================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1994
Commission file number 1-82
PHELPS DODGE CORPORATION
(a New York corporation)
13-1808503
(I.R.S. Employer Identification No.)
2600 N. Central Avenue, Phoenix, AZ 85004-3089
Registrant's telephone number: (602) 234-8100
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes / X / No / /.
Number of Common Shares outstanding at November 4, 1994: 70,716,573 shares.
================================================================================
PHELPS DODGE CORPORATION
Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 1994
TABLE OF CONTENTS
Statement of Consolidated Operations
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Information
Review by Independent Accountants
Report of Independent Accountants on Review of Interim Financial Information
Management's Discussion and Analysis
Legal Proceedings
Exhibits and Reports on Form 8-K
Signatures
Index to Exhibits
PHELPS DODGE CORPORATION AND SUBSIDIARIES
Part I. Financial Information
Item 1. Financial Statements
STATEMENT OF CONSOLIDATED OPERATIONS
(Unaudited; in millions except per share data)
First Nine
Third Quarter Months
----------------- ------------------
1994 1993 1994 1993
---- ---- ---- ----
SALES AND OTHER OPERATING
REVENUES $813.7 646.7 2,288.4 1,943.2
------ ------- ------- -------
OPERATING COSTS AND EXPENSES
Cost of products sold 586.0 484.0 1,700.9 1,429.3
Depreciation, depletion
and amortization 47.9 46.9 141.4 139.9
Selling and general
administrative expense 25.9 22.7 76.6 77.6
Exploration and research
expense 14.8 16.2 37.3 40.4
Loss on sale of mineral
properties, net -- -- 17.5 --
------ ------- ------- -------
674.6 569.8 1,973.7 1,687.2
------ ------- ------- -------
OPERATING INCOME 139.1 76.9 314.7 256.0
Interest expense less
amount capitalized (7.1) (9.0) (20.5) (28.2)
Miscellaneous income and
expense, net 4.7 6.1 5.7 12.3
------ ------- ------- -------
INCOME BEFORE TAXES, MINORITY
INTERESTS AND EQUITY IN NET
EARNINGS OF AFFILIATED
COMPANIES 136.7 74.0 299.9 240.1
Provision for taxes on
income (42.1) (32.0) (93.0) (84.5)
Minority interests in
consolidated subsidiary
companies (see Note 3) (2.4) (2.4) (5.2) (7.4)
Equity in net earnings
(losses) of affiliated
companies 2.0 0.1 5.7 (1.9)
------ ------- ------- -------
NET INCOME $ 94.2 39.7 207.4 146.3
====== ======= ======= =======
EARNINGS PER SHARE $ 1.33 0.56 2.92 2.07
====== ======= ======= =======
AVERAGE NUMBER OF SHARES
OUTSTANDING 71.1 70.6 71.1 70.6
BUSINESS SEGMENTS
(Unaudited; in millions)
SALES AND OTHER OPERATING
REVENUES
Phelps Dodge Mining
Company $441.4 340.9 1,211.2 1,002.5
Phelps Dodge Industries 372.3 305.8 1,077.2 940.7
------ ------- ------- -------
$813.7 646.7 2,288.4 1,943.2
====== ======= ======= =======
OPERATING INCOME
Phelps Dodge Mining
Company $110.9 54.6 226.6 187.5
Phelps Dodge Industries 35.2 29.0 109.8 91.3
Corporate and other (7.0) (6.7) (21.7) (22.8)
------ ------- ------- -------
$139.1 76.9 314.7 256.0
====== ======= ======= =======
See Notes to Consolidated Financial Information.
