-----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, UhRaEDL/H+XARddRA4f6pfr7NHzr3qVol9OTI+zS8qpOwzWAYmQFjD21PGVU71PJ JNCRaaIiauK4IyG8GU1HpA== /in/edgar/work/20000811/0000950123-00-007486/0000950123-00-007486.txt : 20000921 0000950123-00-007486.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950123-00-007486 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALCAN ALUMINIUM LTD /NEW CENTRAL INDEX KEY: 0000004285 STANDARD INDUSTRIAL CLASSIFICATION: [3334 ] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03677 FILM NUMBER: 694309 BUSINESS ADDRESS: STREET 1: 1188 SHERBROOKE ST WEST CITY: MONTREAL QUEBEC CANA STATE: A8 BUSINESS PHONE: 5148488000 10-Q 1 e10-q.txt ALCAN ALUMINIUM LIMITED 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000 Commission file number 1-3677 ALCAN ALUMINIUM LIMITED (Exact name of registrant as specified in its charter) CANADA Inapplicable (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 1188 SHERBROOKE STREET WEST, MONTREAL, QUEBEC, CANADA H3A 3G2 (Address of Principal Executive Offices and Postal Code) (514) 848-8000 (Registrant's Telephone Number, including Area Code) 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 ____ At June 30, 2000, the registrant had 215,854,927 shares of common stock (without nominal or par value) outstanding. ================================================================================ 2 PART I - FINANCIAL INFORMATION In this report, all dollar amounts are stated in U.S. Dollars and all quantities in metric tons, or tonnes, unless indicated otherwise. A tonne is 1,000 kilograms, or 2,204.6 pounds. The word "Company" refers to Alcan Aluminium Limited and, where applicable, one or more consolidated subsidiaries. Item 1. FINANCIAL STATEMENTS ALCAN ALUMINIUM LIMITED INTERIM CONSOLIDATED STATEMENT OF INCOME (unaudited) - --------------------------------------------------------------------------------
Second Quarter Six Months Periods ended June 30 ----------------- ----------------- (in millions of US$, except per share amounts) 2000 1999 2000 1999 ------- ------- ------- ------- REVENUES Sales and operating revenues $ 2,025 $ 1,776 $ 3,987 $ 3,598 Other income (notes 6 and 8) 38 59 55 78 ------- ------- ------- ------- 2,063 1,835 4,042 3,676 ------- ------- ------- ------- COSTS AND EXPENSES Cost of sales and operating expenses 1,560 1,396 3,014 2,864 Depreciation 114 117 230 235 Selling, administrative and general expenses 89 97 178 206 Research and development expenses 16 16 33 32 Interest (note 10) 10 22 16 44 Other expenses (notes 1 and 9) 34 45 54 77 ------- ------- ------- ------- 1,823 1,693 3,525 3,458 ------- ------- ------- ------- Income before income taxes and other items 240 142 517 218 Income taxes (note 3) 88 69 192 103 ------- ------- ------- ------- Income before other items 152 73 325 115 Equity income (loss) - 1 - (1) Minority interests 1 (3) 2 (5) ------- ------- ------- ------- NET INCOME $ 153 $ 71 $ 327 $ 109 Dividends on preference shares 3 1 5 4 ------- ------- ------- ------- NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 150 $ 70 $ 322 $ 105 ------- ------- ------- ------- Net income per common share (note 4) $ 0.70 $ 0.32 $ 1.48 $ 0.48 ------- ------- ------- ------- Dividends per common share $ 0.15 $ 0.15 $ 0.30 $ 0.30 ------- ------- ------- -------
2 3 ALCAN ALUMINIUM LIMITED INTERIM CONSOLIDATED STATEMENT OF RETAINED EARNINGS (UNAUDITED) - -------------------------------------------------------------------------------
Six months ended June 30 (in millions of US$) 2000 1999 ------- ------- RETAINED EARNINGS - BEGINNING OF PERIOD $ 4,227 $ 4,078 Net income 327 109 Amount related to common shares purchased for cancellation (note 11) (109) (171) Dividends - Common (65) (66) - Preference (5) (4) ------- ------- RETAINED EARNINGS - END OF PERIOD $ 4,375 $ 3,946 ======= =======
3 4 ALCAN ALUMINIUM LIMITED INTERIM CONSOLIDATED BALANCE SHEET (unaudited for 2000) - --------------------------------------------------------------------------------
(in millions of US$) June 30, 2000 December 31, 1999 ------------- ----------------- ASSETS - ------ CURRENT ASSETS Cash and time deposits $ 88 $ 315 Receivables 1,468 1,299 Inventories - Aluminum 845 778 - Raw materials 290 298 - Other supplies 173 200 ------- ------- 1,308 1,276 ------- ------- TOTAL CURRENT ASSETS 2,864 2,890 ------- ------- Deferred charges and other assets (note 1) 514 525 Property, plant and equipment Cost (excluding Construction work in progress) 11,721 11,771 Construction work in progress 1,759 1,220 Accumulated depreciation 6,582 6,557 ------- ------- 6,898 6,434 ------- ------- TOTAL ASSETS $10,276 $ 9,849 ======= =======
4 5 ALCAN ALUMINIUM LIMITED INTERIM CONSOLIDATED BALANCE SHEET (cont'd) (unaudited for 2000)
- ------------------------------------------------------------------------------------- (in millions of US$, except per share amounts) June 30, 2000 December 31, 1999 ------------- ----------------- LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES Payables $ 1,380 $ 1,237 Short-term borrowings 586 167 Income and other taxes 35 31 Debt maturing within one year (note 9) 232 311 -------- ------- 2,233 1,746 -------- ------- Debt not maturing within one year 803 1,011 Deferred credits and other liabilities 575 563 Deferred income taxes 798 781 Minority interests 204 207 SHAREHOLDERS' EQUITY Redeemable non-retractable preference shares 160 160 Common shareholders' equity Common shares (note 11) 1,222 1,230 Retained earnings 4,375 4,227 Deferred translation adjustments (94) (76) -------- ------- 5,503 5,381 -------- ------- Total shareholders' equity 5,663 5,541 -------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 10,276 $ 9,849 -------- ------- COMMON SHAREHOLDERS' EQUITY PER COMMON SHARE $ 25.64 $ 24.65 -------- ------- RATIO OF TOTAL BORROWINGS TO EQUITY 22:78 21:79 -------- -------
