0000950147-95-000109.txt : 19950811 0000950147-95-000109.hdr.sgml : 19950811 ACCESSION NUMBER: 0000950147-95-000109 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950810 SROS: NYSE 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00082 FILM NUMBER: 95560632 BUSINESS ADDRESS: STREET 1: 2600 NORTH CENTRAL AVE CITY: PHOENIX STATE: AZ ZIP: 85004 BUSINESS PHONE: 6022348100 MAIL ADDRESS: STREET 1: 2600 NORTH CENTRAL AVENUE CITY: PHOENIX STATE: AZ ZIP: 85004-3089 10-Q 1 FORM 10-Q ================================================================================ 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 June 30, 1995 Commission file number 1-82 PHELPS DODGE CORPORATION (a New York corporation) 13-1808503 (I.R.S. Employer Identification No.) 2600 N. Central Avenue, Phoenix, AZ 85004-3089 Registrant's telephone number: (602) 234-8100 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No . ---- ---- Number of Common Shares outstanding at August 4, 1995: 69,658,759 shares. ================================================================================ PHELPS DODGE CORPORATION Quarterly Report on Form 10-Q For the Quarter Ended June 30, 1995 TABLE OF CONTENTS Statement of Consolidated Operations Consolidated Balance Sheet Consolidated Statement of Cash Flows Notes to Consolidated Financial Information Review by Independent Accountants Report of Independent Accountants on Review of Interim Financial Information Management's Discussion and Analysis Legal Proceedings Submission of Matters to a Vote of Security Holders 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 Six Second Quarter Months --------------- ---------------- 1995 1994 1995 1994 ---- ---- ---- ---- SALES AND OTHER OPERATING REVENUES $ 1,024.2 780.4 2,057.7 1,474.7 ------- ------- ------- ------- OPERATING COSTS AND EXPENSES Cost of products sold 682.2 585.3 1,369.3 1,114.9 Depreciation, depletion and amortization 56.9 46.4 111.4 93.5 Selling and general administrative expense 30.9 25.2 61.6 50.7 Exploration and research expense 15.1 11.5 31.8 22.5 (Gain) loss on asset dispositions (see Note 4) - 17.5 (26.8) 17.5 ------- ------- ------- ------- 785.1 685.9 1,547.3 1,299.1 ------- ------- ------- ------- OPERATING INCOME 239.1 94.5 510.4 175.6 Interest expense (19.4) (11.8) (34.8) (25.6) Capitalized interest 1.1 6.4 1.5 12.2 Miscellaneous income and expense, net 7.5 1.0 18.4 1.0 ------- ------- ------- ------- INCOME BEFORE TAXES, MINORITY INTERESTS AND EQUITY IN NET EARNINGS OF AFFILIATED COMPANIES 228.3 90.1 495.5 163.2 Provision for taxes on income (68.5) (26.0) (148.7) (50.9) Minority interests in consolidated subsidiaries (2.5) (0.9) (5.3) (2.8) Equity in net earnings of affiliated companies 2.2 1.4 3.3 3.7 ------- ------- ------- ------- NET INCOME $ 159.5 64.6 344.8 113.2 ======= ======= ======= ======= EARNINGS PER SHARE $ 2.28 0.91 4.90 1.59 ======= ======= ======= ======= AVERAGE NUMBER OF SHARES OUTSTANDING 69.9 71.0 70.4 71.0 BUSINESS SEGMENTS (Unaudited; in millions) SALES AND OTHER OPERATING REVENUES Phelps Dodge Mining Company $ 589.7 414.9 1,196.1 769.8 Phelps Dodge Industries 434.5 365.5 861.6 704.9 ------- ------- ------- ------- $ 1,024.2 780.4 2,057.7 1,474.7 ======= ======= ======= ======= OPERATING INCOME (LOSS) Phelps Dodge Mining Company $ 187.9 63.1 390.0 115.7 Phelps Dodge Industries 60.0 38.5 138.0 74.6 Corporate and other (8.8) (7.1) (17.6) (14.7) ------- ------- ------- ------- $ 239.1 94.5 510.4 175.6 ======= ======= ======= ======= See Notes to Consolidated Financial Information. CONSOLIDATED BALANCE SHEET (In millions) June 30, Dec. 31, 1995 1994 ---- ---- (unaudited) ASSETS Cash and short-term investments, at cost $ 401.7 286.9 Accounts receivable, net 499.5 489.5 Inventories 289.2 266.3 Supplies 117.6 110.7 Prepaid expenses 19.2 15.9 Deferred income taxes 40.5 38.6 -------- ------- Current assets 1,367.7 1,207.9 Investments and long-term accounts receivable 85.2 82.0 Property, plant and equipment, net 2,633.5 2,566.4 Other assets and deferred charges 276.9 277.5 -------- ------- $ 4,363.3 4,133.8 ======== ======= LIABILITIES Short-term debt $ 76.7 49.3 Current portion of long-term debt 16.8 25.3 Accounts payable and accrued expenses 504.0 528.5 Income taxes 22.3 46.6 -------- ------- Current liabilities 619.8 649.7 Long-term debt 624.8 622.3 Deferred income taxes 289.9 243.6 Other liabilities and deferred credits 356.0 365.3 -------- ------- 1,890.5 1,880.9 -------- ------- MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES 67.3 65.3 -------- ------- COMMON SHAREHOLDERS' EQUITY Common shares, 69.5 outstanding (12/31/94 - 70.7) 434.3 441.7 Capital in excess of par value 23.2 84.5 Retained earnings 2,052.0 1,770.3 Cumulative translation adjustments and other (104.0) (108.9) -------- ------- 2,405.5 2,187.6 -------- ------- $ 4,363.3 4,133.8 ======== ======= See Notes to Consolidated Financial Information. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited; in millions) Six months ended June 30, ---------------- 1995 1994 ---- ---- OPERATING ACTIVITIES Net income $ 344.8 113.2 Adjustments to reconcile net income to cash flow from operations: Depreciation, depletion and amortization 111.4 93.5 Deferred income taxes 44.6 6.3 Equity earnings net of dividends received (3.0) (3.6) ------- ------- Cash flow from operations 497.8 209.4 Adjustments to reconcile cash flow from operations to net cash provided by operating activities: Changes in current assets and liabilities: (Increase) decrease in accounts receivable (6.3) (82.2) (Increase) decrease in inventories (20.9) (13.1) (Increase) decrease in supplies (8.1) 6.9 (Increase) decrease in prepaid expenses (3.2) (4.0) (Increase) decrease in deferred income taxes (1.8) (2.3) Increase (decrease) in interest payable 0.3 - Increase (decrease) in other accounts payable (32.1) 40.9 Increase (decrease) in income taxes (24.2) (4.3) Increase (decrease) in other accrued expenses 5.0 15.1 (Gain) loss on asset dispositions (see Note 4) (26.8) 17.5 Other adjustments, net (1.3) (2.3) ------- ------- Net cash provided by operating activities 378.4 181.6 ------- ------- INVESTING ACTIVITIES Capital outlays (180.3) (171.2) Capitalized interest (1.5) (12.2) Proceeds from asset dispositions 39.6 1.4 Investment in subsidiaries - (51.8) Other - (1.0) ------- ------- Net cash used in investing activities (142.2) (234.8) ------- ------- FINANCING ACTIVITIES Increase in debt 29.7 121.9 Payment of debt (14.4) (103.0) Common dividends (63.1) (58.2) Purchase of common shares (76.4) (2.1) Debt issue costs - (5.4) Other 2.8 4.4 ------- ------- Net cash used in financing activities (121.4) (42.4) ------- ------- INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS 114.8 (95.6) CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD 286.9 255.8 ------- ------- CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 401.7 160.2 ======= ======= 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, 1994. This information reflects all adjustments that are, in the opinion of management, necessary to a fair statement of the results for the interim periods reported. 