-----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, Tp5vhEx3GmaxfyhOsAlqiv67T/0bA4pE8JyWtVRJfS3kh+r54IeaeNtm/U0o59Ic 8t4az9i/PApH+Gq795Na2Q== 0000950147-98-000497.txt : 19980630 0000950147-98-000497.hdr.sgml : 19980630 ACCESSION NUMBER: 0000950147-98-000497 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980629 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: 11-K SEC ACT: SEC FILE NUMBER: 001-00082 FILM NUMBER: 98655587 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 11-K 1 ANNUAL EMPLOYEE BENEFITS REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 11-K --------- (Mark One) [x] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 ----------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to _____________________ Commission file number 1-82 ---- PHELPS DODGE EMPLOYEE SAVINGS PLAN ---------------------------------- PHELPS DODGE CORPORATION ------------------------ 2600 North Central Avenue Phoenix, Arizona 85004-3089 SIGNATURES ---------- The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the Committee has duly caused this Annual Report to be signed by the undersigned hereunto duly authorized. PHELPS DODGE EMPLOYEE SAVINGS PLAN Date: June 26, 1998 By: /s/ R. G. Peru ------------------------------- ------------------------------------- Ramiro G. Peru, Chairman Benefits Administration Committee -2- Phelps Dodge Employee Savings Plan Index December 31, 1997 and 1996 - --------------------------------------------------------------------------------
Page Report of Independent Accountants 5 Statement of Net Assets Available for Benefits, with Fund Information 6 Statement of Changes in Net Assets Available for Benefits, with Fund Information 8 Notes to Financial Statements 10 Supplemental Information:* I. Schedule of Assets Held for Investment Purposes at December 31, 1997 18 II. Schedule of Reportable Transactions for Year Ended December 31, 1997 19 * Other schedules required by Section 2520.103-10 of the Department of Labor Rules and Regulations for Reporting and Disclosure under ERISA have been omitted because they are not applicable
- 4 - Report of Independent Accountants To the Benefits Administration Committee and Participants of the Phelps Dodge Employee Savings Plan In our opinion, the financial statements listed in the accompanying index present fairly, in all material respects, the net assets available for benefits of the Phelps Dodge Employee Savings Plan at December 31, 1997 and 1996, and the changes in net assets available for benefits for the years then ended, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Benefits Administration Committee (the Committee); our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Committee, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The additional information included in Schedules I and II is presented for purposes of additional analysis and is not a required part of the basic financial statements but is additional information required by ERISA. The Fund Information in the statement of net assets available for benefits and the statement of changes in net assets available for benefits is presented for purposes of additional analysis rather than to present the net assets available for plan benefits and changes in net assets available for benefits of each fund. Schedules I and II and the Fund Information have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. Price Waterhouse LLP Phoenix, Arizona June 24, 1998 - 5 - Phelps Dodge Employee Savings Plan Statement of Net Assets Available for Benefits, with Fund Information December 31, 1997 (in thousands) - --------------------------------------------------------------------------------
Money Interest Equity Market Income Balanced Income S&P 500 Growth Assets Fund Fund Fund Fund Index Fund Stock Fund - --------------------------------- --------- --------- --------- --------- ---------- ---------- Investments, at current value (cost basis $292,241): Common Stocks Mutual Funds $ 34,698 $ 4,013 $ 69,032 $ 12,770 $ 85,400 Guaranteed Investment Contracts $ 44,576 Loans to Participants --------- --------- --------- --------- --------- --------- 34,698 44,576 4,013 69,032 12,770 85,400 --------- --------- --------- --------- --------- --------- Receivables: Loan Repayments 78 105 6 125 21 159 Employee Contributions 129 165 18 231 66 338 Employer Contributions 1,553 1,304 185 1,950 600 2,568 --------- --------- --------- --------- --------- --------- 1,760 1,574 209 2,306 687 3,065 --------- --------- --------- --------- --------- --------- Net assets available for benefits $ 36,458 $ 46,150 $ 4,222 $ 71,338 $ 13,457 $ 88,465 ========= ========= ========= ========= ========= ========= Phelps Occidental Dodge Petroleum International Small Cap Common Common Stock Assets Equity Fund Equity Fund Stock Fund Fund Loan Fund Total - --------------------------------- ----------- ----------- ---------- --------- --------- --------- Investments, at