EX-99.3 7 m08474ex99-3.txt UNAUDITED PRO FORMA COMB. BALANCE SHEET OF ALCAN 1 EXHIBIT NO. 99.3: UNAUDITED PRO FORMA FINANCIAL INFORMATION 64 2 ALCAN ALUMINIUM LIMITED UNAUDITED PRO FORMA COMBINED BALANCE SHEET JUNE 30, 2000 (IN MILLIONS OF U.S. DOLLARS)
Historical Translated algroup Business Pro forma Pro forma Alcan historical IAS to divestitures adjustments combined Algroup Cdn GAAP Note(5) Note(2) Note(1) Note(3) (reclassified) ----------- ------------- ------- ----------- ------------ --------- ASSETS Current assets Cash and time deposits 88 181 - (5) (181) A 83 Receivables 1,468 1,082 - (57) - 2,493 Inventories 1,308 783 (1) (27) 38 B 2,101 ------- ----- ---- --- ------ ------ 2,864 2,046 (1) (89) (143) 4,677 Deferred charges and other assets 514 161 58 66 527 C 1,326 (including net assets held for sale) Property, plant and equipment, net 6,898 1,767 2 (67) 1,152 D 9,752 Goodwill, net - 164 120 - 2,106 E 2,390 Deferred income taxes - 56 - - 92 F 148 ------- ----- --- --- ----- ------ Total assets 10,276 4,194 179 (90) 3,734 18,293 ------- ----- ---- --- ------ ------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Payables 1,380 1,015 16 (36) 302 G 2,677 Short term borrowings 586 892 - (4) 756 H 2,230 Income and other taxes 35 55 - - - 90 Debt maturing within one year 232 - - - - 232 ------- ----- ---- --- ------ ------ 2,233 1,962 16 (40) 1,058 5,229 Debt not maturing within one year 803 510 - (9) (1) I 1,303 Deferred credits and other liabilities 575 237 - (35) - 777 Deferred income taxes 798 137 13 (6) 646 J 1,588 Minority interests 204 32 - - - 236 SHAREHOLDERS' EQUITY Redeemable retractable preference shares 160 - - - - 160 Common shares 1,222 417 - - 3,080 K 4,719 Retained earnings 4,375 899 155 - (1,054) L 4,375 Other (94) - (5) - 5 M (94) ------- ----- ---- --- ------ ------ 5,663 1,316 150 - 2,031 9,160 Total liabilities and shareholders' equity 10,276 4,194 179 (90) 3,734 18,293 ======= ===== ==== === ====== ======
The accompanying notes are an integral part of the unaudited pro forma combined financial statements 65 3 ALCAN ALUMINIUM LIMITED UNAUDITED PRO FORMA STATEMENT OF INCOME FROM CONTINUING OPERATIONS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2000 (IN MILLIONS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS)
Historical Translated algroup Business Pro forma Pro forma Alcan historical IAS to divestitures adjustments combined Algroup Cdn GAAP Note(5) Note(2) Note(1) Note(3) (reclassified) ------------- --------------- -------- ------------ ----------- --------- REVENUES Sales and operating revenues 3,987 2,639 - (100) - 6,526 Other income 55 45 - - - 100 ----- ----- ---- ---- --- ----- 4,042 2,684 - (100) - 6,626 COSTS AND EXPENSES Cost of sales and operating expenses 3,014 2,056 4 (85) - 4,989 Depreciation and amortization 230 97 1 (4) 55 O 379 Selling, administrative and general expenses 178 214 - (6) - 386 Research and development expenses 33 25 - (1) - 57 Interest 16 75 (1) - 15 P 105 Other expenses 54 16 - - - 70 ----- ----- ---- ---- --- ----- 3,525 2,483 4 (96) 70 5,986 Income before income taxes, other items and 517 201 (4) (4) (70) 640 amortization of goodwill Income taxes 192 54 6 (2) (26) Q 224 ----- ----- ---- ---- --- ----- Income before other items and amortization of 325 147 (10) (2) (44) 416 goodwill Equity income - 1 - - - 1 Minority interest 2 (3) - - - (1) ----- ----- ---- ---- --- ----- Net income from continuing operations before 327 145 (10) (2) (44) 416 amortization of goodwill Amortization of goodwill - 6 7 - 17 R 30 ----- ----- ---- ---- --- ----- Net income from continuing operations 327 139 (17) (2) (61) 386 Dividends on preference shares 5 - - - - 5 ----- ----- ---- ---- --- ----- Net income from continuing operations 322 139 (17) (2) (61) 381 attributable to common shareholders ===== ===== ==== ==== === ===== Earnings per common share before amortization of goodwill Basic N/A 1.24 Fully diluted N/A 1.23 Earnings per common share after amortization of goodwill Basic 1.48 1.16 Fully diluted 1.48 1.14 Weighted average of common share outstanding Basic 214,600,000 330,762,000 Fully diluted 220,100,000 334,234,000
