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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: October 12, 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
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Item 5. Other Events.
The information set forth in the press release issued by Phelps Dodge
Corporation on October 12, 1999, attached hereto as Exhibit 99.1, is
incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
99.1 Press Release of Phelps Dodge Corporation, dated October 12,
1999
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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 there unto duly authorized.
PHELPS DODGE CORPORATION
(Registrant)
By: /s/ Ramiro G. Peru
--------------------------------------
Name: Ramiro G. Peru
Title: Senior Vice President and Chief
Financial Officer
Date: October 12, 1999
2
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EXHIBIT INDEX
Exhibit
Number Exhibit
99.1 Press Release of Phelps Dodge Corporation, dated October 12, 1999
3
<PAGE> 1
Exhibit 99.1
NEWS RELEASE
[PHELPS DODGE LETTERHEAD]
Contact: Thomas M. Foster
(602) 234-8139
or Greg Stevens
(602) 234-8166
PHELPS DODGE REPORTS EARNINGS OF 28 CENTS PER SHARE
IN 1999 THIRD QUARTER BEFORE RESTRUCTURE CHARGES
Phoenix, Arizona, October 12, 1999 -- Phelps Dodge Corporation today
reported consolidated earnings in the 1999 third quarter of $16.1 million, or
28 cents per share before non-recurring, after-tax charges of $0.7 million, or
1 cent per share, from the company's restructuring plan announced on June 30,
1999. By comparison, earnings for the third quarter of 1998 were $20.3 million,
or 35 cents per share, excluding a non-recurring, after-tax gain of $8.3
million, or 14 cents per share, from the completion of the disposition of
Accuride Corporation. Earnings for the first nine months of 1999 were $17.8
million, or 31 cents per share, before charges of $59.4 million, or $1.03 per
share, from the restructuring plan and an after-tax charge of $3.5 million, or
6 cents per share, recognized in the first quarter for the cumulative effect of
an accounting change associated with unamortized start-up costs. Earnings for
the first nine months of 1998 were $101.6 million, or $1.73 per share, before a
non-recurring, after-tax gain of $131.1 million, or $2.24 per share, from the
disposition of Accuride Corporation.
Douglas C. Yearley, chairman of the board and chief executive officer,
said: "We are pleased with our continuing ability to generate positive
operating results in the midst of a difficult copper market and prolonged
uncertainty in key wire and cable markets. Phelps Dodge Mining Company took
advantage of a slight improvement in copper prices in the third quarter to
produce $36 million of operating income, its best quarterly performance since
the first quarter of 1998. In addition, our specialty chemicals segment
continued its strong performance including significant contributions from the
recently acquired carbon black facilities in Brazil and Korea.
"While confident in the long-term prospects for copper, we remain cautious
about the near-term sustainability of the recent upward trend in copper prices.
We believe depressed prices could continue for several more quarters.
"Cash flow provided by operating activities, the principal measure of our
operating performance, was $116.6 million in the first nine months of 1999,
compared with $227.9 million in the corresponding 1998 period. The decrease
primarily reflected lower copper prices and reduced earnings from the wire and
cable segment."
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Sales were $742.7 million in the 1999 third quarter and $2,096.9 million in
the first nine months of 1999, compared with $764.0 million and $2,356.7 million
in the corresponding 1998 periods. The decrease for the first nine months
primarily resulted from lower average copper prices, lower sales volumes of
copper and lower sales of wire and cable products, partially offset by higher
sales volumes of carbon black.
Phelps Dodge Mining Company reported sales to unaffiliated customers of
$406.9 million in the 1999 third quarter and $1,102.3 million in the first nine
months of 1999. Sales were $421.9 million and $1,303.5 million in the
corresponding 1998 periods. The New York Commodity Exchange spot price per
pound of copper cathode averaged 78 cents in the third quarter and 70 cents in
the first nine months of 1999, compared with 75 cents and 77 cents in the
corresponding 1998 periods.