5 6 ALCAN ALUMINIUM LIMITED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) - -------------------------------------------------------------------------------
Six months ended June 30 (in millions of US$) 2000 1999 ---- ---- OPERATING ACTIVITIES Net income $ 327 $ 109 Adjustments to determine cash from operating activities: Depreciation 230 235 Deferred income taxes 65 41 Equity loss - net of dividends 1 2 Change in operating working capital (127) 95 Change in deferred charges, other assets, deferred credits and other liabilities - net 30 60 Gain on sales of businesses - net (10) (42) Other - net (14) 16 ----- ----- CASH FROM OPERATING ACTIVITIES 502 516 ----- ----- FINANCING ACTIVITIES New debt 1 3 Debt repayments (270) (57) ----- ----- (269) (54) Short-term borrowings - net 399 8 Common shares purchased for cancellation (133) (219) Common shares issued 16 10 Dividends - Alcan shareholders (including preference) (70) (70) - Minority interests - (3) ----- ----- CASH USED FOR FINANCING ACTIVITIES (57) (328) ----- ----- INVESTMENT ACTIVITIES Property, plant and equipment (647) (478) Investments (200) - Net proceeds from disposal of businesses, investments and other assets 173 302 ----- ----- CASH USED FOR INVESTMENT ACTIVITIES (674) (176) ----- ----- Effect of exchange rate changes on cash and time deposits (3) (9) ----- ----- INCREASE (DECREASE) IN CASH AND TIME DEPOSITS (232) 3 Cash of companies consolidated (deconsolidated) 5 (2) Cash and time deposits - beginning of period 315 615 ----- ----- Cash and time deposits - end of period $ 88 $ 616 ===== =====
6 7 ALCAN ALUMINIUM LIMITED INFORMATION BY OPERATING SEGMENT (unaudited)
- ------------------------------------------------------------------------------------------ Periods ended June 30 (in millions of US$) SALES AND OPERATING REVENUES -------------------------------------- OPERATING Second Quarter INCOME --------------------------------------- -------------- Intersegment Third Parties Second Quarter ------------------ ----------------- --------------- 2000 1999 2000 1999 2000 1999 ------ ------ ------ ------ ------ ------ Primary metal group $ 371 $ 317 $ 430 $ 381 $ 160 $ 31 Global fabrication group 2 - 1,589 1,393 58 77 Intersegment and other items (373) (317) 6 2 45 61 ------- ------- ------- ------- ------- ------- $ - $ - $ 2,025 $ 1,776 263 169 ======= ======= ======= ======= Reconciliation to net income Equity income - 1 Corporate offices (12) (8) Interest (10) (22) Income taxes (88) (69) ------- ------- NET INCOME $ 153 $ 71 ======= =======
- ------------------------------------------------------------------------------------------ SALES AND OPERATING REVENUES -------------------------------------- OPERATING Six Months INCOME --------------------------------------- -------------- Intersegment Third Parties Six Months ------------------ ----------------- -------------- 2000 1999 2000 1999 2000 1999 ------ ------ ------ ------ ------ ------ Primary metal group $ 790 $ 630 $ 886 $ 790 $ 394 $ 65 Global fabrication group 13 - 3,089 2,803 130 122 Intersegment and other items (803) (630) 12 5 35 90 ------- ------- ------- ------- ------- ------- $ - $ - $ 3,987 $ 3,598 559 277 ======= ======= ======= ======= Reconciliation to net income Equity loss - (1) Corporate offices (24) (20) Interest (16) (44) Income taxes (192) (103) ------- ------- NET INCOME $ 327 $ 109 ======= =======
7 8 ALCAN ALUMINIUM LIMITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS June 30, 2000 (Unaudited) (in millions of US$, except per share amounts) 1. COMBINATION AGREEMENT WITH PECHINEY AND ALUSUISSE LONZA GROUP LTD. On September 15, 1999, the Company entered into a three-way combination agreement with Pechiney and Alusuisse Lonza Group Ltd. (algroup). On April 13, 2000, in view of objections raised by the European Commission in its review of the proposed combination, the three companies announced their decision not to proceed with the three-way merger and terminated the combination agreement insofar as Pechiney is concerned. As a result, $5 of deferred transaction costs have been written off and included in Other expenses in the second quarter of 2000. The combination agreement between the Company and algroup, as amended on June 1, 2000, remains in effect with respect to their two-way merger and is subject to acceptance by holders of at least 67% of algroup shares. Included in Deferred charges and other assets at June 30, 2000, was an amount of $23 of costs related to the proposed transaction. - -------------------------------------------------------------------------------- 2. RECONCILIATION OF CANADIAN AND U.S. GAAP Differences relate principally to accounting for foreign currency translation and accounting for "available for sale" securities. RECONCILIATION OF CANADIAN AND U.S. GAAP ----------------------------------------
