ITEM 3. LEGAL PROCEEDINGS
Arbitration is pending relating to the Public Service of Indiana long-term coal sales contract at the Cyprus Amax Wabash mine. By agreements signed in July and October 1994, the Company and Public Service of Indiana have resolved all of the outstanding claims for damages relating to past coal sales. The Company will continue to defend its position in arbitration and the limited litigation. While Cyprus Amax is not able to predict the outcome of this matter at this time, based upon facts currently known to it, Cyprus Amax does not believe that the ultimate resolution of any remaining matters will have a material adverse effect on its financial condition.
On November 8, 1993, Cyprus Amax was notified by the United States Department of Justice that it is under investigation for possible violations of the antitrust laws of the United States regarding its molybdenum business. While Cyprus Amax is unable to predict the outcome of this investigation, based upon facts currently known to it, the resolution of this matter is not expected to have a material adverse effect on the Company's financial condition.
In April 1994 Cyprus Amax was notified by the Department of Justice that the government will seek civil penalties for alleged violations of the Federal Clean Water Act in the operation of Cyprus Amax's Bagdad, Miami, and Sierrita mines located in Arizona. These governmental actions relate to findings of violations and orders issued by the Environmental Protection Agency (EPA) to these operations in late 1992 and early 1993. The violations are alleged to have occurred between April 1989 and January 1993. The relief sought by the EPA under these findings of violation and orders was penalties and corrective action to comply with the Clean Water Act. Mine management, in cooperation with the EPA and the Arizona Department of Environmental Quality, have ongoing and substantial programs which address the circumstances of the alleged water quality violations. Based upon information currently known to it, management expects to resolve this matter in the near-term.
In January 1995 Cyprus Foote Mineral Company (Cyprus Foote) agreed to sign a Consent Order with the state of Ohio and Shieldalloy Metallurgical Corporation (Shieldalloy) related to alleged contamination of Shieldalloy's Cambridge, Ohio, operating site with slag containing elevated levels of naturally occurring radionuclides. The slag is alleged to have been produced from Foote Mineral Company's (FMC) operation of the Cambridge ferroalloy plant from the early 1950s to 1987 when the plant was sold by FMC to Shieldalloy. FMC's sale of the ferroalloy facility to Shieldalloy predated Cyprus' 1988 acquisition of FMC's stock. The Consent Order requires Cyprus Foote to participate with Shieldalloy in funding the development of a remedial investigation and feasibility study to be completed in early 1996.
Cyprus Amax received an EPA Unilateral Order in 1994 pursuant to Section 106 of CERCLA requiring it to participate in a cleanup of hazardous materials contamination of soils in the city of Bartlesville, Oklahoma, as well as to participate in funding a remedial investigation and feasibility study. A Cyprus Amax subsidiary built and operated a zinc smelter near Bartlesville in the early 1900s. Cyprus Amax is one of several identified potentially responsible parties (PRPs) at this site and is participating in a PRP group, which includes the city of Bartlesville, in an effort to minimize its immediate costs to comply with the EPA order. Cyprus Amax believes it has legal defenses to EPA's assertions of liability, that other PRPs may have liability, including the U.S. Government, and that insurance recoveries may be available.
In late 1994 Cyprus Amax, along with a number of other PRPs, received a Unilateral Administrative Order for Removal Action pursuant to Section 106 of CERCLA with regard to materials stockpiled at the Colorado School of Mines Research Institute Creekside Superfund site, located in Golden, Colorado. The EPA alleges that these materials result from various research operations at the facility and that Cyprus Amax contributed materials to the site for research. Cyprus Amax is participating with the state of Colorado and a number of other entities in completing a remedial investigation and feasibility study for this site.
In 1994 Cyprus Amax received several Orders from the Bureau of Land Management (BLM) in Roswell, New Mexico, alleging Cyprus Amax's continuing responsibility for closure and reclamation of the Horizon Potash Mine near Carlsbad, New Mexico. Amax sold its interest in the mine in 1991 to Horizon Gold Corp. (Horizon), and Horizon abandoned the site in 1993. Cyprus Amax is vigorously pursuing its legal defenses to this potential liability and has held discussions with the BLM as to possible settlement.