2. The results of operations for the three-month and six-month periods ended June 30, 1995, are not necessarily indicative of the results to be expected for the full year. 3. The Corporation enters into price protection arrangements from time to time, depending on market circumstances, to ensure a minimum price for a portion of its expected future mine production. With respect to 1996 production, as of August 4, 1995, the Corporation had entered into contracts with several financial institutions that provide for a minimum 1996 first quarter average price of 95 cents per pound for approximately 170 million pounds of copper cathode, and a minimum 1996 second quarter average price of 95 cents per pound for approximately 90 million pounds of copper cathode. These contracts are based on the average London Metal Exchange (LME) price for the quarter. In addition, the Corporation has entered into contracts that provide minimum (approximately 95 cents) and maximum (approximately $1.47) prices per pound for the 1996 first quarter for approximately 170 million pounds of copper cathode, minimum (approximately 95 cents) and maximum (approximately $1.42) prices per pound for the 1996 second quarter for approximately 170 million pounds of copper cathode, and minimum (approximately 90 cents) and maximum (approximately $1.40) prices per pound for the 1996 third quarter for approximately 145 million pounds of copper cathode. The minimum and maximum prices are based on the quarterly average LME price. With respect to 1995 production, the Corporation has contracts that provide minimum (approximately 95 cents) and maximum (approximately $1.33) prices per pound for approximately 650 million pounds of copper cathode. The minimum prices are based on quarterly average LME prices for 370 million pounds, of which contracts for 185 million pounds have expired without payment to Phelps Dodge, and on the annual average LME price for approximately 280 million pounds. The maximum prices are based on the annual average LME price for all 650 million pounds. In addition, the Corporation has contracts that provide for minimum quarterly average prices of 80 cents per pound on a remaining 275 million pounds of copper cathode based on the average LME price. 4. The Corporation's net income for the first six months of 1995 included a first quarter after-tax gain of $16.6 million, or 24 cents per common share, from the sale of Columbian Chemicals Company's MAPICO division (MAPICO). MAPICO produces synthetic iron oxides at a plant in St. Louis, Missouri, and was peripheral to Columbian's core business. The gain on the sale of these assets before taxes was $26.8 million. The Corporation's net income for the first six months of 1994 included a second quarter net after-tax loss of $11.2 million, or 16 cents per common share, from the sale of certain gold interests. Included in that amount was an after-tax loss of $15.5 million, or 22 cents per common share, from the sale of the Corporation's Santa Gertrudis property in Mexico, offset in part by an after-tax gain of $4.3 million, or 6 cents per common share, from the sale of its Olinghouse gold interest in Nevada. The combined net loss on the sale of these interests before taxes was $17.5 million. REVIEW BY INDEPENDENT ACCOUNTANTS The financial information as of June 30, 1995, and for the three-month and six-month periods ended June 30, 1995 and 1994, included in Part I pursuant to Rule 10-01 of Regulation S-X has been reviewed by Price Waterhouse LLP (Price Waterhouse), the Corporation's independent accountants, in accordance with standards established by the American Institute of Certified Public Accountants. Price Waterhouse's report is included in this quarterly report. Price Waterhouse does not carry out any significant or additional audit tests beyond those that would have been necessary if its report had not been included in this quarterly report. Accordingly, such report is not a "report" or "part of a registration statement" within the meaning of Sections 7 and 11 of the Securities Act of 1933 and the liability provisions of Section 11 of such Act do not apply. 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 June 30, 1995, and the consolidated statements of operations for the three-month and six-month periods ended June 30, 1995 and 1994, and the consolidated statement of cash flows for the six-month periods ended June 30, 1995 and 1994. These financial statements are the responsibility of the Corporation's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of December 31, 1994, and the related consolidated statements of operations, of retained earnings and of cash flows for the year then ended (not presented herein), and in our report dated January 23, 1995 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1994 is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. Price Waterhouse LLP Phoenix, Arizona July 20, 1995 Item 2. Management's Discussion and Analysis RESULTS OF OPERATIONS Phelps Dodge Corporation had consolidated net income of $159.5 million, or $2.28 per common share, in the second quarter of 1995, compared with $64.6 million, or 91 cents per common share, in the 1994 second quarter. Net income for the six months ended June 30, 1995, was $344.8 million, or $4.90 per common share, compared with $113.2 million, or $1.59 per common share in the corresponding 1994 period. Net income in the 1995 six-month period included a first quarter after-tax gain of $16.6 million, or 24 cents per common share, from the sale of Columbian Chemicals Company's MAPICO division. Net income in the 1994 six-month period included a second quarter net after-tax loss of $11.2 million, or 16 cents per common share, from the sale of certain gold interests. Earnings in the three-month and six-month periods ended June 30, 1995, were higher than those reported in the corresponding 1994 periods principally as a result of higher average copper prices. Average spot prices per pound of cathode copper on the New York Commodity Exchange (COMEX) rose approximately 34 cents and 42 cents in the second quarter and first six months of 1995, respectively, from the average prices in the corresponding 1994 periods. Earnings increases in 1995 also reflected improved results in the Corporation's carbon black, wheel and rim, and wire and cable businesses. Any material change in the price the Corporation receives for copper, or in its unit production costs, has a significant effect on the Corporation's results. The Corporation's present share of annual production is approximately 1.3 billion pounds of copper including about 200 million pounds from Candelaria which began operations in the 1994 fourth quarter. 