-----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, AQ4dU5UJoFgFrVUYq5unvQzwIfeKCFNJqLQ88tVbIxPXODZGudt3JqKLPih25xRb sidNyDnWM5Pd3XaQbezjuA== 0000950123-01-508276.txt : 20020410 0000950123-01-508276.hdr.sgml : 20020410 ACCESSION NUMBER: 0000950123-01-508276 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALCAN INC CENTRAL INDEX KEY: 0000004285 STANDARD INDUSTRIAL CLASSIFICATION: PRIMARY PRODUCTION OF ALUMINUM [3334] IRS NUMBER: 000000000 STATE OF INCORPORATION: A6 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03677 FILM NUMBER: 1782344 BUSINESS ADDRESS: STREET 1: 1188 SHERBROOKE ST WEST CITY: MONTREAL QUEBEC CANA STATE: A8 ZIP: 00000 BUSINESS PHONE: 5148488000 MAIL ADDRESS: STREET 1: 1188 SHERBROOKE STREET WEST CITY: MONTREAL QUEBEC CANA STATE: A8 ZIP: 00000 FORMER COMPANY: FORMER CONFORMED NAME: ALCAN ALUMINIUM LTD /NEW DATE OF NAME CHANGE: 19930519 FORMER COMPANY: FORMER CONFORMED NAME: ALUMINUM CO OF CANADA LTD DATE OF NAME CHANGE: 19870728 10-Q 1 m20214e10-q.txt ALCAN INC. ================================================================================ 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 SEPTEMBER 30, 2001 Commission file number 1-3677 ALCAN INC. (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 September 30, 2001, the registrant had 320,844,342 shares of common stock (without nominal or par value) outstanding. ================================================================================ 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 Inc. and, where applicable, one or more consolidated subsidiaries. ITEM 1. FINANCIAL STATEMENTS ALCAN INC. INTERIM CONSOLIDATED STATEMENT OF INCOME (unaudited)
- ----------------------------------------------------------------------------------------- Periods ended September 30 Third Quarter Nine Months ------------------ ----------------- (in millions of US$, except per share amounts) 2001 2000 2001 2000 ------- ------- ------- ------- SALES AND OPERATING REVENUES $ 3,157 $ 1,979 $ 9,589 $ 5,966 COSTS AND EXPENSES Cost of sales and operating expenses 2,484 1,530 7,535 4,544 Depreciation and amortization 204 120 604 350 Selling, administrative and general expenses 136 89 407 267 Research and development expenses 31 15 98 48 Interest (note 11) 70 12 190 28 Other (income) expenses - net (note 7) (3) 2 117 1 ------- ------- ------- ------- 2,922 1,768 8,951 5,238 ------- ------- ------- ------- Income before income taxes and other items 235 211 638 728 Income taxes (note 4) 67 34 226 226 ------- ------- ------- ------- Income before other items 168 177 412 502 Equity income (loss) (1) 4 2 4 Minority interests 3 - 3 2 ------- ------- ------- ------- NET INCOME BEFORE AMORTIZATION OF GOODWILL $ 170 $ 181 $ 417 $ 508 Amortization of goodwill 19 - 55 - ------- ------- ------- ------- NET INCOME $ 151 $ 181 $ 362 $ 508 Dividends on preference shares 2 2 6 7 ------- ------- ------- ------- NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 149 $ 179 $ 356 $ 501 ------- ------- ------- ------- NET INCOME PER COMMON SHARE BEFORE AMORTIZATION OF GOODWILL (BASIC AND DILUTED) (NOTE 2) $ 0.52 $ 0.85 $ 1.28 $ 2.33 Amortization of goodwill per common share 0.06 - 0.17 - ------- ------- ------- ------- NET INCOME PER COMMON SHARE (BASIC AND DILUTED) (NOTES 2 AND 5) $ 0.46 $ 0.85 $ 1.11 $ 2.33 ------- ------- ------- ------- DIVIDENDS PER COMMON SHARE $ 0.15 $ 0.15 $ 0.45 $ 0.45 ------- ------- ------- -------
The accompanying notes are an integral part of the interim financial statements. 1 ALCAN INC. INTERIM CONSOLIDATED STATEMENT OF RETAINED EARNINGS (unaudited) - --------------------------------------------------------------------------------
Nine months ended September 30 (in millions of US$) 2001 2000 ------ ------ RETAINED EARNINGS - BEGINNING OF PERIOD $ 4,290 $ 4,227 Net income 362 508 Amount related to common shares purchased for cancellation (note 13) - (299) Dividends - Common (143) (98) - Preference (6) (7) ------- ------- RETAINED EARNINGS - END OF PERIOD $ 4,503 $ 4,331 ======= =======
The accompanying notes are an integral part of the interim financial statements. 2 ALCAN INC. INTERIM CONSOLIDATED BALANCE SHEET (unaudited for 2001) - --------------------------------------------------------------------------------