Phelps Dodge Mining Company reported operating income of $36.2 million in
the third quarter, compared with $27.2 million in the 1998 third quarter. The
increase reflected higher average copper prices and lower copper production
costs, which were partially offset by lower volumes of copper sold from mine
production. Operating income in the first nine months of 1999 was $42.7 million
before non-recurring, pre-tax charges of $34.5 million from the restructuring
plan announced on June 30, 1999, compared with $119.2 million in the first nine
months of 1998. The year-to-date decrease reflected lower average copper prices
and lower volumes of copper sold from mine production, partially offset by
lower copper production costs. Lower 1999 copper production costs were due in
part to the 1998 curtailment and shutdown of certain higher cost operations.
The Phelps Dodge Mining Company share of mine production from its
worldwide operations was 187,600 tons of copper in the 1999 third quarter and
595,600 tons in the first nine months of 1999. This production compares with
220,600 tons in the 1998 third quarter and 658,200 tons in the first nine
months of 1998. The division's copper sales from mine production were 193,000
tons in the 1999 third quarter and 595,300 tons in the first nine months of
1999, compared with 220,600 tons and 650,700 tons in the corresponding 1998
periods.
Phelps Dodge Industries reported sales of $335.8 million in the third
quarter and $994.6 million in the first nine months of 1999. Sales were $342.1
million and $1,053.2 million in the corresponding 1998 periods. The
year-to-date decrease principally reflected lower sales in the wire and cable
segment. This decrease was partially offset by higher sales volumes in the
carbon black segment, which included sales from facilities acquired in Brazil
and Korea in the 1998 fourth quarter and 1999 first quarter, respectively.
Phelps Dodge Industries reported operating income of $27.9 million in the
1999 third quarter before non-recurring, pre-tax charges of $1.1 million from
the restructuring plan announced on June 30, 1999. This compares with operating
income of $34.7 million in the 1998 third quarter before the effect of a $12.6
million pre-tax gain from the completion of the disposition of Accuride.
Operating income in the first nine months of 1999 was $101.1 million before
non-recurring, pre-tax charges of $49.4 million from the restructuring plan.
Operating income was $127.5 million in the first nine months of 1998 before the
effect of a $198.7 million pre-tax gain from the disposition of Accuride.
Phelps Dodge Industries' 1999 operating income decrease was principally due to
the continuing effects of Asian and South American economic difficulties and
a slowdown in aerospace and relevant electronic markets in the United States.
These effects were partially offset by strong performances by the carbon black
businesses, including the recently acquired facilities in Brazil and Korea.
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The company's total debt at September 30, 1999, was $1,091.0 million,
compared with $1,021.0 million at year-end 1998. Debt increased primarily as a
result of financing for the first quarter 1999 purchase of a carbon black
business in Korea. The company's ratio of debt to total capitalization was 30.8
percent at September 30, 1999, compared with 27.6 percent at December 31, 1998.
Capital expenditures and investments during the first nine months of 1999
were $55.4 million for Phelps Dodge Mining Company and $118.9 million for Phelps
Dodge Industries including $76.1 million for the acquisition of an 85 percent
interest in the Korean carbon black manufacturing business of Korea Kumho
Petrochemical Co., Ltd. Capital expenditures and investments in the
corresponding 1998 period were $279.9 million for Phelps Dodge Mining Company,
including $113.3 million for the acquisition of Cobre Mining Company, and $105.5
million for Phelps Dodge Industries. The company expects capital expenditures
and investments for the year 1999 to be approximately $100 million for Phelps
Dodge Mining Company, and approximately $165 million for Phelps Dodge
Industries. The projected capital expenditures and investments for the year 1999
do not include the effect of the potential acquisitions of Asarco and Cyprus
Amax.
On September 10, 1999, the company paid a regular quarterly dividend of 50
cents per share on its common shares for the 1999 third quarter, the amount paid
for the third quarter was $29.0 million bringing total 1999 dividends paid
through September to $87.0 million.
Phelps Dodge Corporation is among the world's largest producers of copper.
The company also is one of the world's largest producers of carbon black, one of
the world's largest manufacturers of magnet wire, and has operations and
investments in mines and wire and cable manufacturing facilities around the
world. Phelps Dodge has operations in 28 countries.
This release includes "forward-looking statements" that express
expectations of future events or results. All statements based on future
expectations rather than on historical facts are forward-looking statements that
involve a number of risks and uncertainties, and the company cannot give
assurance that such statements will prove to be correct. Please refer to the
Management's Discussion and Analysis sections of the company's report on Form
10-K for the year ended December 31, 1998.