CONSOLIDATED BALANCE SHEET
(In millions)
September 30, December 31,
1994 1993
---- ----
(unaudited)
ASSETS
Cash and short-term investments, at cost $ 194.2 255.8
Receivables, net 459.8 354.4
Inventories 257.1 225.4
Supplies 103.4 103.3
Prepaid expenses 19.7 13.1
Deferred income taxes 37.1 35.4
-------- -------
Current assets 1,071.3 987.4
Investments and long-term receivables 109.6 115.4
Property, plant and equipment, net 2,520.7 2,340.2
Other assets and deferred charges 289.3 277.9
-------- -------
$3,990.9 3,720.9
======== =======
LIABILITIES
Short-term debt $ 75.9 82.7
Current portion of long-term debt 19.1 17.2
Accounts payable and accrued expenses 501.9 425.8
Income taxes 33.8 14.3
-------- -------
Current liabilities 630.7 540.0
Long-term debt 592.5 547.3
Deferred income taxes 283.6 286.0
Other liabilities and deferred credits 263.7 263.3
-------- -------
1,770.5 1,636.6
-------- -------
MINORITY INTERESTS IN SUBSIDIARIES 65.2 62.2
-------- -------
COMMON SHAREHOLDERS' EQUITY
Common shares, 70.7 outstanding
(12/31/93 - 70.5) 441.9 440.8
Capital in excess of par value 83.4 83.1
Retained earnings 1,738.5 1,618.5
Cumulative translation adjustments and
other (108.6) (120.3)
-------- -------
2,155.2 2,022.1
-------- -------
$3,990.9 3,720.9
======== =======
See Notes to Consolidated Financial Information.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited; in millions)
Nine months
ended
September 30,
--------------------
1994 1993
---- ----
OPERATING ACTIVITIES
Net income $ 207.4 146.3
Adjustments to reconcile net income to
cash flow from operations:
Depreciation, depletion and
amortization 141.4 139.9
Deferred income taxes 9.0 22.2
Equity earnings net of dividends
received (5.6) 2.2
-------- ------
Cash flow from operations 352.2 310.6
Adjustments to reconcile cash flow from
operations to net cash provided by
operating activities:
Changes in current assets and liabilities:
(Increase) decrease in receivables (107.0) (22.2)
(Increase) decrease in inventories (25.9) (4.8)
(Increase) decrease in supplies 6.9 (1.6)
(Increase) decrease in prepaid
expenses (7.2) (10.2)
(Increase) decrease in deferred
income taxes (1.7) (0.9)
Increase (decrease) in interest
payable 2.7 (0.9)
Increase (decrease) in other accounts
payable 57.0 7.2
Increase (decrease) in income taxes 19.4 (9.4)
Increase (decrease) in other accrued
expenses 23.5 8.3
Gain from subsidiary's stock issuance (1.9) --
Other adjustments, net 7.2 (27.8)
------- ------
Net cash provided by operating
activities 325.2 248.3
------- ------
INVESTING ACTIVITIES
Capital outlays (264.1) (263.7)
Capitalized interest (20.0) (12.6)
Investment in subsidiaries (52.2) (3.8)
Proceeds from subsidiary's stock issuance 8.0 --
Other 2.0 3.4
------- ------
Net cash used in investing activities (326.3) (276.7)
------- ------
FINANCING ACTIVITIES
Increase in debt 146.5 279.5
Payment of debt (106.2) (137.1)
Common dividends (87.4) (87.1)
Purchase of common shares (2.1) (5.6)
Debt issue costs (7.1) (23.5)
Other (4.2) 3.1
------- ------
Net cash provided by (used in)
financing activities (60.5) 29.3
------- ------
INCREASE (DECREASE) IN CASH AND
SHORT-TERM INVESTMENTS (61.6) 0.9
CASH AND SHORT-TERM INVESTMENTS AT
BEGINNING OF PERIOD 255.8 251.2
------- ------
CASH AND SHORT-TERM INVESTMENTS AT END
OF PERIOD $ 194.2 252.1
======= ======
See Notes to Consolidated Financial Information.
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
1. The unaudited consolidated financial information presented herein has
been prepared in accordance with the instructions to Form 10-Q and does
not include all of the information and note disclosures required by
generally accepted accounting principles. Therefore, this information
should be read in conjunction with the consolidated financial statements
and notes thereto included in the Corporation's Form 10-K for the year
ended December 31, 1993. This information reflects all adjustments that
are, in the opinion of management, necessary to a fair statement of the
results for the interim periods reported.
2. The results of operations for the three-month and nine-month periods
ended September 30, 1994, are not necessarily indicative of the results
to be expected for the full year.
3. Prior to 1994, minority interests in the income of consolidated
subsidiaries were included in cost of products sold. For comparative
purposes, prior period amounts have been reclassified in this report to
conform with the current year presentation.