(in millions of US$) September 30, December 31, 2001 2000 ----------- ------------ ASSETS CURRENT ASSETS Cash and time deposits $ 223 $ 261 -------- -------- Receivables 2,321 2,280 Inventories - Aluminum operating segments - Aluminum 943 1,034 - Raw materials 435 414 - Other supplies 287 268 -------- -------- 1,665 1,716 - Packaging operating segment 426 399 -------- -------- 2,091 2,115 -------- -------- TOTAL CURRENT ASSETS 4,635 4,656 -------- -------- Deferred charges and other assets 717 719 Property, plant and equipment Cost (excluding Construction work in progress) 15,835 14,807 Construction work in progress 885 1,979 Accumulated depreciation (6,861) (6,753) -------- -------- 9,859 10,033 -------- -------- Intangible assets, net of accumulated amortization of $22 in 2001 and $5 in 2000 312 330 Goodwill, net of accumulated amortization of $72 in 2001 and $17 in 2000 (note 9) 2,947 2,669 -------- -------- Total assets $ 18,470 $ 18,407 ======== ========
The accompanying notes are an integral part of the interim financial statements. 3 ALCAN INC. INTERIM CONSOLIDATED BALANCE SHEET (CONT'D) (unaudited for 2001) - --------------------------------------------------------------------------------
(in millions of US$, except per share amounts) September 30, December 31, 2001 2000 ----------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Payables $ 2,198 $ 2,427 Short-term borrowings 914 1,080 Debt maturing within one year 81 333 -------- -------- 3,193 3,840 -------- -------- Debt not maturing within one year (note 10) 3,787 3,195 Deferred credits and other liabilities 876 874 Deferred income taxes 1,187 1,227 Minority interests 145 244 SHAREHOLDERS' EQUITY Redeemable non-retractable preference shares 160 160 Common shareholders' equity Common shares 4,655 4,597 Retained earnings 4,503 4,290 Deferred translation adjustments (36) (20) -------- -------- 9,122 8,867 -------- -------- 9,282 9,027 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 18,470 $ 18,407 ======== ======== COMMON SHAREHOLDERS' EQUITY PER COMMON SHARE $ 28.43 $ 27.89 -------- -------- RATIO OF TOTAL BORROWINGS TO EQUITY 34:66 33:67 -------- --------
The accompanying notes are an integral part of the interim financial statements. 4 ALCAN INC. INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) - ----------------------------------------------------------------------------------------------------------- Periods ended September 30 Third Quarter Nine months (in millions of US$) ---------------- ---------------- 2001 2000 2001 2000 ---- ----- ---- ---- OPERATING ACTIVITIES Net income $ 151 $ 181 $ 362 $ 508 Adjustments to determine cash from operating activities: Depreciation and amortization 223 120 659 350 Deferred income taxes 9 12 (1) 77 Equity income - net of dividends 1 (4) (1) (3) Change in operating working capital Change in receivables (79) 135 (41) (34) Change in inventories 14 (89) 24 (121) Change in payables (28) (77) (229) 70 Change in operating working capital due to: Deferred translation adjustments 73 (32) (11) (61) Acquisitions, disposals and consolidations/deconsolidations -- -- (58) (44) ----- ----- ----- ----- (20) (63) (315) (190) Change in deferred charges, other assets, deferred credits and other liabilities - net 9 (25) (68) 5 Loss (gain) on sales of businesses - net -- 1 122 (9) Other - net 2 25 12 11 ----- ----- ----- ----- CASH FROM OPERATING ACTIVITIES $ 375 $ 247 $ 770 $ 749 ----- ----- ----- -----
The accompanying notes are an integral part of the interim financial statements. 5 ALCAN INC. INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS (CONT'D) (unaudited)
- --------------------------------------------------------------------------------------------------------- PERIODS ENDED SEPTEMBER 30 Third Quarter Nine months (in millions of US$) ------------------ ------------------ 2001 2000 2001 2000 ------- ------- ------- ------- FINANCING ACTIVITIES New debt $ 9 $ 633 $ 1,828 $ 634 ------- ------- ------- ------- Debt repayments (170) (54) (1,476) (324) ------- ------- ------- ------- (161) 579 352 310 Short-term borrowings - net 131 (228) (143) 171 Common shares purchased for cancellation -- (230) -- (363) Common shares issued 1 2 58 18 Dividends - Alcan shareholders (including preference) (50) (35) (149) (105) - Minority interests (1) (2) (2) (2) ------- ------- ------- ------- CASH FROM (USED FOR) FINANCING ACTIVITIES (80) 86 116 29 ------- ------- ------- ------- INVESTMENT ACTIVITIES Property, plant and equipment (232) (328) (729) (975) Business acquisitions -- (401) (200) Net proceeds from disposal of businesses, investments and other assets 12 -- 206 173 ------- ------- ------- ------- CASH USED FOR INVESTMENT ACTIVITIES (220) (328) (924) (1,002) ------- ------- ------- ------- Effect of exchange rate changes on cash and time deposits 10 (2) -- (5) ------- ------- ------- ------- INCREASE (DECREASE) IN CASH AND TIME DEPOSITS 85 3 (38) (229) Cash of companies consolidated -- -- -- 5 Cash and time deposits - beginning of period 138 88 261 315 ------- ------- ------- ------- Cash and time deposits - end of period $ 223 $ 91 $ 223 $ 91 ======= ======= ======= =======