# # #
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PHELPS DODGE CORPORATION
STATEMENT OF CONSOLIDATED OPERATIONS
(Unaudited; in millions except per share data)
<TABLE>
<CAPTION>
THIRD QUARTER FIRST NINE MONTHS
---------------- -------------------
1999 1998 1999 1998
------- ------ -------- --------
<S> <C> <C> <C> <C>
SALES AND OTHER OPERATING REVENUES...................... $ 742.7 764.0 2,096.9 2,356.7
------- ------ -------- --------
OPERATING COSTS AND EXPENSES
Cost of products sold................................. 579.6 594.7 1,652.8 1,790.8
Depreciation, depletion and amortization.............. 68.4 74.0 212.7 218.5
Selling and general administrative expense............ 29.8 27.4 89.6 91.6
Exploration and research expense...................... 12.3 15.2 33.4 41.5
Provision for asset dispositions and non-recurring
charges (see B and C).............................. 1.1 (12.6) 84.1 (198.7)
------- ------ -------- --------
691.2 698.7 2,072.6 1,943.7
------- ------ -------- --------
OPERATING INCOME (LOSS)................................. 51.5 65.3 24.3 413.0
Interest expense...................................... (20.3) (23.3) (68.4) (67.9)
Capitalized interest.................................. -- 0.5 0.1 1.7
Miscellaneous income and expense, net................. 2.9 7.1 (3.5) 29.4
------- ------ -------- --------
INCOME (LOSS) BEFORE TAXES, MINORITY INTERESTS, EQUITY
IN NET EARNINGS OF AFFILIATED COMPANIES AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE........................... 34.1 49.6 (47.5) 376.2
Provision for taxes on income......................... (17.4) (19.0) 1.3 (138.5)
Minority interests in consolidated subsidiaries....... (0.6) (2.9) (0.1) (6.7)
Equity in net earnings of affiliated companies........ (0.7) 0.9 4.7 1.7
------- ------ -------- --------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGE................................................ 15.4 28.6 (41.6) 232.7
Cumulative effect of accounting change (SOP
98-5 -- Start-up Activities)....................... -- -- (3.5) --
------- ------ -------- --------
NET INCOME (LOSS)....................................... $ 15.4 28.6 (45.1) 232.7
======= ====== ======== ========
AVERAGE NUMBER OF SHARES OUTSTANDING -- BASIC........... 57.8 58.3 57.8 58.4
BASIC EARNINGS (LOSS) PER SHARE BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE.................................. $ 0.27 0.49 (0.72) 3.98
Cumulative effect of accounting change (SOP
98-5 -- Start-up Activities)....................... -- -- (0.06) --
------- ------ -------- --------
BASIC EARNINGS (LOSS) PER SHARE......................... $ 0.27 0.49 (0.78) 3.98
======= ====== ======== ========
AVERAGE NUMBER OF SHARES OUTSTANDING -- DILUTED......... 58.1 58.5 57.8 58.6
DILUTED EARNINGS (LOSS) PER SHARE BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE........................... $ 0.27 0.49 (0.72) 3.97
Cumulative effect of accounting change (SOP
98-5 -- Start-up Activities........................ -- -- (0.06) --
------- ------ -------- --------
DILUTED EARNINGS (LOSS) PER SHARE....................... $ 0.27 0.49 (0.78) 3.97
======= ====== ======== ========
BUSINESS DIVISIONS
(Unaudited; in millions)
SALES AND OTHER OPERATING REVENUES -- UNAFFILIATED
CUSTOMERS
Phelps Dodge Mining Company........................... $ 406.9 421.9 1,102.3 1,303.5
Phelps Dodge Industries............................... 335.8 342.1 994.6 1,053.2
------- ------ -------- --------
$ 742.7 764.0 2,096.9 2,356.7
======= ====== ======== ========
OPERATING INCOME (LOSS)(A)
Phelps Dodge Mining Company (B)....................... $ 36.2 27.2 8.2 119.2
Phelps Dodge Industries (C)........................... 26.8 47.3 51.7 326.2
Corporate and other................................... (11.5) (9.2) (35.6) (32.4)
------- ------ -------- --------
$ 51.5 65.3 24.3 413.0
======= ====== ======== ========
</TABLE>
(A) Operating income has been presented in compliance with SFAS 131 -- Segment
Reporting (with 1998 restated).