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 $13 million. The Corporation's share of estimated annual copper production capacity will increase 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 the second half of 1995. This increase in production will add approximately $1.3 million to the variation in annual pre-tax operating income from each 1 cent per pound change in average 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 $1.33 in the second quarter and $1.35 in the first six months of 1995, compared with 99 cents and 93 cents in the corresponding 1994 periods. From July 1 to August 4, 1995, the COMEX price averaged $1.38 per pound, closing at $1.39 on August 4, 1995. The Corporation enters into price protection arrangements from time to time, depending on market circumstances, to ensure a minimum price for a portion of its expected future mine production. For further discussion of the Corporation's price protection arrangements for 1995 and 1996 production, see Note 3 to Consolidated Financial Information. Sales were $1,024.2 million in the 1995 second quarter and $2,057.7 million in the first six months of 1995, compared with $780.4 million and $1,474.7 million in the corresponding 1994 periods. The 1995 increases principally resulted from higher average copper prices and sales volumes, higher average carbon black prices and sales volumes, higher sales volumes of wheels and rims, and higher average selling prices for wire and cable products. 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 mineral exploration and development programs. ================================================================================ First Six Second Quarter Months --------------- --------------- 1995 1994 1995 1994 ---- ---- ---- ---- Copper from own mines * (short tons) Production 173,400 132,600 330,700 271,800 Deliveries 157,700 141,100 315,700 264,600 New York Commodity Exchange average spot price per pound - copper cathodes $ 1.33 0.99 1.35 0.93 (in millions) Sales and other operating revenues $ 589.7 414.9 1,196.1 769.8 Operating income $ 187.9 63.1 390.0 115.7 ------------------------- * The Corporation's worldwide copper production and deliveries shown in the above table exclude the amounts attributable to (i) the 15 percent undivided interest in the Morenci, Arizona, copper mining complex held by Sumitomo Metal Mining Arizona, Inc., (ii) the one-third partnership interest in Chino Mines Company in New Mexico held by Heisei Minerals Corporation, and (iii) the 20 percent interest in Candelaria held by SMMA Candelaria, Inc., a jointly owned subsidiary of Sumitomo Metal Mining Co., Ltd. and Sumitomo Corporation. ================================================================================ Phelps Dodge Mining Company's 1995 second quarter sales of $589.7 million were 42 percent higher than in the second quarter of 1994. This increase principally resulted from a 34 cents per pound increase in average copper prices and a 16,600 ton increase in copper sales from mine production that included 27,700 tons from Candelaria (Candelaria commenced production in the 1994 fourth quarter). Sales of $1,196.1 million in the first six months of 1995 were 55 percent higher than in the corresponding 1994 period. This increase primarily resulted from a 42 cents per pound increase in average copper prices and a 51,100 ton increase in copper sales from mine production that included 47,700 tons from Candelaria. Phelps Dodge Mining Company recorded operating income of $187.9 million in the 1995 second quarter and $390.0 million in the first six months of 1995, compared with $63.1 million and $115.7 million in the corresponding 1994 periods. The increases resulted from the higher average copper prices and, to a lesser extent, the volumes of copper sold from mine production already discussed, partially offset by higher copper production costs. Increased 1995 unit production costs principally resulted from lower mill throughput at the Morenci mine, related to harder ores encountered in the Metcalf area of the mine, and increased mining rates at the Tyrone mine necessary to increase grades at its solution extraction/electrowinning facilities. In addition, operating income in 1994 included a net loss of $17.5 million before taxes from the sale of certain gold interests in the second quarter. PHELPS DODGE INDUSTRIES Phelps Dodge Industries is a business segment comprising a group of international companies that manufacture engineered products principally for the transportation and electrical sectors. Its operations are characterized by products with significant market share, internationally competitive cost and quality, and specialized engineering capabilities. This business segment includes the Corporation's carbon black operations through Columbian Chemicals Company and its subsidiaries; its wheel and rim operations through Accuride Corporation and its subsidiaries; its magnet wire operations through Phelps Dodge Magnet Wire Company and its subsidiaries; its international wire and cable manufacturing operations through Phelps Dodge International Corporation; and its U.S. specialty conductor operations through Hudson International Conductors. ================================================================================ First Six Second Quarter Months -------------- ------------- 1995 1994 1995 1994 ---- ---- ---- ---- (in millions) Sales and other operating revenues $ 434.5 365.5 861.6 704.9 Operating income $ 60.0 38.5 138.0 74.6 ================================================================================ Phelps Dodge Industries' sales of $434.5 million in the second quarter of 1995 were 19 percent higher than in the second quarter of 1994. Sales of $861.6 million in the first six months of 1995 were 22 percent higher than in the corresponding 1994 period. These increases primarily resulted from higher sales in the carbon black business reflecting higher average worldwide prices, improved sales volumes in North American and European markets and stronger European currencies against the U.S. dollar (particularly the Deutsche mark and French franc). Sales volumes of carbon black benefited from increases at Columbian Chemicals Company's carbon black plant in Hungary that had just commenced operations in late 1993, and from the acquisition of a Spanish carbon black facility in December 1994. Increased 1995 sales also reflected higher sales volumes in the wheel and rim business due to increased truck builds in North America, and higher average selling prices in the wire and cable businesses primarily due to higher copper prices. During the 1995 second quarter, Phelps Dodge Industries recorded operating income of $60.0 million, a 56 percent increase over the $38.5 million recorded in the corresponding 1994 period. Operating income of $138.0 million in the first six months of 1995 included $111.2 million in earnings and a gain of $26.8 million before taxes from the sale of Columbian Chemicals Company's MAPICO division in the first quarter. Operating income was $74.6 million in the corresponding 1994 period. Increased 1995 operating income primarily reflected improved sales volumes and margins in the carbon black, wheel and rim, and wire and cable businesses already discussed. OTHER MATTERS RELATING TO THE STATEMENT OF CONSOLIDATED OPERATIONS The Corporation recorded net