The accompanying notes are an integral part of the unaudited pro forma combined financial statements 66 4 ALCAN ALUMINIUM LIMITED UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME FROM CONTINUING OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 (IN MILLIONS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS)
Translated algroup historical IAS to Business Pro forma Historical Algroup Cdn GAAP divestitures adjustments Pro forma Alcan (reclassified) Note(3) Note(5) Note(2) combined ---------- -------------- -------- ------------ ----------- ---------- REVENUES Sales and operating revenues 7,324 5,064 - (180) - 12,208 Other income 179 82 - - 261 ------ ----- --- ---- ---- ------- 7,503 5,146 - (180) - 12,469 COSTS AND EXPENSES Cost of sales and operating expenses 5,695 3,901 29 (152) 38 N 9,511 Depreciation and amortization 477 194 3 (7) 110 O 777 Selling, administrative and general expenses 375 425 - (12) - 788 Research and development expenses 67 43 - (2) - 108 Interest 76 153 (9) - 25 P 245 Other expenses 127 33 - - - 160 ------ ----- --- ---- ---- ------- 6,817 4,749 23 (173) 173 11,589 Income before income taxes, other items and amortization of goodwill 686 397 (23) (7) (173) 880 Income taxes 211 93 1 (3) (64) Q 238 ------ ----- --- ---- ---- ------- Income before other items and amortization of goodwill 475 304 (24) (4) (109) 642 Equity income ( loss) (1) 5 - - - 4 Minority interest (14) (5) - - - (19) ------ ----- --- ---- ---- ------- Net income from continuing operations before amortization of goodwill 460 304 (24) (4) (109) 627 Amortization of goodwill - 11 16 - 33 R 60 ------ ----- --- ---- ---- ------- Net income from continuing operations 460 293 (40) (4) (142) 567 Dividends on preference shares 9 - - - - 9 ------ ----- --- ---- ---- ------- Net income from continuing operations attributable to common shareholders 451 293 (40) (4) (142) 558 ====== ===== === ==== ==== ======= Earnings per common share before amortization of goodwill Basic N/A 1.86 Fully diluted N/A 1.85 Earnings per common share after amortization of goodwill Basic 2.06 1.69 Fully diluted 2.03 1.67 Weighted average of common shares outstanding Basic 219,100,000 330,762,000 Fully diluted 224,500,000 334,234,000
The accompanying notes are an integral part of the unaudited pro forma combined financial statements 67 5 The unaudited pro forma combined balance sheet as of June 30, 2000 gives effect to the Alcan and algroup combination and related transactions as if such transactions occurred on that date. The unaudited pro forma combined statements of income for the six-month period ended June 30, 2000 and for the year ended December 31, 1999 give effect to the Alcan and algroup combination and related transactions as if such transactions had occurred on January 1, 1999. Certain reclassifications have been made to the algroup historical financial statements to conform to the presentation to be used by Alcan. The combination has been accounted for using the purchase method of accounting. In accordance with Canadian GAAP, the purchase price is based on the market value of the Alcan common shares for a reasonable period of time before and after October 17, 2000, the date the transaction was consummated. The average price of the Alcan common shares for the five trading days beginning on October 13 and ending on October 19, 2000 was $30.11 per share. The total purchase price has been allocated to the tangible and intangible assets and liabilities acquired based upon their fair values determined with the assistance of independent appraisers. The purchase price allocation is preliminary, based on facts currently known to Alcan. However, Alcan management does not expect significant changes in the purchase price allocation. The final allocation of the purchase price will be based upon valuations and other studies including independent appraisals that have not been completed. It is expected that the appraisals will be completed in early January 2001. The excess of the purchase price over the fair market value of the net assets acquired will be treated as goodwill, to be amortized over 40 years. 69 6 For the purpose of the unaudited pro forma combined financial statements, the purchase price and goodwill have been determined as follows:
JUNE 30, 2000 -------------------- (In millions of US$) Purchase price Acquisition of algroup shares (see below) $3,497 Transaction costs (of which $ 21 is incurred and included in deferred charges and other assets) 43 ------ 3,540 Book value of net assets acquired 1,466 Less: Special dividend (562) Repayment of capital (375) Algroup's predecessor goodwill (284) ADD: Conversion of the convertible debentures into algroup common shares 1 ------ 246 Excess of purchase price over the book value of net assets acquired $3,294 ======
Allocation of the excess of the purchase price over the book value of the net assets acquired: Inventories $ 38 Property, plant and equipment 1,152 Intangible assets 548 Restructuring costs (principally severance costs) (80) Derivatives (200) Deferred income taxes (554) Goodwill 2,390 ------ $3,294 ======
70 7 The purchase price for algroup has been determined as follows:
Algroup shares outstanding 6,790,262 Conversion of convertible debentures 1,170 ------------ 6,791,432 Exchange ratio 17.1 ------------ Alcan shares issued 116,133,487 ============ Price per Alcan share $ 30.11 ============ Purchase price (in millions) $ 3,497 ============
The accompanying unaudited pro forma combined financial statements are based on and should be read in conjunction with the historical consolidated financial statements of Alcan and algroup for the year ended December 31, 1999 and for the six-month period ended June 30, 2000, including the notes thereto which are included with this filing. The pro forma adjustments are based upon available information and include certain assumptions and adjustments, which the management of Alcan believes to be reasonable. These adjustments are directly attributable to the combination and are expected to have a continuing impact on Alcan's business, results of operations and financial position. The unaudited pro forma combined financial statements do not give effect to any potential cost savings or other synergies that could result from the combination. Plans are currently in development to integrate the operations of Alcan and algroup. A preliminary estimate of costs related to the integration and to be included in the purchase price allocation is $80 million consisting principally of severance costs. To the extent that other integration costs are incurred and not accounted for as accrued liabilities at the date of consummation of the combination, a charge may result, which may be material. The amount of the charge cannot be quantified at this time, but is expected to be recognized in the period in which restructuring occurs. To the extent that integration costs are accounted for as accrued liabilities and included in the allocation of the purchase price consideration, the amount allocated to goodwill would increase, and pro forma net income from continuing operations would decrease. The unaudited pro forma combined financial statements are not necessarily indicative either of the results that actually would have been achieved if the transactions reflected therein had been effective during the periods presented or of the results which may be obtained in the future. 71 8 2. FOREIGN CURRENCY TRANSLATION The algroup historical consolidated balance sheet information and related Canadian GAAP pro forma and business divestiture adjustments as of June 30, 2000 have been translated into U.S. dollars at the June 30, 2000 rate of exchange of US$ 1 - CHF 1.63. The algroup historical consolidated statements of income information for the year ended December 31, 1999, and for the six-month period ended June 30, 2000 and related Canadian GAAP pro forma and business divestiture adjustments to the unaudited pro forma statements of income, have been translated at the average rates of exchange of US$ 1 - CHF 1.5023, and US$ 1 - CHF 1.6512, respectively. 3. DIFFERENCES BETWEEN INTERNATIONAL ACCOUNTING STANDARDS AND CANADIAN GAAP AS THEY APPLY TO ALGROUP Refer to note 35 of algroup's 1999 consolidated financial statements which are included with this filing for a description of differences between International Accounting Standards and Canadian GAAP as they apply to algroup. 4. UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS The following adjustments have been made to prepare the pro forma balance sheet and statements of income. Pro forma income statement adjustments are assumed to occur as of January 1, 1999. Pro forma balance sheet adjustments are assumed to occur on June 30, 2000. 72 9