The accompanying notes are an integral part of the interim financial statements. 6 ALCAN INC. INTERIM INFORMATION BY OPERATING SEGMENT (unaudited) - --------------------------------------------------------------------------------
Periods ended September 30 (in millions of US$) SALES AND OPERATING REVENUES - INTERSEGMENT Third Quarter Nine Months ------------------- ------------------- 2001 2000 2001 2000 ------ ------ ------ ------ Primary Metal $ 524 $ 374 $ 1,730 $ 1,164 Aluminum Fabrication, Americas and Asia 35 22 132 64 Aluminum Fabrication, Europe 53 65 187 202 Packaging 15 16 49 44 Intersegment and other (627) (477) (2,098) (1,474) ------- ------- ------- ------- $ - $ - $ - $ - ======= ======= ======= =======
SALES AND OPERATING REVENUES - THIRD PARTIES Third Quarter Nine Months ------------------- ------------------- 2001 2000 2001 2000 ------ ------ ------ ------ Primary Metal $ 768 $ 403 $ 2,188 $1,289 Aluminum Fabrication, Americas and Asia 939 1,024 2,924 2,980 Aluminum Fabrication, Europe 720 379 2,274 1,175 Packaging 724 168 2,185 505 Other 6 5 18 17 ------- ------- ------ ------ $ 3,157 $ 1,979 $ 9,589 $5,966 ======= ======= ======= ======
EBITDA Third Quarter Nine Months ------------------- ------------------- 2001 2000 2001 2000 ------ ------ ------ ------ Primary Metal $ 276 $ 194 $ 913 $ 696 Aluminum Fabrication, Americas and Asia 87 95 258 249 Aluminum Fabrication, Europe 30 33 155 110 Packaging 86 9 264 25 ------- ------- ------- ------ EBITDA from operating segments 479 331 1,590 1,080 Depreciation and amortization (204) (120) (604) (350) Intersegment and other * 46 25 (107) 63 Corporate office (17) (9) (49) (33) Interest (70) (12) (190) (28) Income taxes (67) (34) (226) (226) Minority interests 3 -- 3 2 ------- ------- ------- ------ NET INCOME BEFORE AMORTIZATION OF GOODWILL $ 170 $ 181 $ 417 $ 508 ------- ------- ------- ------ NET INCOME AFTER AMORTIZATION OF GOODWILL $ 151 $ 181 $ 362 $ 508 ------- ------- ------- ------
* Included in Intersegment and other is a pre-tax loss on the sale of the Jamaican bauxite and alumina operations of $123 for nine months, 2001. 7 ALCAN INC. NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS September 30, 2001 (Unaudited) (in millions of US$, except per share amounts) 1. ACCOUNTING POLICIES The unaudited interim consolidated financial statements are based upon accounting policies and methods of their application consistent with those used and described in our annual financial statements, except for the accounting change described in note 2. The interim financial statements do not include all of the financial statement disclosures included in the annual financial statements prepared in accordance with Canadian generally accepted accounting principles (GAAP) and therefore should be read in conjunction with the most recent annual financial statements. - -------------------------------------------------------------------------------- 2. ACCOUNTING CHANGE In the first quarter of 2001, the Company adopted the new recommendations of the Canadian Institute of Chartered Accountants dealing with earnings per share. The standard requires the disclosure of the calculation of basic and diluted earnings per share and the use of the treasury stock method for calculating the dilutive impact of stock options. There was no impact on the diluted net income per common share, both before and after amortization of goodwill, for each period presented. - -------------------------------------------------------------------------------- 3. RECONCILIATION OF CANADIAN AND U.S. GAAP Differences relate principally to accounting for foreign currency translation, derivatives and "available for sale" securities. Beginning in 2001, the Company is required to adopt, for supplementary U.S. GAAP reporting purposes only, Financial Accounting Standards Board (FASB) Statements 133 and 138. These standards require that all derivatives be recorded in the financial statements and valued at market. However, the Company has elected not to adopt the FASB's optional hedge accounting provisions. Accordingly, for U.S. GAAP reporting purposes only, beginning in 2001, unrealized gains and losses resulting from the valuation of derivatives at market value are recognized in net income as the gains and losses arise and not concurrently with the recognition of the transactions being hedged. In its primary Canadian GAAP financial statements, the Company continues to recognize the gains and losses on derivative contracts in income concurrently with the recognition of the transactions being hedged. Upon initial adoption of the FASB standards in the first quarter of 2001, the cumulative effect of the accounting change results in a decrease in net income of $12. 8 3. RECONCILIATION OF CANADIAN AND U.S. GAAP (cont'd)