interest expense of $18.3 million in the 1995 second quarter and $33.3 million in the first six months of 1995, compared with $5.4 million and $13.4 million in the corresponding 1994 periods. Increased 1995 net interest expense principally resulted from the cessation of capitalization of interest costs for the Candelaria copper project in Chile reflecting the substantial completion of construction and development of the project in the 1994 fourth quarter. The Corporation's miscellaneous income, net of miscellaneous expense, was $7.5 million in the 1995 second quarter and $18.4 million in the first six months of 1995, compared with $1.0 million in both of the corresponding 1994 periods. These increases primarily resulted from higher interest income earned on cash and short-term investments. Miscellaneous income in the first six months of 1995 also included an increase of $4.5 million in dividends received from the Corporation's 16.25 percent minority interest in Southern Peru Copper Corporation. CHANGES IN FINANCIAL CONDITION Capital outlays during the first six months of 1995 were $154.4 million for Phelps Dodge Mining Company and $25.5 million for Phelps Dodge Industries. Capital outlays in the corresponding 1994 period were $139.9 million for Phelps Dodge Mining Company and $31.1 million for Phelps Dodge Industries. The Corporation expects capital outlays in 1995 to be approximately $325 million for Phelps Dodge Mining Company. This amount does not include $40 million for the potential acquisition of certain mining properties owned by Azco Mining, Inc., including the Sanchez property in southeastern Arizona and a 70 percent interest in the Piedras Verdes property in Mexico. Phelps Dodge Industries is expected to spend approximately $75 million during the year. At June 30, 1995, the Corporation's total debt was $718.3 million, compared with $696.9 million at year-end 1994. The Corporation's ratio of debt to total capitalization was 22.5 percent at June 30, 1995, compared with 23.6 percent at December 31, 1994. Short-term debt increased from $49.3 million at December 31, 1994, to $76.7 million at June 30, 1995, primarily as a result of borrowings to finance working capital requirements at the Corporation's international wire and cable manufacturing operations. During the 1995 second quarter, the Corporation's 80 percent owned subsidiary, Compania Contractual Minera Candelaria, satisfied all operating, financial, construction and legal tests and conditions as set forth in the completion agreement associated with the project financing of its Candelaria mine in Chile. Borrowings under these debt facilities are now non-recourse to Phelps Dodge. On June 8, 1995, the Corporation paid a regular quarterly dividend of 45 cents per share on its common shares for the 1995 second quarter. The amount paid for the second quarter was $31.2 million, bringing total 1995 dividends paid through June 30 to $63.1 million. On July 28, 1995, the Board of Directors declared a 1995 third quarter regular dividend of 45 cents per common share to be paid on September 8, 1995, to shareholders of record at the close of business on August 18, 1995. In 1995 through August 4, the Corporation purchased 1,433,000 of its common shares at a total cost of $78.7 million. These purchases included 1,348,000 shares under a 5 million share buy-back program authorized on March 7, 1995, and 85,000 shares under the superseded program. There were 69,478,400 common shares outstanding on June 30, 1995. Part II. Other Information Item 1. Legal Proceedings Reference is made to Paragraph III. of Item 3. Legal Proceedings of the Corporation's Form 10-K for the year ended December 31, 1994, regarding the proceedings described below. Prior to the mid-1960s, a predecessor of Phelps Dodge Industries, Inc. (PDI), a subsidiary of the Corporation, manufactured and sold some cable and wire products that were insulated with material containing asbestos. PDI believes that the use of its products did not result in significant releases of airborne asbestos fibers. PDI and the Corporation are collectively referred to below as PDI. Since the late 1980s, PDI has been served with complaints in asbestos-related actions filed on behalf of over 13,900 claimants. In these proceedings, plaintiffs have alleged bodily injury or death caused by purported exposures to asbestos and have claimed damages based on theories of strict liability and negligence. Over 12,500 of those claimants were participants in the Ingalls Shipyard asbestos litigation filed in Pascagoula, Mississippi. Each claimant in that litigation sought from $2 million to $20 million in compensatory and punitive damages from a group of approximately 100 to 150 defendants, which included PDI. During 1993 and 1994, PDI was successful in obtaining the dismissal of all but one of the claims against it in Mississippi. During 1995, PDI has been dismissed from 52 asbestos-related claims, while 143 new claims have been filed against PDI in four states. As of June 30, 1995, a total of 429 asbestos-related claims were being defended by PDI in 14 jurisdictions. PDI is vigorously contesting and defending these claims. Item 4. Submission of Matters to a Vote of Security Holders The Corporation's annual meeting was held on May 3, 1995. Set forth below is a description of the matters voted upon at such meeting and a summary of the voting regarding each such matter: For Withheld --- -------- Election of Directors: Edward L. Addison 58,314,541 93,263 Paul Hazen 58,317,143 90,661 Marie L. Knowles 58,314,814 92,990 Gordon R. Parker 58,314,735 93,069 Broker For Against Abstain Nonvotes --- ------- ------- -------- Appointment of Auditors 58,304,219 41,254 62,331 0 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 June 30, 1995. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Corporation has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PHELPS DODGE CORPORATION ------------------------ (Corporation or Registrant) Date: August 10, 1995 By: Thomas M. Foster ---------------- Thomas M. Foster Vice President and Controller (Principal Accounting Officer) PHELPS DODGE CORPORATION AND SUBSIDIARIES INDEX TO EXHIBITS 10.11 Amendment, effective June 7, 1995, to the Corporation's Comprehensive Executive Nonqualified Retirement and Savings Plan. 10.13 Retirement Agreement dated as of June 20, 1995, between Patrick J. Ryan and the Corporation. 10.14 Consulting Agreement dated as of June 20, 1995, between Patrick J. Ryan and the Corporation. 12 Computation of ratios of total debt to total capitalization. 15 Letter from Price Waterhouse LLP with respect to unaudited interim financial information. 27 Financial Data Schedule for the six months ended June 30, 1995. EX-10.11 2 INSTRUMENT OF AMENDMENT Exhibit 10.11 Instrument of Amendment The Comprehensive Executive Non-qualified Retirement and Savings Plan of Phelps Dodge Corporation (the "Non-qualified Plan") is hereby amended as set forth below, with such amendments to be in the form and effective as of a date approved by Mr. John C. Replogle, Vice President, Human Resources of the Corporation, as evidenced by his written execution thereof. 