4. The Corporation enters into price protection arrangements from time to
time, depending on market circumstances, to ensure a minimum price for a
portion of its expected future mine production. Approximately 95 percent
of the Corporation's anticipated copper production for 1995 has been
protected under such arrangements. The Corporation has entered into
contracts with several financial institutions that provide for minimum
quarterly average prices of 80 cents per pound for approximately 640
million pounds of copper cathode, or 47 percent of its anticipated
production for 1995. These contracts are based on the average London
Metal Exchange (LME) price each quarter. In addition, the Corporation
has entered into contracts that provide minimum (approximately 95 cents)
and maximum (approximately $1.33) prices per pound for approximately 650
million pounds of copper cathode, or 48 percent of its anticipated
production for 1995. The minimum prices are based on quarterly average
LME prices for approximately 370 million pounds and on the annual
average LME price for the remainder. The maximum prices are based on the
annual average LME price for all 650 million pounds.
The Corporation also continued to hold contracts entered into in 1993
with several financial institutions that provide for a 1994 fourth
quarter minimum quarterly average price of 75 cents per pound for 64
million pounds of copper cathode. Similar contracts for the first nine
months of 1994 covering approximately 180 million pounds had expired as
of September 30, 1994, without payment to Phelps Dodge.
REVIEW BY INDEPENDENT ACCOUNTANTS
The financial information as of September 30, 1994, and for the
three-month and nine-month periods ended September 30, 1994 and 1993, included
in Part I pursuant to Rule 10-01 of Regulation S-X has been reviewed by Price
Waterhouse LLP (Price Waterhouse), the Corporation's independent accountants, in
accordance with standards established by the American Institute of Certified
Public Accountants. Price Waterhouse's report is included in this quarterly
report.
Price Waterhouse does not carry out any significant or additional audit
tests beyond those that would have been necessary if its report had not been
included in this quarterly report. Accordingly, such report is not a "report" or
"part of a registration statement" within the meaning of Sections 7 and 11 of
the Securities Act of 1933 and the liability provisions of Section 11 of such
Act do not apply.
<AUDIT-REPORT>
PRICE WATERHOUSE LLP
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Phelps Dodge Corporation
We have reviewed the accompanying consolidated balance sheet of Phelps Dodge
Corporation and its subsidiaries as of September 30, 1994, the statement of
consolidated operations for the three-month and nine-month periods ended
September 30, 1994 and 1993, and the consolidated statement of cash flows for
the nine-month periods ended September 30, 1994 and 1993. These financial
statements are the responsibility of the Corporation's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We previously audited, in accordance with generally accepted auditing standards,
the consolidated balance sheet as of December 31, 1993, and the related
consolidated statements of operations, retained earnings and cash flows for the
year then ended (not presented herein), and in our report dated January 24,
1994, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet as of December 31, 1993, is fairly stated in all
material respects in relation to the consolidated balance sheet from which it
has been derived.
Price Waterhouse LLP
Phoenix, Arizona
October 19, 1994
</AUDIT-REPORT>
Item 2. Management's Discussion and Analysis
RESULTS OF OPERATIONS
Phelps Dodge Corporation had consolidated net income of $94.2 million, or
$1.33 per common share, in the third quarter of 1994, compared with $39.7
million, or 56 cents per common share, in the 1993 third quarter. During the
1993 third quarter, the Corporation recognized an after-tax benefit of $13.9
million, or 20 cents per common share, from its 1993 copper price protection
program that was partially offset by an increase in the tax provision of $8.3
million, or 12 cents per common share, related to the Omnibus Budget
Reconciliation Act of 1993 that retroactively raised the maximum corporate
income tax rate. Net income for the nine-month period ended September 30, 1994,
was $207.4 million, or $2.92 per common share, compared with $146.3 million, or
$2.07 per common share, in the corresponding 1993 period.
Earnings in the three-month and nine-month periods ended September 30,
1994, were higher than those reported in the corresponding 1993 periods
principally as a result of higher copper prices. Average spot prices per pound
of cathode copper on the New York Commodity Exchange (COMEX) rose approximately
30 cents and 12 cents in the third quarter and first nine months of 1994,
respectively, from the average prices in the corresponding 1993 periods. Also
contributing to the increases in earnings in both 1994 periods were improved
results in the Corporation's wheel and rim and wire and cable businesses in
North America, and its carbon black business in both North America and Europe.