Second Quarter Six Months --------------------------- ------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ----------- $ per $ per $ per $ per Common Common Common Common $ Share $ Share $ Share $ Share --- ------ --- ------ --- ------ --- ------ Net income - as reported 153 71 327 109 Differences due to: Foreign currency translation (1) (6) (4) (7) Other - 2 - 3 --- --- --- --- Net income - U.S. GAAP 152 67 323 105 --- --- --- --- Net income attributable to common shareholders as reported 150 0.70 70 0.32 322 1.48 105 0.48 --- ---- --- ---- --- ---- --- ---- Net income attributable to common shareholders - U.S. GAAP 149 0.69 66 0.30 318 1.46 101 0.46 --- ---- --- ---- --- ---- ---- ----
8 9 2. RECONCILIATION OF CANADIAN AND U.S. GAAP (cont'd)
Second Quarter --------------------------------------------------------------------- 2000 1999 ---------------------------------- --------------------------------- As reported U.S. GAAP As reported U.S. GAAP ---------------- ---------------- ----------------- -------------- Deferred charges and other assets - - June 30 $ 514 $ 521 $ 523 $ 593 Retained earnings - June 30 4,375 4,417 3,946 3,993 Deferred translation adjustments (DTA) - June 30 $ (94) $ (150) $ 71 $ 125
Second Quarter Six Months -------------- ------------- 2000 1999 2000 1999 ---- ---- ---- ---- COMPREHENSIVE INCOME (U.S. GAAP ONLY) Net income $ 152 $ 67 $ 323 $ 105 Net change in deferred translation adjustments 13 (31) (18) (101) Net change in market value of available-for-sale securities 4 24 2 28 ----- ----- ----- ----- Comprehensive income $ 169 $ 60 $ 307 $ 32 ===== ===== ===== ===== ACCUMULATED OTHER COMPREHENSIVE INCOME (U.S. GAAP ONLY) Accumulated other comprehensive income - beginning of year $(113) $ 21 Change in deferred translation adjustments (18) (101) Change in excess of market value over book value of available-for-sale securities 2 28 ----- ----- Accumulated other comprehensive income - June 30 $(129) $ (52) ===== =====
- ------------------------------------------------------------------------------- 3. INCOME TAXES
Second Quarter Six Months -------------- ------------- 2000 1999 2000 1999 ---- ---- ---- ---- Current $ 57 $ 25 $127 $ 62 Deferred 31 44 65 41 ---- ---- ---- ---- $ 88 $ 69 $192 $103 ==== ==== ==== ====
The composite of the applicable statutory corporate income tax rates in Canada is 40.3% (40.4% for 1999). The difference between income taxes calculated at the composite rate and the amounts shown as reported is primarily attributable to investment and other allowances, reduced rate or tax exempt items and the currency revaluation of deferred income taxes. In 1999, the difference is primarily attributable to the currency revaluation of deferred income taxes, partially offset by exchange and reduced rate or tax-exempt items. 9 10 4. NET INCOME PER COMMON SHARE Net income per common share is based on the average number of shares outstanding during the period (second quarter 2000: 217.8 million; 1999: 217.5 million; six months 2000: 218.1 million; 1999: 220.1 million). As at June 30, 2000, there were 214,628,526 common shares outstanding of which 1,226,401 were cancelled in July 2000. - -------------------------------------------------------------------------------- 5. SUPPLEMENTARY INFORMATION
STATEMENT OF CASH FLOWS Second Quarter Six Months ----------------------- -------------- ---------------- 2000 1999 2000 1999 ---- ---- ---- ---- Interest paid $ 34 $ 35 $ 60 $ 68 Income taxes paid $ 96 $ 81 $115 $ 83
- -------------------------------------------------------------------------------- 6. SALE OF INDIAN ALUMINIUM COMPANY, LIMITED In the second quarter of 2000, the Company completed the sale of its 54.62% interest in Indian Aluminium Company, Limited to Hindalco Industries Limited (Hindalco). Net proceeds from the sale were $162 resulting in a gain of $3, included in Other income. - -------------------------------------------------------------------------------- 7. ACQUISITION OF ALUMINIUM OF KOREA LIMITED In the second quarter of 2000, the Company's subsidiary Alcan Taihan Aluminum Limited (ATA), acquired a 95% interest in Aluminium of Korea Limited for $200 in cash and the assumption of $114 of debt. As a result of the transaction, the Company owns 68% of ATA. - -------------------------------------------------------------------------------- 8. DEMUTUALIZATION OF LIFE INSURANCE COMPANIES During the second quarter of 2000, as a policyholder in Canada and the United States, the Company received proceeds from the demutualization of Sun Life Assurance Company of Canada and Metropolitan Life Insurance Company. As a result of these transactions, a gain of $10 is included in Other income. - -------------------------------------------------------------------------------- 9. DEBT MATURING WITHIN ONE YEAR During the first quarter of 2000, the Company redeemed $100 of 9.5% debentures at a price of 104.64%. The loss on redemption of $3 is included in Other expenses. - -------------------------------------------------------------------------------- 10. CAPITALIZATION OF INTEREST COSTS Total interest costs in the second quarter and six months were $28 and $50 (1999: $31 and $63) respectively of which $18 and $34, (1999: $9 and $19) were capitalized. - -------------------------------------------------------------------------------- 10 11 11. SHARE REPURCHASE PROGRAM Under a normal course issuer bid, which terminates on June 18, 2001, the Company is authorized to repurchase up to 21,800,000 common shares, representing approximately 10% of the outstanding shares. In the second