1. The Non-qualified Plan is hereby amended to conform various section references to the revised Phelps Dodge Employee Savings Plan. 2. The Non-qualified Plan is hereby amended to allow the Benefits Administration Committee, in its sole discretion, to exclude certain foreign nationals from participation therein. 3. The Non-qualified Plan is hereby amended to allow daily investment fund transfers. 4. The Non-qualified Plan is hereby amended to include an indemnification provision substantially similar to the one contained in the amended Phelps Dodge Pension Plan for Day's-Pay Employees (Western Branches). EX-10.13 3 RETIREMENT AGREEMENT Exhibit 10.13 RETIREMENT AGREEMENT This RETIREMENT AGREEMENT ("Agreement"), dated as of June 20, 1995, is between PHELPS DODGE CORPORATION, a New York corporation with its principal place of business at 2600 North Central Avenue, Phoenix, Arizona 85004-3014 ("Phelps Dodge") and PATRICK J. RYAN, an individual residing at 5481 E. Lupine Avenue, Scottsdale, Arizona 85254 ("Ryan"). Ryan serves as a Senior Vice President of Phelps Dodge and Executive Vice President of Phelps Dodge Mining Company ("PDMC"). He has worked for Phelps Dodge and its affiliated entities for over 24 years. Ryan has announced his desire to retire from Phelps Dodge. Phelps Dodge desires to recognize Ryan's service to it. Phelps Dodge and Ryan both desire that Ryan's retirement occur in an orderly fashion and that the issues raised by his retirement are dealt with in a mutually satisfactory manner. Therefore, in consideration of their mutual promises contained in this Agreement, the parties agree as follows: 1. Retirement. Ryan will retire from employment with Phelps Dodge at the close of business on June 30, 1995 (his "Retirement Date"). Ryan will resign from all positions he holds with Phelps Dodge and with each of Phelps Dodge's subsidiaries and affiliated entities on his Retirement Date. At the request of Phelps Dodge, Ryan agrees to execute any documents to effectuate or to facilitate his retirement and resignations. 2. Service Recognition Payment. In recognition of his years of service to Phelps Dodge, Ryan shall receive a payment in the gross amount of $155,500, less all applicable withholding taxes and other deductions. This payment will be made to Ryan within 10 calendar days after his Retirement Date or within 10 calendar days after the effective date of this Agreement, whichever is later. 3. Bonus. Ryan shall be eligible to receive a pro rata bonus for calendar year 1995 based on the period he was an active full-time employee in accordance with the terms of the Annual Incentive Compensation Plan (the "AICP") and the goals that have been established by the AICP. With respect to the individual portion of the AICP award, Ryan will receive an award at the target level subject to the approval of the Compensation and Management Development Committee. The AICP bonus shall be paid to Ryan within 15 calendar days after the Compensation and Management Development Committee sets the award for active employees. 4. Profit Sharing. Ryan shall receive a pro rata profit sharing contribution that is otherwise payable to Ryan with respect to 1995 performance. This profit sharing contribution shall be made at the same time and generally subject to the same terms and conditions as are applicable to other similarly situated employees of Phelps Dodge. 5. Stock Options. Any unvested stock options held by Ryan under Phelps Dodge's 1987 Stock Option and Restricted Stock Plan and 1993 Stock Option and Restricted Stock Plan (the "Stock Plans") will vest as of July 1, 1995, subject to the approval of the Compensation and Management Development Committee. Ryan will then have until July 1, 2000 to exercise those stock options, subject to the approval of the Compensation and Management Development Committee. Except to the extent modified by this paragraph 5, all of the terms and conditions of the Stock Plans and the stock option grants made thereunder to Ryan shall continue to be applicable. 6. Restricted Stock. Subject to the approval of the Compensation and Management Development Committee, the transfer restrictions shall lapse with respect to all outstanding restricted common shares previously awarded to Ryan and those shares shall become fully vested as of July 1, 1995. 7. Monthly Retirement Benefits. In addition to the $2,033 monthly benefit Ryan is entitled to receive under the provisions of the Phelps Dodge Retirement Plan for Salaried Employees, Phelps Dodge will provide him with a nonqualified monthly retirement benefit of $14,247. Phelps Dodge also will provide Ryan with a special, nonqualified, monthly supplemental retirement benefit of $130 until Ryan reaches age 65. Monthly payments of these retirement benefits will start in July 1995. (The monthly benefits set forth in this section are based on a single life annuity.) 8. Additional Benefits. (a) Continuation of Medical and Dental Benefits. Until Ryan reaches age 65, and subject to his making those contributions, if any, required of employees generally to receive these benefits, Phelps Dodge will continue the participation of Ryan and his eligible dependents in its medical and dental benefit plans for active employees as they are in effect on the Retirement Date on the same terms and conditions as generally apply to similarly situated employees. When Ryan attains age 65, he and his eligible dependents will become eligible for retiree medical benefits. If he elects to receive retiree medical benefits, he will be required to contribute the applicable percentage of the premium cost of those benefits that is in effect at the time, subject to the provisions of the retiree medical plan. (b) Accrued Benefits. Except as provided in this Agreement, Ryan also shall receive all of the benefits that have accrued and that have become vested on or prior to the Retirement Date under the terms of Phelps Dodge's generally applicable employee benefit plans. 9. Confidentiality. Ryan agrees that he will maintain the confidentiality of this Agreement, and that he will not communicate or disclose any information concerning this Agreement to anyone, except to his immediate family, his attorney and his accountant, and such persons will be advised of, and bound by, this confidentiality provision. 