(B) Includes a pre-tax charge of $34.5 million in the 1999 second quarter for
the sale of a fluorspar mine, the indefinite closure of a smelter and the
curtailment of a copper mining and refining operation.
(C) Includes a pre-tax charge of $48.3 million in the 1999 second quarter and
$1.1 million in the 1999 third quarter for costs associated with
restructuring of certain wire and cable assets and the suspension of
operations at a carbon black plant. Another $1.7 million, representing the
write-off of a small equity basis investment, was charged to non-operating
expense in the 1999 second quarter. 1998 includes a pre-tax gain of $198.7
million in the first nine months and $12.6 million in the third quarter from
the sale of Accuride Corporation.
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PHELPS DODGE CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited; in millions)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents ............................. $ 165.0 221.7
Accounts receivable, net .............................. 407.9 321.1
Inventories ........................................... 269.5 266.0
Supplies .............................................. 104.6 110.9
Prepaid expenses ...................................... 17.1 16.5
Deferred income taxes ................................. 48.9 43.8
-------- --------
Current assets ...................................... 1,013.0 980.0
Investments and long-term accounts receivable ......... 91.7 85.6
Property, plant and equipment, net .................... 3,455.7 3,587.2
Other assets and deferred charges ..................... 328.9 383.7
-------- --------
$4,889.3 5,036.5
======== ========
LIABILITIES
Short-term debt ....................................... $ 229.8 116.1
Current portion of long-term debt ..................... 54.7 68.5
Accounts payable and accrued expenses ................. 467.3 451.3
Income taxes .......................................... 2.9 15.2
-------- --------
Current liabilities ................................. 754.7 651.1
Long-term debt ........................................ 806.5 836.4
Deferred income taxes ................................. 499.7 508.6
Other liabilities and deferred credits ................ 373.1 359.7
-------- --------
2,434.0 2,355.8
-------- --------
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES ......... 78.5 93.3
-------- --------
COMMON SHAREHOLDERS' EQUITY
Common shares, 58.0 outstanding (12/31/98 - 57.9) ..... 362.5 362.1
Capital in excess of par value ........................ 5.8 1.8
Retained earnings ..................................... 2,212.9 2,345.0
Accumulated other comprehensive income (loss) ......... (197.1) (113.9)
Other ................................................. (7.3) (7.6)
-------- --------
2,376.8 2,587.4
-------- --------
$4,889.3 5,036.5
======== ========
</TABLE>
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PHELPS DODGE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited; in millions)
NINE MONTHS ENDED SEPT. 30,
-------------------------------
1999 1998
-------------- -------------
[S] [C] [C]
OPERATING ACTIVITIES
Net income (loss)............................. $ (45.1) 232.7
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation, depletion and amortization... 212.7 218.5
Deferred income taxes....................... (3.8) 40.8
Equity earnings (loss) net of dividends
received................................... (4.6) (0.1)
Changes in current assets and
liabilities:
(Increase) decrease in accounts
receivable.............................. (104.0) (34.8)
(Increase) decrease in inventories........ (12.4) (17.3)
(Increase) decrease in supplies........... 3.5 (3.0)
(Increase) decrease in prepaid expenses... (1.0) (3.5)
(Increase) decrease in deferred
income taxes............................ (5.2) 6.7
Increase (decrease) in interest payable... 9.2 17.3
Increase (decrease) in other
accounts payable........................ (14.2) (44.8)
Increase (decrease) in income taxes....... (11.6) 28.8
Increase (decrease) in other accrued
expenses................................ (1.6) (6.9)
Asset dispositions and non-recurring
charges................................... 85.8 (198.7)
Other adjustments, net...................... 8.9 (7.8)
-------------- -------------
Net cash provided by operating
activities............................ 116.6 227.9
-------------- -------------
INVESTING ACTIVITIES
Capital outlays............................. (101.2) (248.8)
Capitalized interest........................ (0.1) (1.7)