current value (cost basis $292,241): Common Stocks $ 42,835 $ 269 $ 43,104 Mutual Funds $ 5,024 $ 6,789 217,726 Guaranteed Investment Contracts 44,576 Loans to Participants $ 15,551 15,551 --------- --------- --------- --------- --------- --------- 5,024 6,789 42,835 269 15,551 320,957 --------- --------- --------- --------- --------- --------- Receivables: Loan Repayments 6 8 100 (608) Employee Contributions 29 42 221 1,239 Employer Contributions 283 391 1,547 10,381 --------- --------- --------- --------- --------- --------- 318 441 1,868 - (608) 11,620 --------- --------- --------- --------- --------- --------- Net assets available for benefits $ 5,342 $ 7,230 $ 44,703 $ 269 $ 14,943 $ 332,577 ========= ========= ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements. - 6 - Phelps Dodge Employee Savings Plan Statement of Net Assets Available for Benefits, with Fund Information December 31, 1996 (in thousands) - --------------------------------------------------------------------------------
Money Interest Equity Market Income Balanced Income S&P 500 Growth Assets Fund Fund Fund Fund Index Fund Stock Fund - --------------------------------- --------- --------- --------- --------- ---------- ---------- Investments, at current value (cost basis $261,821): Common Stocks Mutual Funds $ 29,930 $ 1,620 $ 51,044 $ 3,675 $ 68,482 Guaranteed Investment Contracts $ 49,793 Loans to Participants --------- --------- --------- --------- --------- --------- 29,930 49,793 1,620 51,044 3,675 68,482 --------- --------- --------- --------- --------- --------- Receivables: Loan Repayments 75 92 2 82 8 138 Employee Contributions 134 176 10 204 27 316 Employer Contributions 1,242 1,457 89 1,768 266 2,483 --------- --------- --------- --------- --------- --------- 1,451 1,725 101 2,054 301 2,937 --------- --------- --------- --------- --------- --------- Net assets available for benefits $ 31,381 $ 51,518 $ 1,721 $ 53,098 $ 3,976 $ 71,419 ========= ========= ========= ========= ========= ========= Phelps Occidental Small Cap Dodge Petroleum International Equity Common Common Assets Equity Fund Fund Stock Fund Stock Fund Loan Fund Total - --------------------------------- ----------- --------- ---------- ---------- --------- --------- Investments, at current value (cost basis $261,821): Common Stocks $ 46,344 $ 228 $ 46,572 Mutual Funds $ 2,954 $ 4,311 162,016 Guaranteed Investment Contracts 49,793 Loans to Participants $ 15,139 15,139 --------- --------- --------- --------- --------- --------- 2,954 4,311 46,344 228 15,139 273,520 --------- --------- --------- --------- --------- --------- Receivables: Loan Repayments 4 8 83 (492) Employee Contributions 20 31 194 1,112 Employer Contributions 211 297 1,515 9,328 --------- --------- --------- --------- --------- --------- 235 336 1,792 - (492) 10,440 --------- --------- --------- --------- --------- --------- Net assets available for benefits $ 3,189 $ 4,647 $ 48,136 $ 228 $ 14,647 $ 283,960 ========= ========= ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements. - 7 - Phelps Dodge Employee Savings Plan Statement of Changes in Net Assets Available for Benefits, with Fund Information December 31, 1997 (in thousands) - --------------------------------------------------------------------------------
Money Interest Equity Market Income Balanced Income S&P 500 Growth Assets Fund Fund Fund Fund Index Fund Stock Fund - --------------------------------- --------- --------- --------- --------- ---------- ---------- Additions to net assets attributed to: Investment income: Realized gains on investments $ 80 $ 2,265 $ 314 $ 2,155 Change in unrealized appreciation (depreciation) 17 9,890 1,749 10,370 Dividends $ 1,872 437 3,813 5,558 Interest $ 3,218 8 93 23 121 --------- --------- --------- --------- --------- --------- 1,872 3,218 542 16,061 2,086 18,204 --------- --------- --------- --------- --------- --------- Contributions: Employee 1,759 2,320 235 3,168 775 4,738 Employer 2,144 2,046 242 2,844 782 3,880 --------- --------- --------- --------- --------- --------- 3,903 4,366 477 6,012 1,557 8,618 --------- --------- --------- --------- --------- --------- Total additions 5,775 7,584 1,019 22,073 3,643 26,822 --------- --------- --------- --------- --------- --------- Deductions from net assets attributed to: Distributions to participants and beneficiaries (7,162) (5,193) (127) (3,119) (493) (4,370) Other charges, net 1 (9) Loans to participants, net of repayments 4 245 1 (175) (8) (188) Fund exchanges, net 6,459 (7,995) 1,608 (539) 6,339 (5,218) --------- --------- --------- --------- --------- --------- Total deductions (698) (12,952) 1,482 (3,833) 5,838 (9,776) --------- --------- --------- --------- --------- --------- Increase(decrease) in net assets during the year 5,077 (5,368) 2,501 18,240 9,481 17,046 Net assets available for benefits: Beginning of year 31,381 51,518 1,721 53,098 3,976 71,419 --------- --------- --------- --------- --------- --------- End of year $ 36,458 $ 46,150 $ 4,222 $ 71,338 $ 13,457 $ 88,465 ========= ========= ========= ========= ========= ========= Phelps Occidental Small Cap Dodge Petroleum International Equity Common Common Assets Equity Fund Fund Stock Fund Stock Fund Loan Fund Total - --------------------------------- ----------- --------- ---------- ---------- --------- --------- Investment income: Realized gains on investments $ 181 $ 281 $ 1,691 $ 2 $ 6,969 Change in unrealized appreciation (depreciation) (300) (530) (5,101) 54 16,149 Dividends 391 1,132 1,311 10 14,524 Interest 12 15 43 $ 1,434 4,967 --------- --------- --------- --------- --------- --------- 284 898 (2,056) 66 1,434 42,609 --------- --------- --------- --------- --------- --------- Contributions: Employee 429 631 2,917 16,972 Employer 389 543 2,387 15,257 --------- --------- --------- --------- --------- --------- 818 1,174 5,304 -- -- 32,229 --------- --------- --------- --------- --------- --------- Total additions 1,102 2,072 3,248 66 1,434 74,838 --------- --------- --------- --------- --------- --------- Deductions from net assets attributed to: Distributions to participants and beneficiaries (124) (188) (4,225) (6) (1,204) (26,211) Other charges, net (2) (10) Loans to participants, net of repayments 39 16 (2) 68 Fund exchanges, net 1,136 683 (2,454) (19) --------- --------- --------- --------- --------- --------- Total deductions 1,051 511 (6,681) (25) (1,138) (26,221) --------- --------- --------- --------- --------- --------- Increase(decrease) in net assets during the year 2,153 2,583 (3,433) 41 296 48,617 Net assets available for benefits: Beginning of year 3,189 4,647 48,136 228 14,647 283,960 --------- --------- --------- --------- --------- --------- End of year $ 5,342 $ 7,230 $ 44,703 $ 269 $ 14,943 $ 332,577 ========= ========= ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements. - 8 - Phelps Dodge Employee Savings Plan Statement of Changes in Net Assets Available for Benefits, with Fund Information December 31, 1996 (in thousands) - --------------------------------------------------------------------------------
Money Interest Equity Market Income Balanced Income S&P 500 Growth Assets Fund Fund Fund Fund Index Fund Stock Fund - --------------------------------- --------- --------- --------- --------- ---------- ---------- Additions to net assets attributed to: Investment income: Realized gains (losses) on investments $ 2 $ 589 $ 68 $ (1,718) Change in unrealized appreciation (depreciation) (13) 4,667 282 (1,722) Dividends $ 1,280 115 3,140 10,688 Interest 152 $ 2,486 3 28 6 44 --------- --------- --------- --------- --------- --------- 1,432 2,486 107 8,424 356 7,292 --------- --------- --------- --------- --------- --------- Fund to fund transfers from Laurinburg Savings Plan 410 1,336 -- 387 -- 500 --------- --------- --------- --------- --------- --------- Contributions: Employee 1,987 2,569 106 2,803 212 4,805 Employer 1,875 2,284 110 2,597 318 3,857 --------- --------- --------- --------- --------- --------- 3,862 4,853 216 5,400 530 8,662 --------- --------- --------- --------- --------- --------- Total additions 5,704 8,675 323 14,211 886 16,454 --------- --------- --------- --------- --------- --------- Deductions from net assets attributed to: Distributions to participants and beneficiaries (1,782) (3,210) (1) (2,087) (55) (2,702) Other charges, net 11 (21) 4 2 5 Loans to participants, net of repayments (3) 4 15 (231) (12) (338) Fund exchanges, net 1,535 (1,898) 1,380 2,057 3,157 (8,880) --------- --------- --------- --------- --------- --------- Total deductions (239) (5,125) 1,398 (259) 3,090 (11,915) --------- --------- --------- --------- --------- --------- Increase(decrease) in net assets during the year 5,465 3,550 1,721 13,952 3,976 4,539 Net assets available for benefits: Beginning of year 25,916 47,968 39,146 66,880 --------- --------- --------- --------- --------- --------- End of year $ 31,381 $ 51,518 $ 1,721 $ 53,098 $ 3,976 $ 71,419 ========= ========= ========= ========= ========= ========= Phelps Occidental Small Cap Dodge Petroleum International Equity Common Common Assets Equity Fund Fund Stock Fund Stock Fund Loan Fund Total - --------------------------------- ----------- --------- ---------- ---------- --------- --------- Additions to net assets attributed to: Investment income: Realized gains (losses) on investments $ 25 $ 20 $ 770 $ 6 $ (238) Change in unrealized appreciation (depreciation) 103 (15) 2,873 19 6,194 Dividends 106 291 1,335 10 16,965 Interest 5 6 35 $ 1,232 3,997 --------- --------- --------- --------- --------- --------- 239 302 5,013 35 1,232 26,918 --------- --------- --------- --------- --------- --------- Fund to fund transfers from Laurinburg Savings Plan -- -- -- -- 713 3,346 --------- --------- --------- --------- --------- --------- Contributions: Employee 253 427 2,754 15,916 