10. General Release. (a) Ryan agrees not to bring any suit or claim against Phelps Dodge or any of its related entities or individuals with respect to any matter, including those relating to his employment with Phelps Dodge or his retirement from that employment. Therefore, Ryan, and his heirs, executors, administrators and assigns, forever release Phelps Dodge and its parents, subsidiaries and related entities, and their officers, directors, agents, employees, attorneys and representatives from all claims, liabilities, suits, charges and actions, whether known or unknown, accrued or not accrued, as of the date Ryan signs this Agreement. The items released include, but are not limited to, matters relating to or arising out of his employment or retirement from employment. Some examples of the items released are claims under federal, state or local laws, such as the Age Discrimination in Employment Act, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act, the Family and Medical Leave Act, the Arizona Civil Rights Act, and any common law, tort, or contract claims. This provision of course does not affect Ryan's rights to vested benefits under Phelps Dodge's benefit plans. (b) Ryan acknowledges that he has been advised by Phelps Dodge to consult with an attorney of his choice prior to executing this Agreement and that he has had an opportunity to do so, and that he has been given a period of at least 21 days within which to consider this Agreement. (c) Ryan understands that the special benefits he will receive by this Agreement are not required by the policies of Phelps Dodge. Ryan also understands that if he and Phelps Dodge did not have this Agreement, he would not be receiving these valuable special benefits. (d) Ryan has carefully read this Agreement, and he has had an opportunity to ask questions about it, he understands it, and he agrees to all of its provisions. Ryan understands that by signing this Agreement, he agrees not to sue or bring any claim against Phelps Dodge or any other entity or person he has released from claims. Ryan has made this Agreement voluntarily and without any duress. 11. Indemnification. Phelps Dodge or one of its subsidiaries (including, without limitation, PDMC), as appropriate, shall indemnify Ryan for any claim arising out of or in connection with Ryan's service as an officer and employee of Phelps Dodge, or a subsidiary or affiliated entity of Phelps Dodge, in the same manner and to the same extent as Phelps Dodge or such subsidiary, as the case may be, indemnifies its then current officers or employees. Phelps Dodge shall continue coverage of Ryan under its directors' and officers' liability insurance policy to the same extent as its then current officers or employees are covered. 12. Withholding. All cash payments to be made under this Agreement shall be made net of all applicable income and employment taxes required to be withheld from such payments. To the extent any compensation is payable to Ryan in accordance with this Agreement other than as a payment in cash, Ryan shall be required to pay Phelps Dodge an amount equal to all applicable income and employment taxes required to be withheld with respect thereto. 13. Amendment. This Agreement may be amended only by a written instrument signed by Phelps Dodge and Ryan. 14. Entire Agreement. Except to the extent that other agreements between Phelps Dodge and Ryan govern Ryan's rights with respect to outstanding awards under the Stock Plans, or Phelps Dodge's plans and programs that govern Ryan's accrued vested benefits, or the Consulting Agreement between Phelps Dodge and Ryan, this Agreement shall constitute the entire Agreement between Phelps Dodge and Ryan with respect to the subject matter hereof. Any other agreement or understanding between Phelps Dodge and Ryan (including, without limitation, any agreement to provide Ryan with benefits in the event his employment ends), whether written or oral, with respect to any matter addressed or described in this Agreement is hereby superseded and revoked and rendered void and without effect. 15. Effective Date. Ryan may revoke this Agreement during the 7 calendar days after he signs it. The Agreement will not become effective until the eighth calendar day after Ryan signs it. If Ryan wishes to revoke the Agreement, he must do so in writing, and his written notice of revocation must be sent to Mr. John C. Replogle ("Replogle"), Vice President-Human Resources, Phelps Dodge Corporation, 2600 North Central Avenue, Phoenix, Arizona 85004. To be effective, the revocation must be received by Replogle during the 7 calendar days after the day Ryan signs this Agreement. 16. Assignment. No rights or obligations under this Agreement may be assigned or transferred by Ryan except that Ryan's rights to receive any payment in respect to the compensation and benefits provided hereunder shall, in the event of death, pass to his estate, or to his designated beneficiary, and may be transferred by will or operation of law; provided that nothing in this section shall be construed to require Phelps Dodge to pay any survivor or death benefits with respect to the retirement benefits described in paragraph 7 other than those, if any, that are payable in accordance with the form of benefit payment elected by Ryan. 17. Resolution of Disputes. Any disputes arising under or in connection with this Agreement shall be resolved by binding arbitration, to be held in Phoenix, Arizona, in accordance with the rules and procedures of the American Arbitration Association. Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction of the matter. Costs of the arbitration shall be borne equally by the parties. Unless the arbitrator otherwise determines, the party that does not prevail in any such action shall reimburse the other party for his or its reasonable attorneys' fees incurred with respect to such arbitration. 18. Governing Law. This Agreement shall be governed by the laws of the State of Arizona. IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the day first written above. PHELPS DODGE CORPORATION Patrick J. Ryan By______________________ _____________________ John C. Replogle Vice President-Human Resources Date:_______________ Date:___________________ EX-10.14 4 CONSULTING AGREEMENT Exhibit 10.14 CONSULTING AGREEMENT This CONSULTING AGREEMENT ("Agreement"), dated as of June 20, 1995, is between PHELPS DODGE CORPORATION, a New York corporation, with its principal place of business at 2600 North Central Avenue, Phoenix, Arizona 85004-3014 ("Phelps Dodge") and PATRICK J. RYAN, an individual residing at 5481 E. Lupine Avenue, Scottsdale, Arizona, 85254 ("Ryan"). Ryan has served as the Senior Vice President of Phelps Dodge and the Executive Vice President of Phelps Dodge Mining Company ("PDMC"). Ryan has announced that he is retiring from Phelps Dodge at the close of business on June 30, 1995. Phelps Dodge wishes to continue to benefit from the experience and expertise Ryan developed in his more than 24 years of service with Phelps Dodge and its subsidiaries and affiliated entities. Ryan desires to provide his services to Phelps Dodge on a consulting basis. Phelps Dodge and Ryan enter into this Agreement to set forth the terms and conditions pursuant to which Ryan will provide consulting services to Phelps Dodge following his retirement. Therefore, in consideration of their mutual promises contained in this Agreement, Phelps Dodge and Ryan agree as follows: 1. Services. Ryan will provide consulting services relating to projects identified by Phelps Dodge on a case-by-case basis. 