
(Former name or former address, if changed since last
report.)
<PAGE> 2
This Amendment is being filed to provide the unaudited pro forma
combined financial information required by Item 7(c) of Form 8-K which was not
filed with the Registrant's Current Reports on Form 8-K filed on October 22,
1999 and December 2, 1999.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
Previously reported.
(b) Pro Forma Financial Statements.
<PAGE> 3
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Financial Information is derived
from the historical consolidated financial statements of Phelps Dodge
Corporation ("Phelps Dodge") and Cyprus Amax Minerals Company ("Cyprus Amax").
The Unaudited Pro Forma Combined Financial Information is prepared using the
purchase method of accounting, with Phelps Dodge treated as the acquirer and as
if the transaction had been completed as of January 1, 1998, for statement of
operations purposes, and on September 30, 1999, for balance sheet purposes.
The Unaudited Pro Forma Combined Financial Information is based upon the
historical financial statements of Phelps Dodge and Cyprus Amax adjusted to give
effect to the business combination. The pro forma assumptions and adjustments
are described in the accompanying notes presented on the following pages. The
assumptions and related pro forma adjustments have been developed from
information from the December 31, 1998 Form 10-K filings and September 30, 1999,
Form 10-Q filings of Cyprus Amax and Phelps Dodge, the June 30, 1999 Form 8-K
filing of Cyprus Amax, the Agreement and Plan of Merger among Phelps Dodge, CAV
Corporation and Cyprus Amax dated September 30, 1999 (the "Cyprus Merger
Agreement") and other records of Cyprus Amax. Such pro forma adjustments have
been included only to the extent known and reasonably available.
Phelps Dodge agreed to combine its business with Cyprus Amax pursuant to
the Cyprus Merger Agreement. Upon the October 15, 1999 expiration of the Phelps
Dodge offer to acquire Cyprus Amax common shares, approximately 81.5 million,
or 89.6%, of the Cyprus Amax common shares outstanding were purchased by Phelps
Dodge. At a Special Meeting of shareholders on December 2, 1999 (the "Special
Meeting"), shareholders representing a majority of outstanding common shares of
Cyprus Amax voted to approve and adopt the Cyprus Merger Agreement. Following
the Special Meeting, Cyprus Amax merged with and into CAV Corporation, and each
outstanding Cyprus Amax common share (other than those owned by Phelps Dodge,
Cyprus Amax or their respective subsidiaries) was converted into the right to
receive 0.3500 Phelps Dodge common shares. Consequently, Phelps Dodge has
deposited with an exchange agent sufficient of its common shares to effect the
acquisition at the exchange ratio of 0.3500 shares of Phelps Dodge common stock
for each Cyprus Amax common share. Accordingly, the Unaudited Pro Forma
Combined Financial Information reflects the purchase by Phelps Dodge of all
outstanding Cyprus Amax common shares.
Phelps Dodge has not fully completed purchase accounting procedures and
integration planning. Such procedures and planning may provide Phelps Dodge with
additional information that could materially affect the purchase price
allocation and, accordingly, certain assumptions and pro forma adjustments.
Identified factors which may have a significant impact on the basis and results
of the combination are described in Note 2 of the accompanying notes to the
Unaudited Pro Forma Combined Balance Sheet and Combined Statements of
Operations.
The Unaudited Pro Forma Combined Financial Information is provided for
illustrative purposes only and does not purport to represent what the actual
consolidated results of operations or the consolidated financial position of
Phelps Dodge would have been had the acquisition of Cyprus Amax occurred on the
date assumed, nor is it necessarily indicative of future consolidated operating
results or financial position.
The Unaudited Pro Forma Combined Financial Information does not include
the realization of cost savings from operating synergies or other
restructurings resulting from the transaction. Also, the Unaudited Pro Forma
Combined Financial Information does not reflect the impact of any potential
sale of acquired assets. However, subsequent to the acquisition of 89.6% of
Cyprus Amax by Phelps Dodge, Cyprus Amax sold its approximately 30% interest in
Kinross Gold Corporation ("Kinross") for net cash proceeds of $233 million.
