-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BqMolmx2zMqMz+Drowm1cvdHrGuov95U/PIIy8XzxKwWF+1+uTFDY71JzbIollp8 O0O4tbZ6vIHMrhtVddZxjA== 0000950123-99-011254.txt : 19991231 0000950123-99-011254.hdr.sgml : 19991231 ACCESSION NUMBER: 0000950123-99-011254 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991230 ITEM INFORMATION: FILED AS OF DATE: 19991230 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHELPS DODGE CORP CENTRAL INDEX KEY: 0000078066 STANDARD INDUSTRIAL CLASSIFICATION: PRIMARY SMELTING & REFINING OF NONFERROUS METALS [3330] IRS NUMBER: 131808503 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-00082 FILM NUMBER: 99784351 BUSINESS ADDRESS: STREET 1: 2600 NORTH CENTRAL AVE CITY: PHOENIX STATE: AZ ZIP: 85004-3089 BUSINESS PHONE: 6022348100 MAIL ADDRESS: STREET 1: 2600 NORTH CENTRAL AVENUE CITY: PHOENIX STATE: AZ ZIP: 85004-3089 8-K/A 1 AMENDMENT NO. 1 ON FORM 8-K 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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.) 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. 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. 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)
HISTORICAL -------------------------- PRO FORMA PRO FORMA PHELPS DODGE CYPRUS AMAX ADJUSTMENTS COMBINED ------------ ----------- ----------- --------- 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
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)
HISTORICAL --------------------------- PRO FORMA PRO FORMA PHELPS DODGE CYPRUS AMAX ADJUSTMENTS COMBINED ------------ ----------- ----------- --------- 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
6 PHELPS DODGE CORPORATION PRO FORMA COMBINED BALANCE SHEET PHELPS DODGE AND CYPRUS AMAX COMBINED SEPTEMBER 30, 1999 (UNAUDITED) (AMOUNTS IN MILLIONS)
HISTORICAL -------------------------- PRO FORMA PRO FORMA PHELPS DODGE CYPRUS AMAX ADJUSTMENTS COMBINED ------------ ----------- ----------- --------- 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 ======= ======= ======= =======
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):
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 ========
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.
BALANCE SHEET NINE MONTHS YEAR ENDED AT SEPTEMBER 30, ENDED DECEMBER 31, 1999 SEPTEMBER 30, 1999 1998 ---------------- ------------------ ------------ (IN $ MILLIONS) 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
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)] 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
(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. 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):
NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, 1999 1998 ---------------- ---------------- BASIC DILUTED BASIC DILUTED ----- ------- ----- ------- 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 ==== ==== ==== ====
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 -----END PRIVACY-ENHANCED MESSAGE-----