Investment in subsidiaries.................. (75.4) (135.4)
Proceeds from asset dispositions and
other, net................................ 7.3 466.5
-------------- -------------
Net cash provided by (used in)
investing activities.................. (169.4) 80.6
-------------- -------------
FINANCING ACTIVITIES
Increase in debt............................ 136.3 16.0
Payment of debt............................. (49.0) (54.0)
Common dividends............................ (87.0) (88.3)
Purchase of common shares................... -- (31.5)
Other, net.................................. (4.2) 0.9
-------------- -------------
Net cash used in financing activities... (3.9) (156.9)
-------------- -------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.................................. (56.7) 151.6
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD.................................... 221.7 157.9
-------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.... $ 165.0 309.5
============== =============
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PHELPS DODGE CORPORATION
FINANCIAL AND OPERATING STATISTICS BY BUSINESS SEGMENT
(Unaudited; dollars in millions except copper prices)
<TABLE>
<CAPTION>
THIRD QUARTER FIRST NINE MONTHS
---------------------- ----------------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
PHELPS DODGE MINING COMPANY:
Sales and other oper. revenues -
unaffiliated customers.................. $406.9 421.9 1,102.3 1,303.5
Operating income (loss)(A)................ $ 36.2 27.2 8.2 119.2
COMEX copper price per pound.............. $ 0.78 0.75 0.70 0.77
Copper production (thousand tons):
Morenci:
Concentrate........................... 43.1 61.0 156.4 192.1
Electrowon............................ 69.5 68.1 211.6 202.6
Tyrone:
Electrowon............................ 19.7 21.3 59.9 62.1
Chino:
Concentrate and precipitate........... 19.2 19.9 53.1 68.9
Electrowon............................ 13.0 20.0 42.7 53.6
Cobre:
Concentrate........................... 0.1 9.9 6.4 26.6
Candelaria:
Concentrate........................... 63.9 59.9 189.4 169.8
Ojos del Salado:
Concentrate........................... - 5.4 - 16.4
Other.................................. (0.7) (0.1) 1.1 0.2
------- ------ ----- -----
Total copper production............. 227.8 265.4 720.6 792.3
Less minority participants'
shares (B)........................... 40.2 44.8 125.0 134.1
------- ------ ----- -----
Net Phelps Dodge share............... 187.6 220.6 595.6 658.2
======= ====== ===== =====
Copper sales (thousand tons):
Net Phelps Dodge share from own mines.. 193.0 220.6 595.3 650.7
Purchased copper....................... 71.3 73.7 205.6 232.7
------- ------ ----- -----
Total copper sales.................. 264.3 294.3 800.9 883.4
======= ====== ===== =====
</TABLE>
(A) Includes a pre-tax charge of $34.5 million in the 1999 second quarter for
the sale of a fluorspar mine, the indefinite closure of a smelter and the
curtailment of a copper mining and refining operation.
(B) Minority participant interests include (i) a 15 percent undivided interest
in the Morenci, Arizona, copper mining complex, (ii) a one-third partnership
interest in Chino Mines Company in New Mexico, and (iii) a 20 percent
interest in the Candelaria copper mining complex in Chile.
<TABLE>
<S> <C> <C> <C> <C>
PHELPS DODGE INDUSTRIES:
Sales and other operating revenues-
unaffiliated customers:
Specialty chemicals................... $ 132.9 104.6 398.8 326.9
Wire and cable........................ 202.9 237.5 595.8 726.3
------- ----- ----- -------
$ 335.8 342.1 994.6 1,053.2
======== ===== ===== =======
Operating income (loss):
Specialty chemicals (C)............... $ 21.9 17.7 62.7 61.3
Wheels and rims (D)................... -- 12.6 -- 198.7
Wire and cable (E).................... 4.9 17.0 (11.0) 66.2
------- ----- ----- -------
$ 26.8 47.3 51.7 326.2
======== ===== ===== =======
</TABLE>
(C) Includes a pre-tax charge of $19.9 million in the 1999 second quarter for
costs associated with the suspension of operations at a carbon black plant
in the Philippines.
(D) Includes a pre-tax gain of $198.7 million in 1998 from the disposition of
Accuride Corporation.
(E) Includes a pre-tax charge of $28.4 million in the 1999 second quarter and
$1.1 million in the 1999 third quarter for costs associated with
restructuring of certain wire and cable assets. Another $1.7 million
representing the write-off of a small equity basis investment was charged
to non-operating expense in the 1999 second quarter.