In addition to the previously mentioned actions, Cyprus Amax or its subsidiaries have been advised by the EPA and several state environmental agencies that they may be liable under the CERCLA or similar state laws and regulations for costs of responding to environmental conditions at a number of sites which have been or are being investigated by the EPA or states to establish whether releases of hazardous substances have occurred and, if so, to develop and implement remedial actions. Cyprus Amax is named as a PRP or has received EPA requests for information for about 35 sites (including the sites discussed previously). For all sites, Cyprus Amax had an aggregate reserve of approximately $108 million at
December 31, 1994, for its share of the estimated liability. Liability estimates are based on an evaluation of, among other factors, currently available facts, existing technology, presently enacted laws and regulations, Cyprus Amax's experience in remediation, other companies' remediation experience, Cyprus Amax's status as a PRP, and the ability of other PRPs to pay their allocated portions. The cost range of reasonably possible outcomes for all sites is estimated to be from $70 million to $230 million, and work on the sites is expected to be substantially completed within the next five years, subject to the inherent delays involved in the process. Remediation costs that could not be reasonably estimated at December 31, 1994, are not expected to have a material impact on the financial condition and ongoing operations of the Company. Cyprus Amax believes certain insurance policies partially cover these claims; however, some of the insurance carriers have denied responsibility and Cyprus Amax is litigating coverage. Further, Cyprus Amax believes that it has other potential claims for recovery from third parties, including the U.S. Government and other PRPs, as well as liability offsets through lower cost remedial solutions. However, neither insurance recoveries nor other claims or offsets have been recognized in the financial statements unless such offsets are considered probable of realization.
At December 31, 1994, Cyprus Amax's accruals for deferred closure, shutdown of closed operations, and reclamation totalled approximately $296 million. Reclamation is an ongoing activity and a cost associated with Cyprus Amax's mining operations, and accruals for closure and final reclamation liabilities are established on a life of mine basis. The coal reclamation reserve component (about $145 million) is largely a result of reclamation obligations incurred for replacing soils and revegetation of mined areas as required by provisions and permits pursuant to the Surface Mining Control and Reclamation Act. The metals (Cyprus Climax and Cyprus Foote) reclamation reserve component (about $151 million) includes costs for site stabilization, cleanup, long-term monitoring, and water treatment costs as expected to be required largely by state laws and regulations as well as by sound environmental practice. Total coal and metals reclamation costs for Cyprus Amax at the end of current mine lives are estimated at about $550 million.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter ended December 31, 1994.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names, ages and titles of the executive officers of Cyprus Amax as of March 24, 1995:
Mr. Ward was elected Chairman of the Board, President and Chief Executive Officer on May 14, 1992, and was made Co-Chairman on November 15, 1993. Mr. Clevenger was elected to his current position on January 27, 1993, and Mr. Malys was elected Senior Vice President effective October 31, 1988, and Chief Financial Officer effective August 1, 1989. Mr. Spindler was elected to his current office on January 3, 1995, and Mr. Watkins assumed his current office on February 1, 1994. Mr. Wolf was elected to his current office on November 13, 1993. Mr. Hickson was appointed to his current office on November 20, 1994. Mr. Kane assumed his current office on January 11, 1994. Mr. Peppard was elected to his current office on October 4, 1987. Mr. Taraba was elected to his current office on October 31, 1988.
Messrs. Malys, Wolf, Peppard, and Taraba have been engaged full-time in the business of Cyprus Amax and its subsidiaries for more than the past five years. Prior to joining Cyprus in May 1992, Mr. Ward had been President and Chief Operating Officer of Freeport-McMoRan Inc. and Chairman and Chief Executive Officer of Freeport-McMoRan Copper & Gold Inc. since 1984. Mr. Clevenger held various management positions at Phelps Dodge Corporation since 1979. Mr. Malys was Vice President and Corporate Controller from 1985 to 1988, and Senior Vice President Financial and Information Services from 1988 to 1989, when he assumed his current position. Prior to joining Cyprus Amax Coal, Mr. Spindler had been associated with Pittston Coal Company, serving as President and Chief Executive Officer since 1990. Prior to joining Cyprus Amax in 1994, Mr. Watkins occupied various management positions at Minnova Inc. from 1977 until 1991 when he was elected President and Director. Mr. Watkins served as Vice President and Director at Metall Mining Corporation from 1991 until 1993. Mr. Wolf has been a member of Cyprus Amax's law department since 1993 and previously served as chief legal officer from 1984 through 1987. Mr. Wolf had operating responsibility for Cyprus' talc, lithium, gold and iron ore operations during the period from 1987 until 1993 when he assumed his current position. Mr. Hickson joined Cyprus Amax in 1993 as Senior Vice President of Cyprus Climax Metals Company. Before joining Cyprus Amax, Mr. Hickson was President of Freeport McMoRan's Research and Engineering Company. Prior to joining Cyprus Amax in 1994, Mr. Kane served as Associate Director, Relationship Officer for Bear, Stearns & Co. Inc. since 1990. From 1989 to 1990, Mr. Kane served as Manager of Capital Markets and Exposure Management for United Technologies Corporation. Mr. Peppard has held various management positions in Cyprus Amax's human resources department since 1986. Mr. Taraba held various positions in Cyprus' financial departments from 1982 until 1988, when he assumed his current position.
Each executive officer holds office subject to removal at any time by the Board of Directors of Cyprus Amax.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
Information required by this item is incorporated by reference from "Stock Market Information" on page 54 in the 1994 Annual Report.