Employer 249 356 2,337 13,983 --------- --------- --------- --------- --------- --------- 502 783 5,091 -- -- 29,899 --------- --------- --------- --------- --------- --------- Total additions 741 1,085 10,104 35 1,945 60,163 --------- --------- --------- --------- --------- --------- Deductions from net assets attributed to: Distributions to participants and beneficiaries (30) (6) (2,311) (534) (12,718) Other charges, net 4 5 (12) (6) (8) Loans to participants, net of repayments 28 (5) (293) 835 Fund exchanges, net 2,446 3,568 (3,317) (48) --------- --------- --------- --------- --------- --------- Total deductions 2,448 3,562 (5,933) (54) 301 (12,726) --------- --------- --------- --------- --------- --------- Increase(decrease) in net assets during the year 3,189 4,647 4,171 (19) 2,246 47,437 Net assets available for benefits: Beginning of year -- -- 43,965 247 12,401 236,523 --------- --------- --------- --------- --------- --------- End of year $ 3,189 $ 4,647 $ 48,136 $ 228 $ 14,647 $ 283,960 ========= ========= ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements. - 9 - Phelps Dodge Employee Savings Plan Notes to Financial Statements Years Ended December 31, 1997 and 1996 - -------------------------------------------------------------------------------- 1. Description of Plan General The Phelps Dodge Corporation Savings and Deferred Profit Sharing Plan (the Plan), a defined contribution plan, was established by Phelps Dodge Corporation (the Corporation) effective January 1, 1953, for the benefit of eligible salaried employees (the Participants). Hourly employees became eligible for the savings feature of the Plan on April 1, 1989. Subsequently, the Plan name was changed to Phelps Dodge Employee Savings Plan. Employees at Phelps Dodge Magnet Wire's El Paso and Laurinburg facilities became eligible to participate in the savings feature of the Plan on April 1, 1994. Salaried employees at that El Paso facility became eligible for the profit sharing feature of the Plan on January 1, 1995. Salaried employees at Phelps Dodge High Performance Conductors in West Caldwell, New Jersey, became eligible to participate in the savings feature of the Plan on July 1, 1996 and the profit sharing feature of the Plan on January 1, 1997. Assets from the Laurinburg Savings Plan were merged into this Plan during November 1996. The Plan is subject to certain provisions of the Employee Retirement Income Security Act of 1974 (ERISA). A brief description of the Plan is included in the following paragraphs. Participants should refer to the Plan document for a complete description of Plan provisions. Administration The Plan is sponsored by the Corporation and administered by the Benefits Administration Committee (the Committee) composed of six employees of the Corporation who are appointed by the Corporation's Board of Directors. Plan assets are held by a trust (the Trust) administered by Marshall and Ilsley Trust Company of Arizona (the Trustee or M & I). Fees and expenses of the Trust, other than brokerage commissions and taxes paid in connection with security transactions, and other expenses relating to the administration of the Plan are currently paid by the Corporation. Investment Options Participant investments are self-directed. The Trust is comprised of the following investments: Money Market Fund - mutual fund investing in high quality, short-term cash instruments including certificates of deposit and U.S. Treasury bills issued by banks, corporations and the U.S. government or its agencies. Interest Income Fund - high quality government, corporate and mortgage backed debt and other fixed income securities. Equity Income Fund - mutual fund investing in income-producing stocks with expected higher returns than the overall market; a portion may be invested in bonds or other fixed income securities, especially those convertible to stocks. - 10 - Phelps Dodge Employee Savings Plan Notes to Financial Statements Years Ended December 31, 1997 and 1996 - -------------------------------------------------------------------------------- 1. Description of Plan (Continued) Growth Stock Fund - mutual fund investing in stocks of mid-sized companies whose stock is expected to grow faster than the overall market. Phelps Dodge Common Stock Fund - invests only in common stock of the Corporation. Effective March 15, 1996, four new investment fund options were added: Balanced Fund - mutual fund investing in a mix of stocks, U.S. Treasury bonds and money market cash instruments; the allocation of assets may shift substantially from time-to-time. S&P 500 Index Fund - mutual fund investing in stocks, primarily of the same companies as in the S&P 500 Index. International Equity Fund - mutual fund investing in stocks of European and Pacific Basin companies and government securities of developed and developing countries. Small Cap Equity Fund - mutual fund investing in a combination of small