quarter of 2000, 4,300,000 common shares were purchased under this authorization. In the opinion of management, all adjustments necessary for a fair presentation of interim period results have been included in the financial statements. These interim results are not necessarily indicative of results for the full year. - ------------------------------------------------------------------------------- ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS First Second Quarter Six Months Quarter -------------- ------------- ------- 2000 1999 2000 1999 2000 ---- ---- ---- ---- ---- Highlights (US$ millions, except per share amounts) Sales and operating revenues 2,025 1,776 3,987 3,598 1,962 Net income 153 71 327 109 174 Net income per common share 0.70 0.32 1.48 0.48 0.78 Economic Value Added (EVA)(R) 31 (59) 83 (165) 52
(R)EVA is a registered trademark of Stern, Stewart & Company The Company reports second quarter consolidated net income of US$153 million compared to US$71 million in the second quarter of 1999 and to US$174 million in the previous quarter. After preference share dividends, net income per common share for the quarter is 70 cents compared to 32 cents a year earlier and to 78 cents in the first quarter of 2000. For the first half of 2000 earnings per share were US$1.48 compared to 48 cents for the comparable period of 1999, a more than three-fold improvement. Earnings in the quarter more than doubled from a year ago, with record volumes, a 14% increase in revenues and the continued gains arising from the Company's Full Business Potential (FBP) program. During the quarter, Alcan established a solid platform for growth in Asia by completing the acquisition of Aluminium of Korea Limited (Koralu) in South Korea and the sale of its shareholding in Indian Aluminium Company, Limited (Indal). At the beginning of June, revised terms, including a cash component, were agreed for the merger with algroup of Switzerland and we secured the irrevocable commitment of 34% of algroup's shares to the Alcan offer. This transaction is now expected to close early in the fourth quarter. Despite lower metal prices in the quarter, industry fundamentals are strong and the outlook for demand and prices remains encouraging. 11 12
First Second Quarter Six Months Quarter -------------- ------------- ------- 2000 1999 2000 1999 2000 ---- ---- ---- ---- ---- Volumes (thousands of tonnes) Shipments Ingot products* 204 209 397 430 193 Fabricated products 546 488 1,057 949 511 Fabrication of customer-owned metal 88 81 165 147 77 ----- ----- ----- ----- ------ Total volume 838 778 1,619 1,526 781 Ingot product realizations 1,677 1,451 1,714 1,417 1,753 (US$ per tonne) Fabricated product realizations 2,650 2,520 2,665 2,608 2,682 (US$ per tonne) Average London Metal Exchange (LME) 3-month price 1,501 1,332 1,577 1,272 1,652 (US$ per tonne)
* Includes primary and secondary ingot and scrap Sales and operating revenues for the quarter were some 14% above the year-ago quarter, primarily due to higher fabricated products sales volumes and improved ingot and fabricated products realizations. The revenue improvement over the first quarter was 3%, reflecting higher volumes, offset by lower price realizations. Total fabricated product volumes, which include products fabricated from customer-owned metal, reached a record level of 634 thousand tonnes (kt) in the quarter, compared to 588 kt in the preceding quarter, and were 11% ahead of volumes a year earlier. The effect of acquisitions and disposals accounted for about 6% of the year-over-year increase with the remainder coming from existing operations. Average ingot product realizations of US$1,677/tonne declined 4% from the first quarter against a 9% decline in the London Metal Exchange (LME) price. This reflects the time lag of about one month in pricing ingot products to customers as well as an improved sales mix. Ingot realizations were 16% ahead of the year-earlier quarter, primarily reflecting the improvement in LME prices. Fabricated product realizations declined 1% from the preceding quarter due to the effect of weaker European currencies offsetting the lagged improvement due to earlier increases in metal prices. Compared to a year ago, the pattern is similar with the metal price improvement offset in part by the impact of weaker currencies in Europe. The continuing strong level of Economic Value Added (EVA(R)) and the substantial year-over-year improvement reflect ongoing strong operating results and the benefits derived from higher metal prices as well as Alcan's FBP program. A further US$80 million of annual improvements were achieved during the first half of 2000 under the FBP program, bringing the total to US$510 million. Together with capacity-related gains expected to accrue in late 12 13 2000 and 2001,the Company remains confident that the target of US$1 billion by the end of 2001 will be achieved. OPERATING SEGMENT REVIEW The Company reports selected information by major product sector, viewed on a stand-alone basis. Transactions between product sectors are conducted on an arm's length basis and reflect market-related prices. Thus, income from primary metal operations is mainly profit on metal produced by the Company, whether sold to third parties or used in the Company's fabricating operations. Income from fabricated product businesses represents only the fabricating profit on rolled products and downstream businesses.