The Unaudited Pro Forma Combined Financial Information does not reflect the
sale. In addition, Phelps Dodge is in the process of assessing, formulating and
implementing integration plans, which are expected to include employee
separations, exiting from certain acquired activities and other restructuring
actions. The final result of these plans could result in material revisions to
the estimated liabilities and purchase price allocations reflected in the
Unaudited Pro Forma Combined Financial Information.
This Unaudited Pro Forma Combined Financial Information should be read in
conjunction with the separate historical consolidated financial statements and
accompanying notes of Phelps Dodge and Cyprus Amax which were filed with the
December 31, 1998 Form 10-K filings and September 30, 1999 Form 10-Q filings of
Phelps Dodge and Cyprus Amax and the June 30, 1999 Form 8-K filing of Cyprus
Amax. You should not rely on the Unaudited Pro Forma Combined Financial
Information as an indication of the consolidated results of operations or
financial position that would have been achieved if the business combination
had taken place earlier or of the consolidated results of operations or
financial position of Phelps Dodge after the completion of such transaction.
<PAGE> 4
PHELPS DODGE CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
PHELPS DODGE AND CYPRUS AMAX COMBINED
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------- PRO FORMA PRO FORMA
PHELPS DODGE CYPRUS AMAX ADJUSTMENTS COMBINED
------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
Sales and other operating revenues....... $2,097 869 -- 2,966
------ ---- ---- -----
Operating costs and expenses
Cost of products sold.................. 1,653 646 -- 2,299
Depreciation, depletion
and amortization.................... 213 153 38(I) 404
Selling and general administrative
expense............................. 90 139 (86)(A) 143
Exploration and research expense....... 33 11 -- 44
Non-recurring charges and provision for
asset dispositions.................. 84 -- 86 (A) 170
------ ---- ---- -----
2,073 949 38 3,060
------ ---- ---- -----
Operating income (loss).................. 24 (80) (38) (94)
Interest expense....................... (68) (102) -- (170)
Capitalized interest................... -- 4 -- 4
Miscellaneous income and
expense, net........................ (4) 22 -- 18
------ ---- ---- -----
Income (loss) before taxes, minority
interests and equity in net earnings of
affiliated companies................... (48) (156) (38) (242)
Provision for taxes on income.......... 1 34 12(J) 47
Minority interests in consolidated
subsidiaries........................ -- (1) -- (1)
Equity in net earnings (losses) of
affiliated companies................ 5 (28) -- (23)
------ ---- ---- -----
Income (loss) from continuing
operations............................. (42) (151) (26) (219)
Preferred stock dividends.............. -- (14) 14(E) --
------ ---- ---- -----
Income (loss) from continuing operations
applicable to common shares............ $ (42) (165) (12) (219)
====== ==== ==== =====
Net earnings (loss) per share
Basic.................................. $(0.72) (2.80)
Diluted................................ $(0.72) (2.80)
Weighted average shares outstanding
Basic.................................. 57.8 78.3
Diluted................................ 57.8 78.3
</TABLE>
<PAGE> 5
PHELPS DODGE CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
PHELPS DODGE AND CYPRUS AMAX COMBINED
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
--------------------------- PRO FORMA PRO FORMA
PHELPS DODGE CYPRUS AMAX ADJUSTMENTS COMBINED
------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
Sales and other operating revenues.... $3,064 1,661 (218)(A) 4,507
------ ----- ---- -----
Operating costs and expenses
Cost of products sold................. 2,361 1,087 (42)(A) 3,406
Depreciation, depletion and
amortization..................... 293 255 (7)(A)
56 (I) 597
Selling and general administrative
expense.......................... 123 105 (4)(A) 224
Exploration and research expense.... 55 44 -- 99
Non-recurring charges and provision
for asset dispositions.......... (191) 118 (154)(A) (227)
------ ----- ---- -----
2,641 1,609 (151) 4,099
------ ----- ---- -----
Operating income (loss)............... 423 52 (67) 408
Interest expense.................... (97) (157) -- (254)