Any material change in the price the Corporation receives for copper, or
in its unit production costs, has a significant effect on the Corporation's
results. The Corporation's share of annual production presently is approximately
1.1 billion pounds of copper. Accordingly, each 1 cent per pound change in the
average annual copper price received by the Corporation, or in average annual
unit production costs, causes a variation in annual operating income before
taxes of approximately $11 million. The Corporation's share of estimated annual
copper production capacity will increase by approximately 200 million pounds as
a result of the Candelaria project in Chile, scheduled to begin operations in
the 1994 fourth quarter, and by approximately 130 million pounds as a result of
the Southside expansion at the Corporation's Morenci mine in southeastern
Arizona, with startup scheduled in late 1995. These increases will add more than
$3.0 million to the variation in annual pre-tax operating income from each 1
cent per pound change in realized copper prices or average unit production
costs.
The COMEX spot price per pound of copper cathode, upon which the
Corporation bases its selling price, averaged $1.14 in the third quarter and
$1.00 in the first nine months of 1994, compared with 84 cents and 88 cents in
the corresponding periods in 1993. From October 1 to November 4, 1994, the
average price was $1.20, closing at $1.28 on November 4, 1994.
The Corporation enters into price protection arrangements from time to
time, depending on market circumstances, to ensure a minimum price for a portion
of its expected future mine production. Approximately 95 percent of the
Corporation's anticipated copper production for 1995 has been protected under
such arrangements. The Corporation has entered into contracts with several
financial institutions that provide for minimum quarterly average prices of 80
cents per pound for approximately 640 million pounds of copper cathode, or 47
percent of its anticipated production for 1995. These contracts are based on the
average London Metal Exchange (LME) price each quarter. In addition, the
Corporation has entered into contracts that provide minimum (approximately 95
cents) and maximum (approximately $1.33) prices per pound for approximately 650
million pounds of copper cathode, or 48 percent of its anticipated production
for 1995. The minimum prices are based on quarterly average LME prices for
approximately 370 million pounds and on the annual average LME price for the
remainder. The maximum prices are based on the annual average LME price for all
650 million pounds.
The Corporation also continued to hold contracts entered into in 1993
with several financial institutions that provide for a 1994 fourth quarter
minimum quarterly average price of 75 cents per pound for 64 million pounds of
copper cathode. Similar contracts for the first nine months of 1994 covering
approximately 180 million pounds had expired as of September 30, 1994, without
payment to Phelps Dodge.
Sales were $813.7 million in the third quarter and $2,288.4 million in
the first nine months of 1994, compared with $646.7 million and $1,943.2 million
in the corresponding 1993 periods. These increases principally resulted from
higher average copper prices and higher sales volumes of copper purchased for
resale, wheels and rims, wire and cable products and carbon black. These
increases also reflected the sales of two recently acquired U.S. magnet wire
plants.
PHELPS DODGE MINING COMPANY
Phelps Dodge Mining Company is an international business comprising a
group of companies involved in vertically integrated copper operations including
mining, concentrating, electrowinning, smelting and refining, rod production,
marketing and sales, and related activities. Copper is sold primarily to others
as rod, cathode or concentrates, and to the Phelps Dodge Industries segment. In
addition, Phelps Dodge Mining Company at times smelts and refines copper and
produces copper rod for others on a toll basis. Phelps Dodge Mining Company also
produces gold, silver, molybdenum and copper chemicals, principally as
by-products, and sulfuric acid from its air quality control facilities. This
segment also includes the Corporation's other mining operations and investments
(including fluorspar, silver, lead and zinc operations) and its worldwide
exploration and development programs.
================================================================================
First Nine
Third Quarter Months
--------------- ---------------
1994 1993 1994 1993
---- ---- ---- ----
Copper from own mines *
(short tons)
Production 134,800 135,200 406,600 404,300
Deliveries 128,800 139,800 393,400 410,600
New York Commodity Exchange
average spot price per
pound - copper cathodes $ 1.14 0.84 1.00 0.88
(in millions)
Sales and other operating
revenues $ 441.4 340.9 1,211.2 1,002.5
Operating income $ 110.9 54.6 226.6 187.5
- -------------------------
* The Corporation's worldwide copper production and deliveries shown in the
above table exclude the amounts attributable to (i) the 15 percent
undivided interest in the Morenci, Arizona, copper mining complex held by
Sumitomo Metal Mining Arizona, Inc. and (ii) the one-third partnership
interest in Chino Mines Company in New Mexico held by Heisei Minerals
Corporation.
