No 
.Number of Common Shares outstanding at August 12, 2002: 88,906,857 shares.
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, 2002
Commission file number 1-82
PHELPS DODGE CORPORATION
(a New York corporation)
13-1808503
(I.R.S. Employer Identification No.)
One North Central Avenue, Phoenix, AZ 85004
Registrant’s telephone number: (602) 366-8100
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 No .
Number of Common Shares outstanding at August 12,
2002: 88,906,857 shares.
-i-
PHELPS DODGE CORPORATION
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 2002
Table of Contents
| Page | ||||||
Part I. Financial Information |
||||||
Item 1. Financial Statements (unaudited) |
||||||
Statement of Consolidated Operations |
1 | |||||
Consolidated Balance Sheet |
2 | |||||
Consolidated Statement of Cash Flows |
3 | |||||
Consolidated Statement of Shareholders’ Equity |
4 | |||||
Financial Data by Business Segment |
5 | |||||
Notes to Consolidated Financial Information |
6 | |||||
Review by Independent Accountants |
14 | |||||
Report of Independent Accountants |
15 | |||||
Item 2. Management’s Discussion and Analysis |
||||||
Results of Operations |
16 | |||||
Results of Phelps Dodge Mining Company |
18 | |||||
Results of Phelps Dodge Industries |
20 | |||||
Other Matters Relating to the Statement of Consolidated Operations |
21 | |||||
Changes in Financial Condition |
21 | |||||
Part II. Other Information |
||||||
Item 1. Legal Proceedings |
24 | |||||
Item 4. Submission of Matters to a Vote of Security Holders |
24 | |||||
Item 6. Exhibits and Reports on Form 8-K |
25 | |||||
Signatures |
26 | |||||
Index to Exhibits |
27 | |||||
-1-
PHELPS DODGE CORPORATION AND SUBSIDIARIES
Item 1. Financial Statements
STATEMENT OF CONSOLIDATED OPERATIONS
(Unaudited; in millions except per share data)
| Six Months Ended | |||||||||||||||||
| Second Quarter | June 30, | ||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | ||||||||||||||
Sales and other operating revenues |
$ | 966.8 | 1,063.5 | 1,885.3 | 2,164.2 | ||||||||||||
Operating costs and expenses |
|||||||||||||||||
Cost of products sold |
807.2 | 897.5 | 1,576.0 | 1,831.2 | |||||||||||||
Depreciation, depletion and amortization |
106.1 | 121.3 | 211.7 | 237.8 | |||||||||||||
Selling and general administrative expense |
29.8 | 31.5 | 62.0 | 63.7 | |||||||||||||
Exploration and research expense |
9.2 | 17.1 | 17.9 | 31.9 | |||||||||||||
Special items and provisions, net (see Note 2) |
30.3 | 13.3 | 26.5 | (17.6 | ) | ||||||||||||
| 982.6 | 1,080.7 | 1,894.1 | 2,147.0 | ||||||||||||||
Operating income (loss) |
(15.8 | ) | (17.2 | ) | (8.8 | ) | 17.2 | ||||||||||
Interest expense |
(49.2 | ) | (55.5 | ) | (102.0 | ) | (108.9 | ) | |||||||||
Capitalized interest |
— | — | — | 0.6 | |||||||||||||
Miscellaneous income and expense, net |
(0.3 | ) | 10.9 | 1.7 | 14.6 | ||||||||||||
Loss before taxes, minority interests, equity in net earnings (loss)
of affiliated companies and cumulative effect of accounting change |
(65.3 | ) | (61.8 | ) | (109.1 | ) | (76.5 | ) | |||||||||
Benefit (provision) for taxes on income (see Note 8) |
30.8 | (47.4 | ) | 70.5 | (14.1 | ) | |||||||||||
Minority interests in consolidated subsidiaries |
(2.5 | ) | (1.3 | ) | (3.7 | ) | (2.9 | ) | |||||||||
Equity in net earnings (loss) of affiliated companies |
0.6 | — | 1.1 | (0.8 | ) | ||||||||||||
Loss before cumulative effect of accounting change |
(36.4 | ) | (110.5 | ) | (41.2 | ) | (94.3 | ) | |||||||||
Cumulative effect of accounting change, net of taxes
of $10.1 in 2002 |
— | — | (22.9 | ) | (2.0 | ) | |||||||||||
Net loss |
$ | (36.4 | ) | (110.5 | ) | (64.1 | ) | (96.3 | ) | ||||||||
Preferred stock dividends |
(2.4 | ) | — | (2.4 | ) | — | |||||||||||
Loss applicable to common shares |
$ | (38.8 | ) | (110.5 | ) | (66.5 | ) | (96.3 | ) | ||||||||
Average number of shares outstanding — basic |
80.6 | 78.5 | 79.6 | 78.5 | |||||||||||||
Basic loss per share before cumulative effect of accounting change |
$ | (0.48 | ) | (1.41 | ) | (0.55 | ) | (1.20 | ) | ||||||||
Cumulative effect of accounting change |
— | — | (0.29 | ) | (0.03 | ) | |||||||||||
Basic loss per share |
$ | (0.48 | ) | (1.41 | ) | (0.84 | ) | (1.23 | ) | ||||||||
Average number of shares outstanding — diluted |
80.6 | 78.5 | 79.6 | 78.5 | |||||||||||||
Diluted loss per share before cumulative effect of accounting change |
$ | (0.48 | ) | (1.41 | ) | (0.55 | ) | (1.20 | ) | ||||||||
Cumulative effect of accounting change |
— | — | (0.29 | ) | (0.03 | ) | |||||||||||
Diluted loss per share |
$ | (0.48 | ) | (1.41 | ) | (0.84 | ) | (1.23 | ) | ||||||||
See Notes to Consolidated Financial Information.