THE INFORMATION REQUIRED BY ITEMS 6 THROUGH 8 IS INCORPORATED BY REFERENCE FROM THE PAGES OF THE COMPANY'S 1994 ANNUAL REPORT SET FORTH BELOW.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information about the Directors of the Company required by this item is located in Cyprus Amax's Proxy Statement for the 1995 Annual Meeting to be filed within 120 days after the end of the fiscal year. Information about the Executive Officers of the Company required by this item appears in Part I of this Annual Report on Form 10-K.*
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item appears in Cyprus Amax's Proxy Statement for the 1995 Annual Meeting to be filed within 120 days after the end of the fiscal year.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item appears in Cyprus Amax's Proxy Statement for the 1995 Annual Meeting to be filed within 120 days after the end of the fiscal year.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item appears in Cyprus Amax's Proxy Statement for the 1995 Annual Meeting to be filed within 120 days after the end of the fiscal year.
- ------------ * References in this Annual Report on Form 10-K to material contained in Cyprus Amax's Proxy Statement for the 1995 Annual Meeting to be filed within 120 days after the fiscal year incorporate such material into this Report by reference.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following financial statements are filed as part of this Report:
1. Financial Statements included in the 1994 Annual Report and incorporated by reference:
With the exception of the aforementioned financial statements and schedule, and the information incorporated in Items 1 and 2 and Items 5 through 8, the 1994 Annual Report is not deemed to be filed as part of this Annual Report on Form 10-K. Schedules not included in this Form 10-K have been omitted because they are not applicable or the required information is shown in the financial statements in the 1994 Annual Report or notes thereto. Separate financial statements of 50 percent or less owned companies accounted for by the equity method have been omitted since, if considered in the aggregate, they would not constitute a significant subsidiary.
3. The following exhibits are filed with this Annual Report on Form 10-K. The exhibit numbers correspond to the numbers assigned in Item 601 of Regulation S-K.
- ------------ * To be filed by amendment within 180 days of the plan's fiscal year end, in accordance with Rule 15d-21.
(b) The following 8-K's were filed during the last quarter of the period covered by this Report on Form 10-K:
No Report on Form 8-K was filed during the last quarter of the period covered by this Report on Form 10-K.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED ON THE 24 DAY OF MARCH 1995.
CYPRUS AMAX MINERALS COMPANY (REGISTRANT)
By /s/ GERALD J. MALYS -------------------- Gerald J. Malys Senior Vice President and Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED ON MARCH 24, 1995.
Signatures Titles ---------- ------
/s/ MILTON H. WARD Co-Chairman of the Board, Director, President, - ----------------------------- and Chief Executive Officer Milton H. Ward
/s/ ALLEN BORN Co-Chairman of the Board and Director - ----------------------------- Allen Born
/s/ GERALD J. MALYS Senior Vice President and Chief Financial - ----------------------------- Officer (Principal Financial Officer) Gerald J. Malys
/s/ JOHN TARABA Vice President and Controller (Principal - ----------------------------- Accounting Officer) John Taraba
/s/ LINDA G. ALVARADO Director - ----------------------------- Linda G. Alvarado
/s/ GEORGE S. ANSELL Director - ----------------------------- George S. Ansell
/s/ WILLIAM C. BOUSQUETTE Director - ----------------------------- William C. Bousquette
/s/ THOMAS V. FALKIE Director - ----------------------------- Thomas V. Falkie
/s/ ANN MAYNARD GRAY Director - ----------------------------- Ann Maynard Gray
/s/ JAMES C. HUNTINGTON, JR. Director - ----------------------------- James C. Huntington, Jr.
/s/ MICHAEL A. MORPHY Director - ----------------------------- Michael A. Morphy
/s/ ROCKWELL A. SCHNABEL Director - ----------------------------- Rockwell A. Schnabel
/s/ THEODORE M. SOLSO Director - ----------------------------- Theodore M. Solso
/s/ JOHN HOYT STOOKEY Director - ----------------------------- John Hoyt Stookey
/s/ JAMES A. TODD, JR. Director - ----------------------------- James A. Todd, Jr.
/s/ BILLIE B. TURNER Director - ----------------------------- Billie B. Turner
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders of Cyprus Amax Minerals Company:
Our audits of the consolidated financial statements referred to in our report dated February 17, 1995, appearing on page 23 of the 1994 Annual Report to Shareholders of Cyprus Amax Minerals Company (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Denver, Colorado February 17, 1995
SCHEDULE VIII CYPRUS AMAX MINERALS COMPANY AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31 (MILLIONS OF DOLLARS)
- ------------ /(1)/ Amount includes the elimination of reserves for operations sold or shut down, $4 million; remainder represents deductions for transfers, usage, returns, and obsolescence due to the M&S inventory reduction program. /(2)/ Amount primarily represents increased reserve for obsolescence, $12 million. /(3)/ Amount primarily represents the write-off of LTV receivables.
INDEX TO EXHIBITS
- ------------
(b) The following 8-K's were filed during the last quarter of the period covered by this Report on Form 10-K:
No Report on Form 8-K was filed during the last quarter of the period covered by this Report on Form 10-K.