Second Quarter Six Months First Quarter -------------- -------------- ------------- (US$ millions) 2000 1999 2000 1999 2000 ---- ---- ---- ---- ---- Operating income Primary metal group 160 31 394 65 234 Global fabrication group 58 77 130 122 72 Intersector and other items 45 61 35 90 (10) --- ---- ---- ---- ---- Total 263 169 559 277 296 Equity income (loss) -- 1 -- (1) -- Corporate head office (12) (8) (24) (20) (12) Interest (10) (22) (16) (44) (6) Income taxes (88) (69) (192) (103) (104) --- ---- ---- ---- ---- Net income 153 71 327 109 174
Second quarter operating income for the primary metal group showed a strong improvement over the year-ago quarter, reflecting higher sales realizations resulting from the increased LME metal price. Compared to the first quarter of this year, the decline reflects the impact of lower LME prices on primary metal operations, lower power sales in the U.K. and pre-production and start-up costs relating to the Alma and Lynemouth smelters. In the global fabrication group, operating profits were below both the preceding and year-earlier quarters due in large part to the time lag in passing on increases in metal prices that resulted in a squeeze in fabricating margins. In North America, sales volume was slightly ahead of the year-ago and preceding quarters. European shipments continued their improving trend with an 8% improvement over a year earlier, but margins were weaker, particularly in foil markets where U.K. operations were affected by the strength of the pound against the Euro. In South America, sales volumes were over 40% above year-ago levels, as sales volume begins to ramp up from the rolling mill expansion. This is offset by higher depreciation charges, but further volume increases are expected to result in improvements in profitability. In Asia, the higher volume in the quarter results from the inclusion of the Koralu acquisition for May and June, with profitability depressed by initial losses. "Intersector and other items" includes the deferral or realization of profits on intersector sales of metal. In the first quarter of 2000, with rising ingot prices, profits were deferred. For the second quarter, as ingot prices decreased, previously deferred profits on intersector sales were realized. Also included in this category is interest income. 13 14 The effective income tax rate for the quarter was 36.7%, reflecting a non-cash credit of US$8 million resulting from the revaluation of Canadian dollar-denominated deferred income tax balances, partly offset by losses in Korea for which tax benefits have not been recorded. The second quarter of 1999 included a non-cash charge of US$12 million for currency revaluation of deferred income taxes. Interest expense was US$10 million in the quarter compared to US$22 million a year earlier and US$6 million in the first quarter. The decline from a year ago reflects lower average debt levels and the capitalization of interest related to the Alma project. GEOGRAPHIC REVIEW
Second Quarter Six Months First Quarter -------------- -------------- ------------- (US$ millions) 2000 1999 2000 1999 2000 ---- ---- ---- ---- ---- Net income (Loss) Canada 68 (14) 153 (41) 85 United States 29 40 73 74 44 South America 7 8 15 (1) 8 Europe 11 23 47 31 36 Asia and Pacific 7 8 13 24 6 Other (including eliminations) 31 6 26 22 (5) ---- ---- ---- ---- ---- 153 71 327 109 174
In Canada, the improvement in operating net income over the year-ago quarter reflects the impact of higher metal prices as well as a US$20 million after-tax charge in the prior year. The decline in earnings compared to the first quarter is primarily a reflection of lower ingot prices. In the United States, the decline in earnings from a year ago is principally due to the time lag in passing on increases in metal prices to certain customers and exceptional provisions of some US$9 million in the current year's second quarter. This item, together with lower metal prices, resulted in the decline from the first quarter level. Operating results in South America were in line with those in the prior and year-ago quarters. Improved fabricating earnings over the first quarter were offset by the effect of lower metal prices on primary operations. In Europe, despite higher sales volumes, fabricating margins were squeezed and primary operations were affected by lower prices and reduced power sales compared to the first quarter. U.K. operations were also adversely affected by the strength of the pound against European currencies. Results in the Asia and Pacific region for the quarter were in line with the prior and year-ago quarters. 14 15 LIQUIDITY AND CAPITAL RESOURCES Cash generated from operating activities during the first half of 2000 was US$502 million compared to US$516 million in the comparable period of 1999. The increase in net income US$218 million for the first half of 2000 was offset by an almost identical increase in operating working capital. In the first six months of 1999, working capital had been reduced by US$95 million. FINANCING ACTIVITIES Cash used for financing activities in the first half of 2000 was US$57 million compared to US$328 million in the same period of 1999. In the second quarter of this year, the Company purchased for cancellation 4.3 million common shares for US$133 million. During the first half of this year, total debt increased by US$132 million. The debt:equity ratio at June 30 was 22:78, compared to 19:81 at March 31, 2000 and 24:76 a year ago. During the first quarter of 2000, the Company redeemed US$100 million of 9.5% debentures at a price of 104.64%. The loss on redemption was US$3 million. In the second quarter, the Company repaid, at their maturity date, US$150 million of 5.875% debentures. During the first half of 2000, cash and time deposits declined from US$315 million to US$88 million. INVESTMENT ACTIVITIES Capital expenditures during the first half of 2000 were US$647 million compared to US$478 million a year earlier. The most important project during the six-month period was the construction of the Alma, Quebec aluminum smelter. The smelter is expected to start up on the fourth quarter of 2000. As well, in the second quarter, the Company's subsidiary Alcan Taihan Aluminum Limited (ATA) acquired a 95% interest in Koralu for US$200 million in cash and the assumption of US$114 million of debt. As a result of the transaction, the Company owns 68% of ATA. Net proceeds from the disposal of businesses were US$173 million. During the second quarter, the Company completed the sale of its 54.62% interest in Indal for net proceeds of US$162 million. FINANCIAL INSTRUMENTS CURRENCY HEDGING FOR ALMA SMELTER Through a combination of option contracts and forward exchange contracts totaling US$446 million at June 30, 2000, and maturing over various periods in 2000, the Company has hedged its future Canadian dollar commitments for the construction of the new smelter at Alma, Quebec. The present hedging position for the Alma project will ensure that the Company will pay, on average, no more than US$0.72 for Can$1.00, and will be able to benefit, in part, from any future reductions in the value of the Canadian dollar. Any gains or losses from these hedging activities, and related costs, will be included in the capital cost of the new smelter. CURRENCY HEDGING FOR THE AUSTRALIAN DOLLAR Additionally, at June 30, 2000, the Company has hedged $A 427 million of its future $A commitments through forward exchange contracts and options maturing over the next five years. 15 16 PART II. OTHER INFORMATION ITEMS 1. THROUGH 5. The registrant has nothing to report under these items. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits (27) Financial Data Schedule. (Filed herewith) (99.1) Employment Agreement dated August 1, 1999 with Jacques Bougie. (Filed herewith) (99.2) Cautionary statement for purposes of the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995. (Filed herewith) (b) Reports on Form 8-K The following reports on Form 8-K were filed during the three months ended June 30, 2000: 1. On April 26, 2000 a report was filed reporting the announcement of the waiting period under U.S. antitrust regulation with respect to Alcan-algroup had expired. 2. On June 2, 2000 a report was filed reporting the announcement that Alcan and algroup had reached agreement on revised terms of the proposed merger of the two companies. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ALCAN ALUMINIUM LIMITED Dated: August 11, 2000 By: /s/ Glenn R. Lucas ------------------- Glenn R. Lucas, Treasurer (A Duly Authorized Officer) 16 17 EXHIBIT INDEX
Exhibit Number Description (27) Financial Data Schedule. (99.1) Employment Agreement with Jacques Bougie. (99.2) Cautionary statement for purposes of the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995.