and mid-sized value and growth stocks. In addition, certain participants hold assets in the Occidental Petroleum Common Stock Fund as a result of the transfer of assets from the Columbian Chemicals Company plan. Participant loans are held in a separate Loan Fund. Contributions A profit sharing contribution made for certain salaried and Phelps Dodge Mercantile hourly employee participants by the Corporation (the Company Profit Sharing Contribution) was limited to the lesser of 4 percent for the years 1996 or earlier, and 8 percent for 1997 and thereafter, of consolidated net income of the Corporation or 7 1/2 percent of the aggregate eligible base pay of Participants and can be made only to the extent that it does not reduce consolidated net income below $0.50 per common share for such year after provision for payment of preferred and preference share dividends. Profit sharing contributions, which are included in Employer Contributions in the Statement of Changes in Net Assets Available for Benefits, with Fund Information, totaled $9,867,000 for 1997 and $8,885,000 for 1996. Participants were allowed to make voluntary contributions from 1 percent to 10 percent of their base pay on an after-tax basis (After-tax Contributions) to the Plan by payroll deduction from July 1, 1986 to March 31, 1989. Effective April 1, 1989, these voluntary After-tax Contributions were eliminated and Participants became eligible to make pretax contributions (Pretax Contributions), subject to certain limitations, equal to 2 percent to 10 percent of their base pay before March 15, 1996 and 1 percent to 10 percent after that date. Pretax Contributions are eligible for a matching contribution from the Corporation (Company Matching Contribution) equal to 50 percent of the first 5 percent of the base pay deferred. All contributions are invested in one or more of the investment funds available within the Plan as elected by participants. Participants are fully vested in their total account balance. - 11 - Phelps Dodge Employee Savings Plan Notes to Financial Statements Years Ended December 31, 1997 and 1996 - -------------------------------------------------------------------------------- 1. Description of Plan (Continued) Distributions Participants' interests in the Trust become distributable upon severance of their service with the Corporation or to their beneficiaries in the event of their death or, effective July 1, 1995, upon attaining age 59 1/2. The distribution may be a single lump sum or a series of substantially equal annual, quarterly or monthly cash installments beginning no earlier than age 55 and continuing over a period not to exceed 10 years, at the election of the Participant or beneficiary. Distributions are generally made in cash, although distributions from the Phelps Dodge Common Stock Fund, Occidental Petroleum Stock Fund, Equity Income Fund and Growth Stock Fund may also be made in shares. Effective March 15, 1996, cash distributions are based upon the market price of the funds within two days prior to the time of distribution. Previously, accounts were valued monthly and cash distributions were based on the market price of funds about one month prior to the time of distribution. Participants may withdraw their After-tax Contributions and earnings thereon at any time. The Plan also provides, with certain limitations, for hardship withdrawals of employee Pretax, Company Matching and Company Profit Sharing Contributions; however, earnings on any of these contributions are ineligible for hardship withdrawal. Hardship withdrawals are not granted unless other financial resources are not reasonably available, including after-tax savings or a loan from the Plan. All withdrawals and distributions are made in accordance with procedures outlined in the Plan document. Loans Participants may borrow amounts as provided in the Plan. A maximum of one loan, with the exception of certain grandfathered loans for participants who transferred from the Laurinburg Plan, may be borrowed and are repayable over a maximum of 5 years with the exception of loans for the purchase of a primary residence which may extend to 15 years. The minimum loan is $1,000 and the maximum loan is an amount equal to $50,000 minus the Participants highest outstanding loan balance during the past 12 months, limited to 50 percent of the Participant's vested account balance. All loans bear the Trustee's prime interest rate plus 2 percent at the end of the month preceding the month in which the loan is applied for. The prime rate at December 31, 1997 was 8.5 percent. Loans are repaid by payroll deduction and interest is credited to Participant accounts. Loans are secured by the Participant's previous contributions to the Plan. Effective September 1, 1997, spousal consent was eliminated for all inservice withdrawals and loans except where required by law for persons with grandfathered joint and survivor benefit