2. Conferences and Meetings. Ryan will attend conferences and meetings when requested to do so by Phelps Dodge. Phelps Dodge agrees to provide Ryan with reasonable notice of the conferences and meetings it wants Ryan to attend. If a conflict arises between Ryan's schedule and a meeting or conference at which Phelps Dodge desires his attendance, Phelps Dodge and Ryan will cooperate with each other in attempting to arrange their respective schedules in order to facilitate Ryan's attendance at the meeting or conference. 3. Compensation. In addition to the special pay and benefits contained in the Retirement Agreement between Ryan and Phelps Dodge, Phelps Dodge shall pay Ryan an annual gross fee of $75,000 for his consulting services. Ryan will work at the Company's request for up to 60 days per year for this amount. For each day in a year in excess of 60 days that Ryan works at the request of Phelps Dodge, he will be paid the gross sum of $1,300. Phelps Dodge shall not be responsible for providing Ryan any benefits that it normally provides its employees, except for those benefits provided by the Retirement Agreement between Ryan and Phelps Dodge. 4. Payment. Phelps Dodge shall pay Ryan on a quarterly basis, and the payments will be made within 10 calendar days after the end of each calendar quarter. The annual fee of $75,000 will be paid in installments of a gross amount of $18,750 for each calendar quarter. Any additional amounts due for consulting services in excess of 60 days in a year will normally be paid within 10 calendar days after the end of the calendar quarter in which Ryan rendered the additional consulting services. Phelps Dodge will reimburse Ryan for his reasonable out-of-pocket expenses including, but not limited to, travel, accommodations, and meals necessarily incurred by Ryan in performing his consulting services under this Agreement. The general nature of these expenses will be approved by Phelps Dodge before the expenses are incurred. When traveling in the course of performing his consulting services under this Agreement, Ryan will be covered under Phelps Dodge's business travel accident insurance plan in the same manner as other similarly situated consultants. 5. Term. This Agreement will be for a term of three years from July 1, 1995 through June 30, 1998, unless sooner terminated pursuant to paragraph 15. 6. Non-Competition. Ryan acknowledges that in the course of his employment and his independent consulting relationship with Phelps Dodge, he had and will have direct or indirect contact with existing and prospective customers and others having business dealings with Phelps Dodge and thereby will have the opportunity to meet and develop on behalf of Phelps Dodge, its subsidiaries and affiliated entities, goodwill and working relationships with these persons, firms, or other entities. Ryan acknowledges that such goodwill and relationships are valuable assets of Phelps Dodge, and he understands and agrees that, because of the nature of the business of Phelps Dodge, its subsidiaries, and affiliated entities, it is necessary to afford fair protection to Phelps Dodge for those assets. Therefore, during the term of this Agreement, Ryan shall not engage, directly or indirectly, in, or become employed by, serve as an agent or consultant to, become a partner, principal, or stockholder of any partnership, corporation or other entity (a "Competitor") which is engaged in any business in direct competition with Phelps Dodge or any of its subsidiaries or affiliated entities unless he obtains prior written approval from Phelps Dodge, which approval will not be unreasonably withheld. During the term of this Agreement, Ryan shall not develop and sell any found minerals to other persons or entities without first presenting the opportunity to Phelps Dodge and obtaining its prior written consent to develop and sell the found minerals to others if Phelps Dodge is not interested in the opportunity. Phelps Dodge will respond expeditiously to the opportunities presented to it by Ryan. Ryan acknowledges and agrees that the geographic scope of this provision has not been limited because Phelps Dodge's business and customers are worldwide and Phelps Dodge has a legitimate protectable business interest in its goodwill and relationships with its customers and in preventing the solicitation of its customers regardless of the geographical location of its customers or where Ryan is employed if and when he attempts such solicitation. Ryan's ownership of less than one percent of the issued and outstanding stock of any corporation whose stock is traded on an established securities market shall not constitute a violation of this paragraph. 7. Non-Solicitation. Ryan acknowledges that the employees of Phelps Dodge are an integral part of the business of Phelps Dodge, and he understands and agrees that, because of the nature of the business of Phelps Dodge, it is necessary to afford fair protection to Phelps Dodge from the loss of any such employees. Therefore, during the term of this Agreement and for two years after the date that this Agreement terminates (or until June 30, 2000 if Ryan terminates this Agreement pursuant to paragraph 15), Ryan will not solicit or otherwise induce any employee of Phelps Dodge, or any of its respective subsidiaries or affiliated entities, to leave the employ of Phelps Dodge or any of its subsidiaries or affiliated entities or to become associated, whether as an employee, officer, parent, director, consultant or otherwise, with any business organization, including, but not limited to, a Competitor. 8. Non-Disclosure. Ryan acknowledges that the information, observations and data obtained by him during the course of his employment with Phelps Dodge, and to be obtained by him during the period of this Agreement, concerning the business or affairs of Phelps Dodge or any of its subsidiaries or any affiliated entities are confidential and are the property of Phelps Dodge. Therefore, Ryan will not at any time disclose to any unauthorized person or use for his own account any of such information, observations or data without the written authorization of Phelps Dodge, unless such information, observations or data have previously been disclosed to the public by Phelps Dodge or have become public knowledge other than by reason of the actions of Ryan. The provisions of this paragraph 8 shall survive the term of this Agreement. 