Capitalized interest................ 2 1 -- 3
Miscellaneous income and expense,
net.............................. 9 17 -- 26
------ ----- ---- -----
Income (loss) before taxes, minority
interests and equity in net earnings
of affiliated companies............. 337 (87) (67) 183
Provision for taxes on income....... (134) 5 21 (J) (108)
Minority interests in consolidated
subsidiaries..................... (8) 1 -- (7)
Equity in net earnings (losses) of
affiliated companies............. (4) (53) -- (57)
------ ----- ---- -----
Income (loss) from continuing
operations.......................... 191 (134) (46) 11
Preferred stock dividends........... -- (19) 19 (E) --
------ ----- ---- -----
Income (loss) from continuing
operations applicable to common
shares.............................. $ 191 (153) (27) 11
====== ===== ==== =====
Net earnings (loss) per share
Basic............................... $ 3.28 0.14
Diluted............................. $ 3.26 0.14
Weighted average shares outstanding
Basic............................... 58.2 78.7
Diluted............................. 58.5 79.1
</TABLE>
<PAGE> 6
PHELPS DODGE CORPORATION
PRO FORMA COMBINED BALANCE SHEET
PHELPS DODGE AND CYPRUS AMAX COMBINED
SEPTEMBER 30, 1999
(UNAUDITED)
(AMOUNTS IN MILLIONS)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------- PRO FORMA PRO FORMA
PHELPS DODGE CYPRUS AMAX ADJUSTMENTS COMBINED
------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents..................... $ 165 845 (25)(C)
(693)(B)
(30)(B) 262
Accounts receivable, net.................... 408 91 -- 499
Inventories................................. 269 246 30 (D) 545
Supplies.................................... 105 55 -- 160
Prepaid expenses............................ 17 73 (42)(A) 48
Assets held for sale........................ -- -- 233 (A) 233
Deferred income taxes....................... 49 2 (2)(J) 49
------- ------- ------- -------
Current assets............................ 1,013 1,312 (529) 1,796
Investments and long-term accounts
receivable................................ 92 317 (233)(A)
92 (A)
(16)(D) 252
Property, plant and equipment, net.......... 3,455 2,543 54 (A)
391 (D) 6,443
Other assets and deferred charges........... 329 175 (54)(A)
119 (J)
(92)(A)
42 (A)
30 (B) 549
------- ------- ------- -------
Total Assets......................... $ 4,889 4,347 (196) 9,040
======= ======= ======= =======
LIABILITIES
Short-term debt............................. $ 230 7 205(E) 442
Current portion of long-term debt........... 55 76 -- 131
Accounts payable and accrued expenses....... 467 277 147(F) 891
Dividends payable........................... -- 5 -- 5
Accrued income taxes........................ 3 38 -- 41
------- ------- ------- -------
Current liabilities....................... 755 403 352 1,510
Long-term debt.............................. 806 1,532 (15)(D) 2,323
Deferred income taxes....................... 500 4 180(J) 684
Other liabilities and deferred credits...... 373 410 119(D)
7(F) 909
------- ------- ------- -------
2,434 2,349 643 5,426
------- ------- ------- -------
Minority interests in consolidated
subsidiaries................................ 78 21 -- 99
------- ------- ------- -------
Shareholders' equity
Common shares............................... 362 1 (1)(H)
3(E)
125(G) 490
Treasury shares............................. -- (79) 79(A) --
Preferred shares............................ -- 5 (1)(E)
(4)(E) --
Capital in excess of par value.............. 6 2,911 (79)(A)
-- (2,832)(H)
24(E)
-- 971(G)
15(B) 1,016
Retained earnings........................... 2,213 (847) 847(H) 2,213
Accumulated other comprehensive income
(loss).................................... (197) -- -- (197)
Other....................................... (7) (14) 14(H) (7)
------- ------- ------- -------
Total Shareholders' Equity........... 2,377 1,977 (839) 3,515
------- ------- ------- -------
Total Liabilities and Shareholders'
Equity............................. $ 4,889 4,347 (196) 9,040
======= ======= ======= =======
</TABLE>
<PAGE> 7
COMBINATION OF PHELPS DODGE AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION
1. BASIS OF PRESENTATION
The Unaudited Pro Forma Combined Financial Information has been derived
from historical consolidated financial statements of Phelps Dodge and Cyprus
Amax. See Phelps Dodge "Unaudited Pro Forma Combined Financial Information" on
page 3 of this filing.