options. Also effective September 1, 1997 are new loan provisions which include new loan delinquency and default procedures to comply with IRS regulation. Plan Termination The Plan may be amended or terminated at any time by the Corporation. No such action may cause any portion of the Trust to revert to the Corporation or to be used or diverted for any purpose other than for the exclusive benefit of Participants or their beneficiaries. - 12 - Phelps Dodge Employee Savings Plan Notes to Financial Statements Years Ended December 31, 1997 and 1996 - -------------------------------------------------------------------------------- 2. Summary of Significant Accounting Policies The financial statements of the Plan are prepared on the accrual basis of accounting. Plan investments, other than Guaranteed Investment Contracts, are presented at fair value. The fair values of common stock and mutual fund shares are based upon the closing market price on the valuation date. The Guaranteed Investment Contracts are valued based upon their respective face values plus accrued interest on the valuation date. Participant loans are valued at amounts advanced to participants less principal payments received. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Security transactions are recorded on a trade date basis. Expenses paid by the Plan in connection with such transactions include brokerage commissions and taxes which are included in the cost of securities purchased and deducted from the proceeds of securities sold. Realized gains (losses) resulting from the sale of investments are based upon carrying value at the end of the prior year or the acquisition date if later. The change in unrealized appreciation (depreciation) is determined by comparison of the carrying value at the end of the prior year or the acquisition date if later. Dividend income is recognized on the ex-dividend date. Interest income is recognized as earned. Employer and employee contributions are recognized on the accrual basis. Benefit obligations for persons who have withdrawn from participation in the Plan are not recorded as liabilities in the accompanying financial statements and are as follows:
December 31, --------------------------- 1997 1996 -------- -------- Money Market Fund $604,401 $277,004 Interest Income Fund 899,093 73,620 Balanced Fund 49,923 34,929 Equity Income Fund 406,218 424,795 S&P 500 Index Fund 109,708 18,472 Growth Stock Fund 740,329 456,030 International Equity Fund 3,226 13,241 Small Cap Equity Fund 2,574 13,377 Phelps Dodge Common Stock Fund 690,271 645,308 Loan Fund 44,703 66,948
- 13 - Phelps Dodge Employee Savings Plan Notes to Financial Statements Years Ended December 31, 1997 and 1996 - -------------------------------------------------------------------------------- 3. Investments The following table presents the current value of investments with separate identification of individual investments which represent 5 percent or more of net assets:
December 31, 1997 1996 -------- -------- (in thousands) Barclays Money Market Fund I $ 34,698 $ 31,396 Commonwealth Synthetic GIC, 6.04% open maturity rate resets calendar quarter 33,908 34,880 Fidelity Equity Income Fund 69,032 51,044 Fidelity Magellan Fund 85,400 68,482 Phelps Dodge Corporation Common Stock 42,074 45,609 Loans to participants, 8% -12.5 %, maturing through December 2012 15,551 15,139 Other 40,294 26,970 -------- -------- $320,957 $273,520 ======== ========
4. Unitized Funds In 1996, several investment funds were unitized to allow the Trustee to participate in late day trading. Unitization requires the establishment and maintenance of a cash reserve to settle the sale of the units with cash from the reserve rather than having to wait at least one business day for the settlement of the underlying mutual fund as would normally be the case without unitization. The value of the fund determined using the number of units and net asset value per unit may not agree to the statement of net assets available for benefits with fund information, due to pending trades and in-kind distributions. - 14 - Phelps Dodge Employee Savings Plan Notes to Financial Statements Years Ended December 31, 1997 and 1996 - -------------------------------------------------------------------------------- 4. Unitized Funds (Continued) The following represents the number of units and the net asset value per unit for all unitized funds:
December 31, 1997 December 31, 1996 --------------------------- --------------------------- Net Asset Net Asset Number of Value Per Number Value Per Units Unit of Units Unit --------- ----------- --------- ----------- Interest Income Fund 3,982,513 $ 11.187 4,234,630 $ 10.524 Balanced Fund 303,009 13.097 150,262 10.782 S&P 500 Index Fund 847,004 15.097 318,465 11.435 International Equity Fund 418,361 12.005 267,562 11.012 Small Cap Equity Fund 514,633 13.143 390,816 11.155 Phelps Dodge Common Stock Fund 654,674 65.365 669,828 68.971