17 EX-27 2 ex27.txt FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Form 10-Q of Alcan Aluminium Limited for the quarter ended 30 June 2000 and is qualfied in its entirety by reference to such financial statements. 1,000,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 88 0 1,468 0 1,308 2,864 13,480 6,582 10,276 2,233 803 0 160 1,222 4,281 10,276 3,987 4,042 3,014 3,014 230 0 16 517 192 327 0 0 0 327 1.48 1.48
EX-99.1 3 ex99-1.txt EMPLOYMENT AGREEMENT W/ JACQUES BOUGIE 1 EXHIBIT 99.1: EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT BETWEEN JACQUES BOUGIE AND ALCAN ALUMINIUM LIMITED 2 This EMPLOYMENT AGREEMENT entered into at Montreal, Canada, as of the 1st day of August 1999. BETWEEN: Mr. Jacques Bougie (hereinafter referred to as the "CEO"). AND: ALCAN ALUMINIUM LIMITED, a company incorporated under the laws of Canada, having its head office at Montreal, Quebec, Canada (hereinafter referred to as "ALCAN"). AND WHEREAS the Board of Directors of Alcan agrees to maintain Mr. Jacques Bougie in the position of Chief Executive Officer for the duration of this Agreement, subject to the terms and conditions of this Agreement. AND WHEREAS Mr. Jacques Bougie agrees to serve as Chief Executive Officer for the duration of the Agreement, subject to its terms and conditions. AND WHEREAS the special pension arrangements (dated 1993) for Mr. Jacques Bougie recognize the mutual understanding of the parties, that Mr. Bougie could retire on or approximately at age 56; nevertheless the exact retirement date has not been set. The Board intends to review the succession requirements on, or about, 1 January 2002, while Mr. Jacques Bougie undertakes to formally advise the Board, in writing, of his expected retirement date, no later than 1 July 2002. THE PARTIES AGREE AS FOLLOWS: 1.0 TERM AND TERMINATION 1.1 The term of this Agreement shall run from the 1st day of January 2000 to the 31st day of July 2003 (43 months) and therewith terminate unless extended by mutual written Agreement. 2.0 UNDERTAKING AND DECLARATIONS 2.1 For the Term of this Agreement, the CEO hereby agrees not to accept employment offers by any other Corporations. 20 3 3.0 COMPENSATION (all amounts are in U.S. dollars unless stated otherwise) 3.1 BASE SALARY For the period of the Agreement, the Base Salary is set as follows:
Base Salary ----------- -- From 1 January 2000 = $800,000 -- From 1 January 2001 = $850,000 -- From 1 January 2002 = $900,000 -- From 1 January 2003 = $950,000
3.2 EXECUTIVE PERFORMANCE AWARD ("EPA") The total guideline amount defined under the regular Plan is set at 100% of the base salary, and prorated as follows for each award.