Phelps Dodge has not fully completed purchase accounting procedures and
integration planning. Such procedures and planning may provide Phelps Dodge
with additional information that could materially affect purchase price
allocations and accordingly certain assumptions and pro forma adjustments. Pro
forma adjustments have been included only to the extent that definitive
information to determine or reasonably estimate appropriate adjustments has been
available. Additional information may exist that could materially affect the
assumptions and related pro forma adjustments.
2. THE OFFER
Phelps Dodge agreed to a business combination with Cyprus Amax pursuant to
the Cyprus Merger Agreement through an offering to exchange all the issued and
outstanding Cyprus Amax common shares for a combination of Phelps Dodge common
shares and cash.
Phelps Dodge offered to exchange $7.61176875 net in cash plus 0.2203
shares of Phelps Dodge common stock for each outstanding share of Cyprus Amax
common stock, on a fully prorated basis. Cyprus Amax shareholders had the right
to elect to receive either $20.54 in cash or 0.3500 shares of Phelps Dodge
common stock for each Cyprus Amax common share that was validly tendered and
not properly withdrawn, subject, in each case, to proration if the stock
portion or the cash portion of the offer was oversubscribed. Upon the October
15, 1999 expiration of the Phelps Dodge offer, approximately 81.5 million, or
89.6%, of the Cyprus Amax common shares outstanding were purchased by Phelps
Dodge. Shareholders of Cyprus Amax at a Special Meeting on December 2, 1999
approved and adopted the Cyprus Merger Agreement. Following the Special
Meeting, Cyprus Amax merged with and into CAV Corporation, and each outstanding
Cyprus Amax common share (other than those owned by Phelps Dodge, Cyprus Amax
or their respective subsidiaries) was converted into the right to receive
0.3500 Phelps Dodge common shares.
The funds for the cash consideration in connection with the exchange of
Cyprus Amax common shares were obtained from cash on hand and from a bridge
financing revolving credit facility with Citibank, N.A. for borrowings of $650
million, terminating on January 31, 2000 and at a variable interest rate which
approximated 6% on October 15, 1999. Phelps Dodge repaid the borrowings.
The transaction will be accounted for under the purchase method. The
purchase price for the business combination is estimated as follows (dollars in
millions and shares in thousands except per share data):
<TABLE>
<CAPTION>
<S> <C>
Cyprus Amax common shares outstanding on October 15,1999.... 90,867
Exchange offer ratio of Phelps Dodge common shares for each
Cyprus Amax common share on a fully prorated basis.......... 0.2203
------
Phelps Dodge common shares to be issued................... 20,018
Preferred stock converted to Cyprus Amax common shares...... 1,431
Cyprus Amax common shares issued after October 15, 1999..... 61
------
Sub-total................................................. 1,492
Merger exchange ratio of Phelps Dodge common shares for
each Cyprus Amax common share converted on December 2, 1999. 0.3500
------
Phelps Dodge common shares to be issued .................. 522
--------
20,540
Fair value of each Phelps Dodge common share issued to
effect the merger based on the average of closing market
prices for a reasonable period before and after September
30, 1999, the date of the Cyprus Merger Agreement......... $54.70
========
Fair value of Phelps Dodge common shares issued, comprising
par value of $128 ($6.25 per share) and capital in excess
of par of $995............................................ $1,123
Cash Consideration of $7.61176875 for each Cyprus Amax
common share and cash exchanged for fractional shares..... 693
Estimated fair value of Cyprus Amax outstanding options..... 15
Estimated transaction costs................................. 25
--------
Purchase price.............................................. $ 1,856
========
</TABLE>
<PAGE> 8
COMBINATION OF PHELPS DODGE AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION -- (CONTINUED)
3. PRO FORMA ASSUMPTIONS AND ADJUSTMENTS
The following assumptions and related pro forma adjustments give effect to
the business combination of Phelps Dodge and Cyprus Amax as if such combination
occurred on January 1, 1998, for the Unaudited Pro Forma Combined Statements of
Operations for the nine-month interim period ended September 30, 1999, and for
the year ended December 31, 1998, and on September 30, 1999, for the Unaudited
Pro Forma Combined Balance Sheet.
The Unaudited Pro Forma Combined Financial Information is provided for
illustrative purposes only and does not purport to represent what the actual
consolidated results of operations or the consolidated financial position of
Phelps Dodge would have been had the business combination with Cyprus Amax
occurred on the respective dates assumed, nor is it necessarily indicative of
future consolidated operating results or financial position.