5. Related Party Transactions The Trustee invests in the Corporation's common stock in accordance with the provisions of the Plan. The following is a summary of transactions in the Corporation's common stock:
Year Ended December 31, 1997 1996 ------- ------- (in thousands) Cost of shares purchased $16,215 $12,000 Number of shares purchased 217 182 Proceeds from shares sold $15,046 $11,553 Number of shares sold 197 174 Value of shares distributed $ 1,271 $ 626 Number of shares distributed 20 10
- 15 - Phelps Dodge Employee Savings Plan Notes to Financial Statements Years Ended December 31, 1997 and 1996 - -------------------------------------------------------------------------------- 6. Tax Status The Plan received a determination letter from the Internal Revenue Service (IRS) dated September 13, 1996, which stated that the Plan met the requirements of Section 401(a) of the Internal Revenue Code and that the earnings of the Trust are exempt from taxation under Section 501(a) of the Code. The Plan has been amended and restated since receiving the determination letter, and on March 6, 1998, filed for a redetermination by the IRS that the Plan as amended and restated continues to satisfy such requirements. The Phelps Dodge redetermination letter is pending with the IRS. The Committee believes that the Plan, as amended and restated and as operated, continues to satisfy IRS requirements for tax exemption. 7. Participation in the Plan The following is a summary of the number of participants invested in the investment options offered by the Plan as of:
December 31, 1997 1996 ----- ----- Money Market Fund 3,876 2,666 Interest Income Fund 2,936 3,147 Balanced Fund 434 225 Equity Income Fund 3,610 3,357 S&P 500 Index Fund 1,106 463 Growth Stock Fund 4,144 3,956 International Equity Fund 631 359 Small Cap Equity Fund 809 501 Phelps Dodge Common Stock Fund 3,437 3,264 Occidental Petroleum Common Stock Fund 34 38 Loan Fund 2,440 2,460
8. Realized Gains (Losses) on Investments
Realized Carrying Gains Proceeds Value (Losses) -------- -------- -------- Year Ended December 31, 1997 (in thousands) Investments: Phelps Dodge Common Stock $ 16,317 $ 14,626 $ 1,691 Mutual Funds and other common stock 51,034 45,756 5,278 -------- -------- -------- $ 67,351 $ 60,382 $ 6,969 ======== ======== ======== Year Ended December 31, 1996 (in thousands) Investments: Phelps Dodge Common Stock $ 12,179 $ 11,409 $ 770 Mutual Funds and other common stock 30,096 31,104 (1,008) -------- -------- -------- $ 42,275 $ 42,513 $ (238) ======== ======== ========
- 16 - Phelps Dodge Employee Savings Plan Notes to Financial Statements Years Ended December 31, 1997 and 1996 - -------------------------------------------------------------------------------- 9. Investment in Guaranteed Investment Contracts On August 12, 1994, Canadian and U.S. Government regulators took control of Confederation Life Insurance Company (Confederation). Until May 1997, the Plan's Interest Income Fund assets included a Guaranteed Investment Contract (GIC) with Confederation. The GIC was purchased on March 20, 1991, with an 8.59% contract rate of interest, with interest paid annually on April 1 and principal payable at maturity, April 1, 1996. The carrying value of the GIC at the time of seizure was $5,355,000, representing principal of $4,969,000 and accrued interest of $386,000. The Plan froze the Confederation GIC and did not allow any distributions, withdrawals, loans or elective investment transfers of this portion of the Interest Income Fund from August 12, 1994 through May 1997. The accrual of interest on the Confederation GIC was discontinued on the seizure date and the nonaccrual has resulted in approximately $750,000 of interest income through the April 1, 1996 maturity date not being realized by participants or recognized in Statement of Changes in Net Assets Available for Benefits, with Fund Information, for the year ended December 31, 1996. Accordingly, the Confederation GIC is included in the December 31, 1996 Statements of Net Assets Available for Benefits, with Fund Information, at the carrying value as of the date of seizure. In May 1996, Canadian and U.S. regulators agreed in principle to a split of assets to settle each country's claims separately. Final settlement terms were carried out during April and May 1997, with 100% of principal plus $422,000 in earnings deposited to participants' accounts. 