================================================================================
Phelps Dodge Mining Company's 1994 third quarter sales of $441.4 million
were 30 percent higher than in the third quarter of 1993. This increase
principally resulted from a 30 cents per pound increase in average copper prices
and a 20,300 ton increase in the sale of copper purchased for resale, offset in
part by an 11,000 ton decrease in copper sales from mine production. Sales of
$1,211.2 million in the first nine months of 1994 were 21 percent higher than in
the corresponding 1993 period. This increase primarily resulted from a 12 cents
per pound increase in average copper prices and a 78,000 ton increase in the
sale of copper purchased for resale, offset in part by a 17,200 ton decrease in
copper sales from mine production.
During the 1994 third quarter, Phelps Dodge Mining Company recorded
operating income of $110.9 million, a 103 percent increase from the $54.6
million recorded in the corresponding 1993 period. This increase principally
resulted from the higher average copper prices already discussed and lower unit
production costs. The corresponding 1993 period reflected a pre-tax benefit of
$21.0 million from the Corporation's 1993 copper price protection program.
Operating income was $226.6 million in the nine months ended September 30, 1994,
compared with $187.5 million in the corresponding 1993 period. This 21 percent
increase principally resulted from higher average copper prices and lower unit
production costs already discussed. Offsetting this increase in part was a 1994
second quarter loss on the sale of certain gold interests of $17.5 million
before taxes. The 1993 period reflected a pre-tax benefit of $28.0 million from
the Corporation's 1993 copper price protection program.
During the 1994 second quarter, Phelps Dodge Mining Company announced a
$200 million expansion (the Corporation's share will be $170 million with the
remainder provided by its partner, Sumitomo Metal Mining Arizona, Inc.) of its
Morenci mine in southeastern Arizona. This project, which will increase Phelps
Dodge's share of annual electrowon copper production capacity by approximately
130 million pounds, is expected to be in production by late 1995. The expansion
involves the development of Southside, a mineral deposit adjacent to the
existing open-pit mine at Morenci. The expansion will include the construction
of an electrowinning tankhouse, the expansion of existing solvent extraction
plants, the upgrading of infrastructure systems and the purchase of mining
equipment.
In late August 1994, the Corporation initiated start-up procedures at the
Candelaria copper concentrator in Chile, and mill throughput has been steadily
increasing since that time. The Corporation expects that full design production
should be attained by January 1, 1995, and that substantial amounts of
concentrates will be produced in the 1994 fourth quarter as commissioning
activities continue.
PHELPS DODGE INDUSTRIES
Phelps Dodge Industries is a business segment comprising a group of
international companies that manufacture engineered products principally for the
transportation and electrical sectors worldwide. Its operations are
characterized by products with significant market share, internationally
competitive cost and quality, and specialized engineering capabilities. This
business segment includes the Corporation's carbon black and synthetic iron
oxide operations through Columbian Chemicals Company and its subsidiaries, its
truck wheel and rim operations through Accuride Corporation and its
subsidiaries, its magnet wire operations through Phelps Dodge Magnet Wire
Company and its subsidiaries, its U.S. specialty conductor operations through
Hudson International Conductors, and its international wire and cable
manufacturers through Phelps Dodge International Corporation.
================================================================================
First Nine
Third Quarter Months
---------------- --------------
1994 1993 1994 1993
---- ---- ---- ----
(in millions)
Sales and other operating
revenues $372.3 305.8 1,077.2 940.7
Operating income $ 35.2 29.0 109.8 91.3
================================================================================
Phelps Dodge Industries' 1994 third quarter sales of $372.3 million were
22 percent higher than in the third quarter of 1993. Sales of $1,077.2 million
in the first nine months of 1994 were 15 percent higher than in the
corresponding 1993 period. These increases principally resulted from higher
sales volumes in North American markets for wheels and rims and wire and cable
products, and higher sales volumes in both North American and European markets
for carbon black.
During the 1994 third quarter, Phelps Dodge Industries recorded operating
income of $35.2 million, a 21 percent increase over the $29.0 million recorded
in the corresponding 1993 period. Operating income of $109.8 million in the
first nine months of 1994 was 20 percent higher than in the corresponding 1993
period. These increases reflected improved sales volumes in the wheel and rim
business (due to increased truck builds in North America), the wire and cable
business (principally as a result of the recent acquisition of two U.S. magnet
wire facilities) and the carbon black business (both in the United States and
Europe). Improved operating results were offset in part by reduced earnings as a
result of the deterioration of economic conditions in Venezuela and, to a lesser
extent, the unfavorable competitive environment for the telephone cable business
in Mexico.