Future cash cost savings are not recognized in this Unaudited Pro Forma
Combined Financial Information. Non-recurring items related to 1998 and the
nine-month interim period ended September 30, 1999 are included.
(A) Reclassifications have been made to the Cyprus Amax historical
consolidated financial information to conform to Phelps Dodge's
presentation. The historical financial information of Cyprus Amax excludes
the results of operations and assets of its discontinued Coal segment.
Cyprus Amax's historical financial information for the year ended December
31, 1998, also has been adjusted to exclude the identifiable results of
recurring operations of its Lithium segment which was sold in October 1998.
<TABLE>
<CAPTION>
BALANCE SHEET NINE MONTHS YEAR ENDED
AT SEPTEMBER 30, ENDED DECEMBER 31,
1999 SEPTEMBER 30, 1999 1998
---------------- ------------------ ------------
(IN $ MILLIONS)
<S> <C> <C> <C>
Reclassification adjustments:
Treasury shares............ 79
Capital in excess of par
value................... (79)
Property, plant and
equipment (water rights) 54
Other assets and deferred
charges ................ (54)
Assets held for sale
(Kinross) .............. 233
Investments and long-term
receivables ............ (233)
Investments and long-term
receivable (cost
investments and long-
term receivables) ...... 92
Other assets and deferred
charges ................ (92)
Prepaid expenses .......... (42)
Other assets and deferred
charges (classification
of non-current assets) . 42
Reclassification of merger
termination and legal
settlement:
Selling, general and
administrative ........ (86)
Non-recurring charges and
provision for asset
dispositions .......... 86
Elimination of identifiable
recurring results from
sold Lithium segment:
Sales and other operating
revenues ............... (64)
Cost of products sold ..... (42)
Depreciation, depletion
and amortization
expense ................ (7)
Selling and general
administrative
expense ................ (4)
Reclassification of gain on
sale of Lithium segment:
Sales and other revenues ... (154)
Non-recurring charges and
provisions for asset
dispositions ........... 154
</TABLE>
<PAGE> 9
COMBINATION OF PHELPS DODGE AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION -- (CONTINUED)
(B) This pro forma adjustment represents payment of the cash component
of the purchase price of $693 million, the estimated fair value of Cyprus
Amax outstanding stock options of $15 million and the funding by Cyprus
Amax of certain change of control settlements and benefits of $72 million.
(C) Phelps Dodge estimates it will incur approximately $25 million of
transaction costs, consisting primarily of investment bankers, attorneys
and accountant fees, and financial printing and other charges.
(D) The business combination will be accounted for using the purchase
method in accordance with generally accepted accounting principles.
Accordingly, the assets and liabilities of Cyprus Amax will be recorded at
their estimated fair values.
Phelps Dodge has not fully completed purchase accounting procedures
and integration planning necessary to determine the fair value of Cyprus
Amax assets or liabilities or to identify unknown liabilities or
obligations. Pro forma adjustments to allocate the purchase price have been
recorded in the Unaudited Pro Forma Combined Financial Information on the
basis of fair values assessed for the assets and liabilities by management
with support of independent valuations. Because fair value information for
certain capital assets and any possible identifiable intangible assets is
incomplete, the estimated excess of the purchase price over the historical
net book values (as amended) of Cyprus Amax's assets acquired has been
allocated as an increase to its combined net property, plant and equipment.
Additionally, Phelps Dodge believes that cost savings will be realized
upon the consolidation and integration of Cyprus Amax. Phelps Dodge is
developing formal plans for combining the operations and the integration is
proceeding. However, additional liabilities beyond those reflected in the
pro forma adjustments, may be incurred in connection with the business
combination and any ultimate restructuring. Accordingly, the allocation of
the purchase price may differ materially from the amounts assumed in the
Unaudited Pro Forma Combined Financial Information. Phelps Dodge
management believes that, with the exception of the final estimation of
fair values for certain capital assets and any possible identifiable
intangible assets or goodwill, changes to the pro forma adjustments for
the allocation of the purchase price should not be material to the
Unaudited Pro Forma Combined Financial Information.