Weight Rating Scale (% of guideline) ------ ----------------------------- Minimum Maximum ------- ------- -- Value Creation (EVA) = 30% 0% 300% -- Corporate (FBP) = 20% 0% 200% -- Business Unit (Agreed Objectives)(1) = 50% 0% 250%
(1) For the Business Unit Award (BUA), annual performance objectives will be prepared and agreed with the Board, focusing on specific strategic initiatives to be taken. 3.3 MEDIUM TERM INCENTIVE PLAN ("MTIP") Under the MTIP, two performance periods ("cycle") will be established. The first 3-year cycle will cover the period from 1 January 1999 to 31 December 2001. The payout, if at all, for the first 3-year cycle, will be made in February 2002 on the basis of achieving Alcan's Full Business Potential (FBP-II) and having completed the full 3-year term of employment(1). Performance objectives for the 3-year cycle are defined in Schedule-A. ---------------------------- (1) As regard the MTIP entitlement for the year 1999, Mr. Bougie needs to be an employee of Alcan until 31 December 1999. 21 4 The minimum, target and maximum payouts for the first performance cycle are shown in TABLE 1 below : TABLE 1 ------- MEDIUM TERM INCENTIVE PERIOD 1 JANUARY 1999 TO 31 DECEMBER 2001 DEGREE OF ACHIEVEMENT OF "FBP-II" - --------------------------------------------------------------------------------
LESS THAN ------- US$525M US$700M US$790M US$850M US$910M --------- ------- ------- ------- ------- (1) (1) (1) (1) (1) Performance 0 125% 200% 250% 300% Rating Award US$'000 $0 $1,125 $1,800 $2,250 $2,700 --------
Results between US$525M and US$700M; and US$700M to US$910M will be prorated. For the second performance cycle covering the period from 1 January 2002 to 31 July 2003 (19 months), the Board will establish, in December 2001, the objectives to be achieved as well as the payout formula. The target amount will be set on the basis of the competitive Total Cash level (US market data), for the period. The target MTIP award when added to Base Salary and target EPA will equal the Total Cash target for the period. The payout, if at all, for the 2nd cycle will be made in August 2003 on the basis of achieving the objectives set by the Board and having completed the full 43-month term of employment. In any event, the target amount of the MTIP for the 2nd cycle will not be less than $300,000 per year, which is the amount set for the first cycle. 3.4 ALCAN EXECUTIVE SHARE OPTION PLAN ("AESOP")(2) During the term of the Agreement, the CEO will be granted either (1) a single grant or (2) a number of grants to be determined by the Option Committee at its December 1999 meeting. The number of shares to be granted will be based on (1) the compensation value to be achieved (2) the Black-Scholes value of the Alcan share and (3) the 3-year average market share price (calculated at month end). The exercise price will be the market price on the date of grant. The annual compensation value will not be less than $2 Million. ---------------------------- (1) The target, as well as the payout formula, will be adjusted as outlined in Schedule A. (2) The compensation value to be achieved will be based on the 1999 US Hay Compensation Survey which should be available early September. 22 5 3.5 PENSION The attached Schedule B replaces the Board Resolution of 22 September 1993 regarding the Extra Pension Undertaking for Mr. Jacques Bougie and all subsequent amendments to the said Resolution. Under the Alcan Supplementary Retirement Benefit Plan (ASRBP), the normal form of the benefit is a lump sum. Mr. Bougie has the right to either choose the normal form or the monthly pension payment. 4.0 SPECIAL CONDITIONS Even though the CEO could retire at the end of this Agreement, it is understood by both parties that the exact retirement date has not been set, and the CEO may wish to defer such retirement to a later date. For the purpose of planning an effective transition (succession), the Board will review the succession requirements on, or about, 1 January 2002. The CEO agrees to advise the Board, in writing, no later than 1 July 2002 of his personal decision relative to his retirement date. 5.0 TERMINATION OF EMPLOYMENT 5.1 In the event of a termination of employment, which has been initiated by the Board, the following termination settlement will be made: (i) 36 multiplied by ------------- (ii) the monthly equivalent of the annual compensation described in paragraphs 3.1 (base salary), 3.2 (EPA at guideline amount) and 3.3 (MTIP at guideline amount, 100%). 5.2 Mr. Bougie will have the option of receiving the termination settlement either in a lump sum, in which case all "Benefit Plan" coverage will cease on the date of termination, or through 36 equal monthly installments (or for a greater number of months to reach age 56) on the non-active payroll of the Corporation, in which case "Benefit Plan" coverage will continue except for Short and Long-Term Disability, vacation and eligibility for participation in the AESOP. Upon reaching age 56 on the non-active payroll, Mr. Bougie will be entitled to the pension specified in Schedule B, i.e. $C950,000 per annum. 23 6 5.3 Given that Mr. Bougie will be treated as a retiree, in the event of a termination of employment, for purposes of the Alcan Executive Share Option Plan, paragraph 9.2(b)(1) will apply. 6.0 CHANGE OF CONTROL A separate "Change of Control" Agreement has been signed between Mr. Bougie and Alcan Aluminium Limited and forms part of this employment contract. The Change of Control Agreement is appended to this contract. 7.0 DISABILITY In the event the CEO becomes disabled prior to the end of the term and cannot perform the duties of his position, Alcan shall maintain full payment of the amounts under paragraph 3.1 for a period of 12 months after the date deemed disabled. Regular EPA amounts will also be payable during the period. After the period of pay continuance the CEO will receive regular LTD benefits. In addition to the pay continuation stated above, the Board may at its discretion recommend that a portion of the MTIP payment (paragraph 3.3) be made even though through no fault on the CEO's part he was not able to complete the performance period. 8.0 DEATH In the event of death prior to age 56, in addition to the regular benefit payable under the life assurance program and the death benefits payable under the Alcan Pension Plan and the ASRPB using the Minimum Target Benefit described under column (B) of Schedule B, the Company will pay to the Estate of the CEO the following amounts: 1. the EPA guideline amount prorated to the date of death; 2. a discretionary amount deemed by the Board to be a just and equitable payment for the progress toward achieving the objectives under the MTIP program (paragraph 3.3). - ----------------------------------- (1) Reference: Subject to the Original Option Period, the Option Period shall terminate no later than 5 years after the earlier of (a) the death of the Optionee, and (b) the Retirement of the optionee. All waiting periods are also waived. 