CHANGES IN FINANCIAL CONDITION
Capital outlays during the first nine months of 1994 were $222.5 million
for Phelps Dodge Mining Company (including $127.3 million for Candelaria) and
$41.1 million for Phelps Dodge Industries. Capital outlays in the corresponding
1993 period were $200.6 million for Phelps Dodge Mining Company (including
$134.8 million for Candelaria) and $62.6 million for Phelps Dodge Industries.
The Corporation expects capital outlays in 1994 to be approximately $300.0
million for Phelps Dodge Mining Company (including $140.0 million for
Candelaria) and approximately $65.0 million for Phelps Dodge Industries.
At September 30, 1994, the Corporation's total debt was $687.5 million,
compared with $647.2 million at year-end 1993. This $40.3 million increase
resulted from borrowings used to fund construction and development of the
Corporation's Candelaria copper project in Chile. The Corporation's ratio of
debt to total capitalization was 23.6 percent at September 30, 1994, compared
with 23.7 percent at December 31, 1993.
On September 8, 1994, the Corporation paid a regular quarterly dividend
of 41.25 cents per share on its common shares for the 1994 third quarter; the
total amount paid was $29.2 million. On November 2, 1994, the Board of Directors
declared a 1994 fourth quarter regular dividend of 45 cents per common share, an
increase of 9 percent from the previous quarterly dividend, to be paid on
December 8, 1994, to shareholders of record at the close of business on November
18, 1994. There were 70,705,000 shares outstanding at September 30, 1994.
During the 1994 first quarter, the Corporation purchased 43,000 of its
common shares in connection with an odd-lot buy-back program under the current 4
million common share buy-back program initiated in September 1989. Under this
program, the Corporation from time to time makes purchases in the open market
and also considers purchasing its common shares in negotiated transactions. As
of September 30, 1994, 1,584,000 shares remained authorized for purchase under
the program.
Part II. Other Information
Item 1. Legal Proceedings
Reference is made to Paragraph III. of Item 3. Legal Proceedings of the
Corporation's Form 10-K for the year ended December 31, 1993, regarding the
proceedings described below.
Prior to the mid-1960s, a predecessor of Phelps Dodge Industries, Inc.
(PDI), a subsidiary of the Corporation, manufactured and sold some cable and
wire products that were insulated with material containing asbestos. PDI
believes that the use of these products did not result in significant releases
of airborne asbestos fibers. PDI and the Corporation are collectively referred
to below as PDI.
Since the late 1980s, PDI has been served with complaints in
asbestos-related actions filed on behalf of a total of 13,776 claimants. Over
12,500 of those claimants were participants in the Ingalls Shipyard asbestos
litigation filed in Pascagoula, Mississippi. Each claimant in that litigation
sought from $2 million to $20 million in compensatory and punitive damages from
a group of approximately 100 to 150 defendants, which included PDI. During 1993
and 1994, PDI was successful in obtaining dismissal of all claims against it.
In addition, a total of 959 claims filed against PDI in states other than
Mississippi also have been dismissed. The remaining 315 asbestos-related claims
are being defended by PDI in 14 jurisdictions.
During 1994, complaints in 48 new asbestos-related actions have been
filed against PDI in eight states, and PDI has been dismissed from a total of 91
such actions in six states.
In these asbestos-related proceedings, plaintiffs allege bodily injury or
death from exposure to asbestos and claimed damages based on theories of strict
liability and negligence. PDI is vigorously contesting and defending the
remaining cases.
Item 6. Exhibits and Reports on Form 8-K
(a) Any exhibits required to be filed by the Corporation are listed
in the Index to Exhibits.
(b) No reports on Form 8-K were filed by the Corporation during the
quarter ended September 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Corporation has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PHELPS DODGE CORPORATION
------------------------
(Corporation or Registrant)
Date: November 14, 1994 By: Thomas M. Foster
----------------
Thomas M. Foster
Vice President and Controller
(Principal Accounting Officer)
PHELPS DODGE CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
3.2 By-Laws of the Corporation, as amended effective September 1, 1994.
12 Computation of ratios of total debt to total capitalization.
15 Letter from Price Waterhouse LLP with respect to unaudited interim
financial information.
27 Financial Data Schedule.