Adjustments to reflect fair value estimates [increase,(decrease)]
<TABLE>
<S> <C>
Inventories................................................. $ 30
Investments and long-term receivables....................... $ (16)
Long-term debt.............................................. $ (15)
Other liabilities and deferred credits...................... $ 119
Net property, plant and equipment (derived)................. $ 391
</TABLE>
(E) The pro forma adjustment reflects the redemption or conversion of
all 4,664,302 outstanding shares of Cyprus Amax's Series A Preferred Stock.
Cyprus Amax issued notice of redemption effective November 19, 1999 at
$52.4778 per preferred share, including $0.8778 per preferred share in
accrued and unpaid dividends. For pro forma presentation purposes only the
redemption is shown as being financed by short term borrowings which were
repaid from the proceeds of $233 million from the Kinross sale. Redemption
of the preferred shares was funded November 19, 1999, through available
cash and the proceeds from the Kinross sale.
(F) The pro forma adjustment includes the estimated liabilities
relating to costs arising from the merger of Cyprus Amax and Phelps
Dodge, employee separations including certain change of control
obligations, exiting of certain acquired activities and other
restructuring actions taken or planned.
(G) This pro forma adjustment reflects the issuance of 20,018,000
shares of Phelps Dodge common stock in connection with the exchange offer
for common shares of Cyprus Amax and the merger of Cyprus Amax with and
into CAV Corporation. The common stock of Phelps Dodge represents common
shares of $125 million at $6.25 per share par value and capital in
excess of par of $971 million.
(H) These pro forma adjustments eliminate the historical shareholders'
equity accounts of Cyprus Amax.
<PAGE> 10
COMBINATION OF PHELPS DODGE AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION -- (CONTINUED)
(I) This pro forma adjustment records the estimated increase in
depreciation, depletion and amortization expense related to the pro forma
increase in property, plant and equipment recorded in connection with the
business combination purchase price allocation. Because fair value
information regarding the composition of Cyprus Amax's property, plant and
equipment is not yet complete, actual adjustments to depreciation,
depletion and amortization expense could differ substantially from these
estimates.
(J) The estimated income tax effect of the pro forma adjustments has
been recorded based upon the estimated statutory tax rates ranging from
15%-35% for Cyprus Amax and foreign operations. The business combination
is expected to be a tax-free transaction with Cyprus Amax's historical
tax bases surviving for income tax reporting purposes.
A provision for pro forma income tax expense has been recorded for pro
forma adjustments to the Pro Forma Combined Statements of Operations
resulting from pro forma purchase price allocation adjustments and other
items.
Cyprus Amax has Separate Return Limitation Year net operating loss
carryforwards through 1998, expiring from 1999 to 2012, which along with
other deferred tax assets are subject to an existing valuation allowance.
The net operating loss carryforwards will be subject to annual limitations
after the acquisition because of the change in ownership rules. The annual
limit is calculated as the long-term tax exempt rate times the fair
market value of Cyprus Amax. The annual limit is currently estimated to be
$98 million. Other tax rules may further limit the use of net
operating loss carryforwards. Once all facts are known, the annual limit
and other rules may necessitate an increase in the consolidated valuation
allowance for deferred tax assets.
Deferred tax allocations finally recorded for the business
combination could vary significantly from the pro forma estimates because
information regarding Cyprus Amax's income tax reporting has not yet been
fully evaluated.
(K) Pro forma weighted average common stock and common stock
equivalents outstanding are estimated as follows (in millions):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1999 1998
---------------- ----------------
BASIC DILUTED BASIC DILUTED
----- ------- ----- -------
<S> <C> <C> <C> <C>
Average number of Phelps Dodge
common shares outstanding......... 57.8 57.8 58.2 58.5
Phelps Dodge common shares to be
issued in connection with the
business combination (Note 2)....... 20.5 20.5 20.5 20.6
---- ---- ---- ----
78.3 78.3 78.7 79.1
==== ==== ==== ====
</TABLE>
<PAGE> 11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PHELPS DODGE CORPORATION
(Registrant)
By: /s/ Stanton K. Rideout
--------------------------------
Name: Stanton K. Rideout
Title: Vice President and Controller
Date: December 30, 1999