10. Subsequent Events Assets of $2,136,000 from the Nesor Alloy Corporation Non-Union Employees' Profit Sharing Plan were merged into the Plan during February 1998 as a result of the Corporation's acquisition of Nesor Alloy Corporation in 1996. Effective January 1, 1998, the Plan was amended to spin-off a new plan called the Accuride Employee Savings Plan as a result of the Corporation's sale of Accuride Corporation effective January 1, 1998. Assets totaling $21,116,000 at January 1, 1998 were transferred from the Plan. The Small Cap Equity Fund was comprised of two mutual funds, 50 percent in the IAI Mid Cap Growth Fund (IAI) and 50 percent in the Lazard Freres Small Cap Portfolio (Lazard). The IAI portion (50%) of the Small Cap Equity Fund was discontinued as an investment option effective May 1, 1998. All the IAI shares were sold at the end of April 1998 and the assets transferred to the Lazard. During March 1998, the Benefits Administration Committee and the Senior Management Team approved American Century Investments as the new recordkeeper and administrator and UMB, n.a. as trustee for the Plan. The transfer of assets from M & I Trust Company to American Century Investments is projected to be effective September 1, 1998. - 17 - Phelps Dodge Employee Savings Plan Supplemental Information Line 27a - Schedule of Assets Held for Investment Purposes Schedule I December 31, 1997 (in thousands) - --------------------------------------------------------------------------------
Description of investment including maturity Party-in- Identity of issue, borrower, lessor or date, rate of interest, collateral, par or maturity Current interest similar party value Cost Value - --------- -------------------------------------- --------------------------------------------------- ------- ------- MONEY MARKET FUND Barclay's Global Investors Barclay's Money Market Fund I $34,698 $34,698 INTEREST INCOME FUND Lincoln National Insurance Company Guaranteed Investment Contract, 8.02% matures December 31, 1998 3,581 3,581 Principal Mutual Insurance Company Guaranteed Investment Contract, 5.06% matures December 31, 1998 3,043 3,043 Sun Life of Canada Insurance Company Guaranteed Investment Contract, 5.74% matures June 20, 2000 3,884 3,884 Commonwealth Life Insurance Company Synthetic GIC 6.04% Open maturity rate resets calendar quarter 33,908 33,908 Marshall Money Market Fund 160 160 BALANCED FUND Barclay's Global Investors PD Stagecoach Fund 3,755 3,830 Marshall Money Market Fund 183 183 EQUITY INCOME FUND Fidelity Investment Management Company Fidelity Equity Income Fund 55,722 69,032 S&P 500 INDEX FUND Barclay's Global Investors PD Barclay's Equity Index Fund 10,022 12,206 Marshall Money Market Fund 564 564 GROWTH STOCK FUND Fidelity Investment Management Company Fidelity Magellan Fund 77,159 85,400 INTERNATIONAL EQUITY FUND American Funds Group PD Euro Pacific Fund 4,832 4,786 Marshall Money Market Fund 238 238 SMALL CAP EQUITY FUND IAI Investment Advisors Inc. IAI Midcap Growth 3,347 2,919 Lazard Freres Asset Management Lazard Small Cap 3,346 3,551 Marshall Money Market Fund 319 319 PHELPS DODGE COMMON STOCK FUND * Marshall & Ilsley Trust Company Phelps Dodge Corporation Common Stock 36,978 42,074 Marshall Money Market Fund 761 761 OCCIDENTAL PETROLEUM COMMON STOCK FUND * Marshall & Ilsley Trust Company Occidental Petroleum Company Common Stock 190 269 LOAN FUND Participants Loans to Participants 0 15,551 8% - 12.5%, maturing through December 2012 -------- -------- TOTAL INVESTMENTS $276,690 $320,957 -------- --------
- 18 - Phelps Dodge Employee Savings Plan Supplemental Information Line 27d - Schedule of Reportable Transactions* Schedule II Year ended December 31, 1997 - --------------------------------------------------------------------------------
Expense Current Identity of incurred value on party Purchase with transaction involved Description of asset price Selling price Lease rental transaction Cost of asset date Net gain - ----------- ----------------------- ----------- ------------- ------------ ----------- ------------- ----------- ---------- M & I Money Market Fund Purchases $30,526,161 $30,526,161 $ - Sales 25,738,361 25,738,361 - M & I Interest Income Fund Purchases 23,504,267 23,504,267 - Sales 25,011,073 25,011,073 - M & I Equity Income Fund Purchases 24,780,201 24,780,201 - Sales 18,906,700 16,971,897 1,934,803 M & I Growth Stock Fund Purchases 25,754,327 25,754,327 - Sales 21,331,938 20,424,820 907,118 M & I Small Cap Fund Purchases 17,030,044 17,030,044 - Sales 15,425,005 14,326,474 1,098,531 M & I Barclay's Equity Index Fund (S&P 500) Purchases 24,719,392 24,719,392 - Sales 17,690,119 17,503,380 186,739 M & I Phelps Dodge Common Stock Fund Purchases 43,877,077 43,877,077 - Sales 42,707,779 39,567,756 3,140,023 M & I Loan Fund Purchases 7,183,894 7,183,894 - Sales 6,774,066 6,774,066 - * Transactions or series of transactions in excess of 5 percent of the current value of the Plan assets as of December 31, 1996 as defined in Section 2520.103-6 of the Department of Labor Rules and Regulations for Reporting and Disclosure under ERISA.
- 19 - EX-23 2 CONSENT OF PRICE WATERHOUSE Consent of Independent Accountants We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-26442) of Phelps Dodge Corporation of our report dated June 24, 1998 appearing on page 5 of this Form 11-K. Price Waterhouse LLP Phoenix, Arizona June 26, 1998 -----END PRIVACY-ENHANCED MESSAGE-----