-2-
CONSOLIDATED BALANCE SHEET
(Unaudited; in millions except par value data)
| June 30, | December 31, | |||||||||
| 2002 | 2001 | |||||||||
Assets |
||||||||||
Cash and cash equivalents |
$ | 870.3 | 386.9 | |||||||
Accounts receivable, net |
415.2 | 398.8 | ||||||||
Inventories and supplies |
566.3 | 602.1 | ||||||||
Prepaid expenses and other current assets |
133.4 | 116.4 | ||||||||
Current assets |
1,985.2 | 1,504.2 | ||||||||
Investments and long-term receivables |
130.3 | 105.3 | ||||||||
Net property, plant and equipment |
5,500.9 | 5,665.6 | ||||||||
Non-current deferred income taxes |
58.3 | 56.3 | ||||||||
Other assets and deferred charges |
239.8 | 287.4 | ||||||||
| $ | 7,914.5 | 7,618.8 | ||||||||
Liabilities |
||||||||||
Short-term debt |
$ | 51.6 | 59.3 | |||||||
Current portion of long-term debt |
135.7 | 269.7 | ||||||||
Accounts payable and accrued expenses |
659.5 | 673.7 | ||||||||
Dividends payable |
2.4 | — | ||||||||
Accrued income taxes |
10.9 | 11.5 | ||||||||
Current liabilities |
860.1 | 1,014.2 | ||||||||
Long-term debt |
2,467.5 | 2,522.0 | ||||||||
Deferred income taxes |
444.3 | 441.8 | ||||||||
Other liabilities and deferred credits |
859.4 | 874.2 | ||||||||
| 4,631.3 | 4,852.2 | |||||||||
Minority interests in consolidated subsidiaries |
62.4 | 59.4 | ||||||||
Shareholders’ equity |
||||||||||
Common shares, par value $6.25; 200.0 shares authorized;
88.7 outstanding in 2002 and 78.7 outstanding in 2001 |
554.5 | 491.9 | ||||||||
Preferred shares, par value $1.00; 6.0 shares authorized;
2.0 outstanding in 2002 |
2.0 | — | ||||||||
Capital in excess of par value |
1,544.5 | 1,016.8 | ||||||||
Retained earnings |
1,431.1 | 1,497.6 | ||||||||
Accumulated other comprehensive loss |
(305.7 | ) | (292.7 | ) | ||||||
Other |
(5.6 | ) | (6.4 | ) | ||||||
| 3,220.8 | 2,707.2 | |||||||||
| $ | 7,914.5 | 7,618.8 | ||||||||
See Notes to Consolidated Financial Information.
-3-
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited; in millions)
| Six Months Ended | ||||||||||||
| June 30, | ||||||||||||
| 2002 | 2001 | |||||||||||
Operating activities |
||||||||||||
Net loss |
$ | (64.1 | ) | (96.3 | ) | |||||||
Adjustments to reconcile net loss to net cash
provided by operating activities: |
||||||||||||
Depreciation, depletion and amortization |
211.7 | 237.8 | ||||||||||
Deferred income taxes |
(9.1 | ) | 7.6 | |||||||||
Equity earnings (loss) net of dividends received |
1.2 | 1.3 | ||||||||||
Special items and provisions |
60.7 | (21.4 | ) | |||||||||
Changes in current assets and liabilities: |
||||||||||||
Accounts receivable, net |
(24.2 | ) | (19.1 | ) | ||||||||
Proceeds from securitization of accounts receivable |
4.7 | — | ||||||||||
Inventories |
37.0 | (1.2 | ) | |||||||||
Supplies |
(0.3 | ) | (0.4 | ) | ||||||||
Prepaid expenses and other current assets |
(9.9 | ) | (7.5 | ) | ||||||||
Deferred income taxes |
0.1 | 0.1 | ||||||||||
Interest payable |
(7.5 | ) | 5.8 | |||||||||
Other accounts payable |
(29.7 | ) | 0.1 | |||||||||
Accrued income taxes |
1.5 | (7.9 | ) | |||||||||
Other accrued expenses |
(15.6 | ) | (20.0 | ) | ||||||||
Other adjustments, net |
23.2 | (1.6 | ) | |||||||||
Net cash provided by operating
activities |
179.7 | 77.3 | ||||||||||
Investing activities |
||||||||||||
Capital outlays |
(48.9 | ) | (146.1 | ) | ||||||||
Capitalized interest |
— | (0.6 | ) | |||||||||
Investment in subsidiaries and other |
(1.9 | ) | (47.0 | ) | ||||||||
Proceeds from asset dispositions |
24.6 | 1.1 | ||||||||||
Other investing |
(28.7 | ) | (2.2 | ) | ||||||||
Net cash used in investing activities |
(54.9 | ) | (194.8 | ) | ||||||||
Financing activities |
||||||||||||
Increase in debt |
16.8 | 1,175.2 | ||||||||||
Payment of debt |
(246.7 | ) | (887.2 | ) | ||||||||
Common dividends |
— | (49.2 | ) | |||||||||
Issuance of shares |
592.2 | 0.4 | ||||||||||
Other, net |
(3.7 | ) | (7.7 | ) | ||||||||
Net cash provided by financing
activities |
358.6 | |||||||||||