9. Remedies. Ryan understands and agrees that Phelps Dodge may suffer irreparable harm in the event that he breaches any of his material obligations under this Agreement and that monetary damages will be inadequate to compensate Phelps Dodge for such breach. Accordingly, Ryan agrees that, in the event of his material breach or threatened material breach of any of the provisions of this Agreement, Phelps Dodge, in addition to and not in limitation of any other rights, remedies or damages available to Phelps Dodge at law or in equity, shall be entitled to a temporary restraining order, preliminary injunction and permanent injunction in order to prevent or to restrain any such breach by Ryan or any or all of his partners, co-venturers, employers, employees, servants, agents, representatives and any other persons directly or indirectly acting for, or on behalf of, or with him. 10. Reasonableness; Severability. Ryan has carefully considered his obligations as stated in this Agreement and agrees that the restrictions contained in this Agreement are fair and reasonable and are reasonably required for Phelps Dodge's protection. If, however, the time, geographic, occupational or other scope of any restrictions of this Agreement should ever be deemed to exceed that permitted by applicable law or be otherwise over-broad, Ryan agrees that a court of competent jurisdiction shall enforce that restriction to the maximum scope permitted by law under the circumstances. 11. Independent Contractor. In providing the consulting services called for by this Agreement, Ryan will serve as an independent contractor. Nothing contained in this Agreement shall be construed to constitute Ryan as an officer, employee, or agent of Phelps Dodge, nor shall either party have the authority to bind the other in any respect. Ryan will be responsible for his own actions. Subject to paragraph 6, Ryan may perform services for other businesses, entities and/or individuals in addition to Phelps Dodge. Phelps Dodge shall not be required to withhold any federal or state income taxes, FICA or FUTA from the annual gross fee paid to Ryan for his consulting services. Ryan shall be responsible for maintaining his own books and records and for the filing of any taxes or other information returns with any federal or state agencies. Further, Phelps Dodge will not be responsible for providing Ryan any benefits that it provides to its employees, including, without limitation, health and life insurance, disability insurance, and qualified or nonqualified deferred compensation arrangements of any nature other than those benefits covered by the Retirement Agreement between Ryan and Phelps Dodge. 12. Office and Materials. Except as provided for in paragraph 4, Ryan is responsible for all expenses incurred during the performance of his work under this Agreement. Ryan is to provide the necessary materials, tools, equipment, and labor to perform the job. Phelps Dodge shall not be required to provide any office space, equipment, materials, supplies or personnel to Ryan. Ryan is responsible for hiring, supervising, and paying all support staff necessary to provide the services called for by this Agreement. Ryan acknowledges that he is not acting as a representative or agent of Phelps Dodge when he hires, supervises, or pays his staff or assistants. 13. Working Arrangements. Phelps Dodge does not have the right to and will not exercise any control or direction over the method by which Ryan chooses to perform the consulting services called for by this Agreement. Ryan will devote such time as is required to perform the consulting services. Ryan may use any of his employees or consultants that he deems necessary to complete the consulting services. Ryan shall choose the time and manner for performing the consulting services according to his own routines and schedules. Ryan shall set his own hours of work. Ryan has no obligation to submit reports relating to the method in which consulting services are rendered under this Agreement. No training will be provided by Phelps Dodge to Ryan. Ryan acknowledges that he is not in need of any training by Phelps Dodge to perform the consulting services called for by this Agreement. 14. Assignment. Phelps Dodge is retaining the services of Ryan based on his specific experience and expertise. Therefore, there shall be no assignment of this Agreement by Ryan without Phelps Dodge's written consent. 15. Termination. Either Phelps Dodge or Ryan may terminate this Agreement for good cause upon thirty days written notice to the other party. Neither party shall have the right to terminate this Agreement without good cause, and good cause will mean a serious breach of the spirit and intent of the Agreement. 16. Resolution of Disputes. Any disputes arising under or in connection with this Agreement, other than disputes arising under paragraphs 6, 7, 8, 9 and 10, shall be resolved by binding arbitration to be held in Phoenix, Arizona in accordance with the rules and procedures of the American Arbitration Association. Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction of the matter. Costs of the arbitration shall be borne equally by the parties. Unless the arbitrator otherwise determines, the party that does not prevail in any such action shall reimburse the other party for his or its reasonable attorneys' fees incurred with respect to such arbitration. 17. Governing Law. This Agreement shall be governed by the laws of the State of Arizona. 18. Entire Agreement. This Agreement contains the entire agreement of the parties. It may not be changed orally, but only by a written agreement signed by the parties. IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the day first written above. PHELPS DODGE CORPORATION, Patrick J. Ryan a New York corporation By________________ _________________ John C. Replogle Vice President, Human Resources Date:_____________ Date:______________ EX-12 5 COMPUTATION OF TOTAL DEBT RATIO PHELPS DODGE CORPORATION AND SUBSIDIARIES Exhibit 12 COMPUTATION OF TOTAL DEBT TO TOTAL CAPITALIZATION (Dollars in thousands) June 30, December 31, 1995 1994 ---- ---- (unaudited) Short-term debt $ 76,700 49,300 Current portion of long-term debt 16,800 25,300 Long-term debt 624,800 622,300 ----------- ----------- Total debt 718,300 696,900 Minority interests in subsidiaries 67,300 65,300 Common shareholders' equity 2,405,500 2,187,600 ----------- ----------- Total capitalization $ 3,191,100 2,949,800 =========== =========== Ratio of total debt to total capitalization 22.5% 23.6% =========== =========== EX-15 6 AUDITORS' CONSENT Exhibit 15 Price Waterhouse LLP August 10, 1995 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Ladies and Gentlemen: We are aware that Phelps Dodge Corporation has incorporated by reference our report dated July 20, 1995 (issued pursuant to the provisions of Statements on Auditing Standards Nos. 71 and 42) in the Prospectus constituting part of its Registration Statements on Form S-3 (No. 33-44380) and Form S-8 (Nos. 33-26442, 33-6141, 33-26443, 33-29144, 33-19012, 2-67317, 33-34363, 33-34362, 33-62486). We are also aware of our responsibilities under the Securities Act of 1933. Yours very truly, Price Waterhouse LLP Phoenix, Arizona EX-27 7 ART. 5 FDS FOR 2ND QUARTER 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AT JUNE 30, 1995 AND THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS AND OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1995 OF PHELPS DODGE CORPORATION AND ITS SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 1 401,700 0 499,500 0 289,200 1,367,700 2,633,500 0 4,363,300 619,800 624,800 434,300 0 0 1,971,200 4,363,300 2,057,700 2,057,700 1,369,300 1,369,300 146,200 0 33,300 495,500 148,700 344,800 0 0 0 344,800 4.90 4.90