JUNE 30, 2000 (In millions of US$) -------------------- A Repayment of capital on algroup common shares (181) ----- B Fair value allocation to inventories 38 ----- C Reversal of transaction costs included in deferred charges and other assets (21) Fair value allocation to intangible assets 548 ----- 527 ----- D Fair value allocation to property plant and equipment 1,152 ----- E Elimination of predecessor goodwill (284) Goodwill arising on acquisition 2,390 ----- 2,106 ----- F Deferred income taxes arising on fair value allocations using a tax rate of 38% 92 ----- G Fair value allocation to derivatives 200 Accrued restructuring costs 80 Accrued transaction costs -- Alcan 22 ----- 302 ----- H Repayment of capital on algroup common shares 194 Special dividend on algroup common shares 562 ------ 756 ------
73 10
JUNE 30, 2000 (In millions of US$) -------------------- I Conversion of convertible debentures to algroup common shares (1) J Deferred income taxes on fair value allocations using a tax rate of 38% 646 ------ K Issuance of Alcan Common Shares 3,497 Conversion of convertible debentures to algroup common shares 1 Repayment of capital on algroup common shares (375) Elimination of algroup common shares residual value after conversion of the Convertible debentures, and repayment of capital on algroup common shares (43) ------ 3,080 ------ L Special dividend on algroup common shares (562) Elimination of algroup's residual retained earnings (492) ------ (1,054) ------ M Elimination of algroup deferred translation adjustment 5 ------
74 11
SIX-MONTH ENDED YEAR ENDED JUNE 30, 2000 DECEMBER 31, 1999 (In millions of US$) ------------- ----------------- N Fair value allocation to inventories charged to cost of sales and operating expenses - 38 --- --- O Depreciation of fair value allocation to property, plant and equipment and amortization of fair value allocation to intangible assets over 17 years and 13 years, respectively 55 110 --- --- P Reduction in interest expense re: convertible debentures - (8) (using an interest rate of 4 %) Reduction in interest expense re: repayment of amount owed by Lonza Group Ltd. (using an interest rate of 4 %) (3) (7) Increase in interest expense re: special dividend and repayment of capital using an interest rate of 4 % 18 40 --- --- 15 25 --- --- Q Income taxes recovery at 38 % on items included in items N,O and P 26 64 --- --- R Amortization of goodwill over 40 years 30 60 Elimination of predecessor goodwill amortization (13) (27) --- --- 17 33 --- ---
75 12 5. BUSINESS DIVESTITURES Pursuant to the European Commission's decision to authorize the combination, Alcan agreed to divest the following algroup businesses: o the alumina trihydrate plant at Martinswerk, Germany; o the Star lithographic sheet mill at Bridgenorth, United Kingdom; and, o certain machines producing semi-rigid aluminum containers. These divestitures are required to be completed by March 31, 2001. The unaudited pro forma combined financial statements have been adjusted to record the impact of these divestitures. The net assets to be divested have been included in Deferred charges and other assets in the unaudited pro forma combined balance sheet and the results of operations from these assets have been removed from the unaudited pro forma statements of income. 6. U.S. GAAP Under U.S. GAAP, pro forma combined common shareholders' equity as at June 30, 2000 would be $9,018, pro forma combined net income for the year ended December 31, 1999 and for the six-month period ended June 30, 2000 would be $411 million and $427 million, respectively. Basic combined pro forma earnings per share for the year ended December 31, 1999 and the six-month period ended June 30, 2000 would be $1.27 and 1.31, respectively. Refer to Note 5 of the Alcan consolidated financial statements included in Alcan's most recent 10-K for a description of the differences between Canadian and U.S. GAAP as they apply to Alcan. Refer to Note 35 of algroup's 1999 consolidated financial statements which are included with this filing for a description of the differences between IAS and U.S. GAAP as the apply to algroup. The disclosure of net income before amortization of goodwill in the income statements is not permitted under U.S. GAAP. 76