24 7 9.0 OTHER EXECUTIVE BENEFITS AND PERQUISITES All other benefits and perquisites currently available to the CEO will continue unchanged for the duration of this Agreement, with the exception of those benefits which are calculated on the basis of the definition of pensionable earnings. 10.0 ENGLISH LANGUAGE This contract is written in English at the express request of the Parties. Ce contrat est redige en anglais a la demande expresse des parties. 11.0 APPLICABLE LAW This Agreement shall be interpreted according to the laws of the Province of Quebec. The Parties agree that the courts of the District of Montreal shall have exclusive jurisdiction. IN WITNESS WHEREOF the Parties have signed these presents as at the place and date first hereinabove written. ALCAN ALUMINIUM LIMITED By /s/ John Evans --------------- Dr. John Evans Chairman of the Board WITNESS: /s/ Robert Maheu ---------------- Robert Maheu /s/ Jacques Bougie --------------------- Jacques Bougie 25 8 SCHEDULE A The Board has the discretion, during a cycle, to adjust performance measures set for that period in order to reflect changes in accounting principles and practices, mergers, acquisitions or divestitures or extraordinary non-recurring or unusual items. FULL BUSINESS POTENTIAL (II) OBJECTIVES : - ----------------------------------------- By the end of 2001, improve the run rate of pre-tax earnings by $700 Million over 3 years (EVA neutral at $1380/tonne). ASSUMPTIONS : - ------------- (bullet) Base year : 1998 (bullet) 1998 average metal price of $1380/tonne (bullet) Smelters operating at full capacity (bullet) Major strategic investment, acquisition or merger not included in FBPII plan TARGET : - -------- US$700 Million (pre-tax income) ADJUSTMENTS : - ------------- (bullet) For deviation from the basic assumptions above (bullet) For major strategic initiatives 26 9 Page 1 of 2 SCHEDULE B Mr. Jacques Bougie will be paid a discretionary retirement benefit under section 8.06 of the Alcan Supplemental Retirement Benefit Plan (the "Plan"), commencing on his Date of Determination as defined under the Plan. The benefit shall be the Actuarial Equivalent at such date of an annual retirement pension payable from the Retirement Date equal to the excess, if any, of the amount of a Target Benefit described in B.1, subject to the conditions in B.2, over the amount defined in B.3, where: B.1 The Target Benefit, as of Mr. Jacques Bougie's Date of Determination, shall be an annual retirement pension payable from his Retirement Date equal to the lesser of (1) or (2) and subject to the same conditions and options as the retirement benefit payable from the Alcan Pension Plan (Canada), where (1) is the sum of (a) 1.15% of Highest Average Earnings up to the Average YMPE, plus (b) 1.7% of Highest Average Earnings in excess of Average YMPE; multiplied by the sum of: (a) Credited Service, plus (b) 24 months, plus (c) a number of months equal to Credited Service earned after 1 November 1993, up to the date of termination of employment as Chief Executive Officer ("CEO"), with a maximum of 120 months; (2) is 60% of Highest Average Earnings; B.2 The Target Benefit shall be subject to the following provisions: (1) The CEO's annual Pensionable Earnings from 1 January 1997 are equal to 140% of Base Salary. (2) US dollar Pensionable Earnings shall be translated monthly to Canadian dollars using the month-end AGHO exchange rate. 27 10 Page 2 of 2 SCHEDULE B (3) In the events described in paragraphs (a) and (b) below, the Target Benefit shall not be less than the following Minimum Target Benefit in the following table: AGE AT MINIMUM TARGET BENEFIT (CDN $) DATE OF ------------------------------ DETERMINATION COLUMN (A) COLUMN (B) 52 365,000 500,000 53 440,000 612,500 54 570,000 725,000 55 735,000 837,500 56 950,000 950,000 57 1,000,000 1,000,000 58 1,050,000 1,050,000 59 1,100,000 1,100,000 60 1,150,000 1,150,000 (a) If the CEO retires at any time from age 52, except in circumstances described in (b), the Minimum Target Benefit is as per column (A) (b) If the Board requests the CEO's termination of employment or if there is a mutual agreement between the Board and the CEO, or if the appointment of a new Chair of the Board is not acceptable to the CEO, the Minimum Target Benefit is as per Column (B)., (c) Minimum Target Benefit are pro-rated for fractional ages. B.3 An amount equal to the sum of (1), (2) and (3) below, where: (1) is any other pension, benefit of a pension or income nature, or any payment required by law on termination of service which payment is, in the opinion of the Company, compensation related to service with the Company or an Affiliated Company; (2) is the retirement pension determined under the Alcan Pension Plan (Canada), (3) is the retirement pension determined under the Plan which would otherwise be payable without taking into account section 8.06 of the Plan. 28 EX-99.2 4 ex99-2.txt CAUTIONARY STATEMENT 1 EXHIBIT NO. 99.2: CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Written or oral statements made by Alcan or its representatives, including statements set forth in Alcan's Form 10-Q for the quarter ended June 30, 2000, which describe the Company's or management's objectives, projections, estimates, expectations or predictions of the future may be "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, which can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "estimates," "anticipates" or the negative thereof or other variations thereon. The Company cautions that, by their nature, forward-looking statements involve risk and uncertainty and that the Company's actual results could differ materially from those expressed or implied in such forward-looking statements or could affect the extent to which a particular projection is realized. Important factors which could cause the Company's actual performance to differ materially from projections or expectations included in forward-looking statements include global aluminum supply and demand conditions, aluminum ingot prices and changes in other raw materials costs and availability, cyclical demand and pricing within the principal markets for the Company's products, changes in government regulations, particularly those affecting environmental, health or safety compliance, economic developments and other factors within the countries in which the Company operates or sells its products and other factors relating to the Company's ongoing operations including, but not limited to, litigation, labour negotiations and fiscal regimes. Copies of the Company's filings may be obtained by contacting the Company or the United States Securities and Exchange Commission. 29 -----END PRIVACY-ENHANCED MESSAGE-----