Third Quarter Nine Months ----------------------------------- ------------------------------------ 2001 2000 2001 2000 ------------- -------------- -------------- -------------- $ per $ per $ per $ per Common Common Common Common $ Share $ Share $ Share $ Share --- ----- --- ------ --- ------ --- ------ Net income - as reported 151 181 362 508 Differences due to: Foreign currency translation (2) (2) (4) (6) Valuation of derivatives (45) - (79) - Other - - 5 - --- --- --- --- Net income from continuing operations before cumulative effect of accounting change - U.S. GAAP 104 179 284 502 Cumulative effect on prior years of accounting change - - (12) - --- --- --- --- Net income - U.S. GAAP 104 179 272 502 --- --- --- --- Net income attributable to common shareholders - as reported 149 0.46 179 0.85 356 1.11 501 2.33 --- ---- --- ---- --- ---- --- ---- Net income attributable to common shareholders from continuing operations before cumulative effect of accounting change - U.S. GAAP 102 0.32 176 0.84 278 0.87 495 2.30 --- ---- --- ---- --- ---- --- ---- Net income attributable to common shareholders - U.S. GAAP 102 0.32 176 0.84 266 0.83 495 2.30 --- ---- --- ---- --- ---- --- ----
Third Quarter --------------------------------------------------------------------- 2001 2000 ------------------------------------ ----------------------------- As reported U.S. GAAP As reported U.S. GAAP ----------- --------- ----------- --------- Deferred charges and other assets - September 30 $ 717 $ 707 $ 530 $ 532 Payables - September 30 $ 2,198 $ 2,313 $ 1,338 $ 1,338 Deferred income taxes - September 30 $ 1,187 $ 1,143 $ 785 $ 785 Retained earnings - September 30 $ 4,503 $ 4,447 $ 4,331 $ 4,371 Deferred translation adjustments (DTA) - September 30 $ (36) $ (92) $ (132) $ (188)
Third Quarter Nine Months ----------------------------- ----------------------------- 2001 2000 2001 2000 -------------- ------------ ------------ ----------- COMPREHENSIVE INCOME (U.S. GAAP ONLY) Net income $ 104 $ 179 $ 272 $ 502 Net change in deferred translation adjustments 185 (38) (16) (56) Net change in market value of available-for-sale securities (7) (3) 4 (1) ------ ------ ------ ----- Comprehensive income $ 282 $ 138 $ 260 $ 445 ====== ====== ====== =====
9 3. RECONCILIATION OF CANADIAN AND U.S. GAAP (cont'd)
Nine Months ACCUMULATED OTHER COMPREHENSIVE ------------------ INCOME (U.S. GAAP ONLY) 2001 2000 ---- ---- Accumulated other comprehensive income - beginning of year $(61) $(113) Change in deferred translation adjustments (16) (56) Change in excess of market value over book value of available-for-sale securities 4 (1) ---- ----- Accumulated other comprehensive income - September 30 $(73) $(170) ==== =====
- -------------------------------------------------------------------------------- 4. INCOME TAXES
Third Quarter Nine Months --------------- ------------------ 2001 2000 2001 2000 ---- ---- ---- ---- Current $58 $22 $227 $149 Deferred 9 12 (1) 77 --- --- ---- ---- $67 $34 $226 $226 === === ==== ====
The composite of the applicable statutory corporate income tax rates in Canada is 40.1% (40.3% for 2000). The difference between income taxes calculated at the composite rate and the amounts shown as reported is primarily attributable to lower tax rates in foreign jurisdictions and translation gains on the revaluation of deferred tax balances, partially offset by unrecorded tax benefits on losses. In 2000, the difference is primarily attributable to prior years' tax adjustments, investment and other allowances and the effect of the reduced corporate income tax rate in Germany. - -------------------------------------------------------------------------------- 5. NET INCOME PER COMMON SHARE Net income per common share is based on the average number of shares outstanding during the period (third quarter 2001: 320.8 million; 2000: 210.3 million; nine months 2001: 319.5 million; 2000: 215.3 million). As at September 30, 2001, there were 320,844,342 common shares outstanding. The following table outlines the calculation of basic and diluted net income per common share.
Third Quarter Nine Months ----------------- ----------------- 2001 2000 2001 2000 ---- ---- ---- ---- Numerator for basic and diluted net income per common share $ 149 $ 179 $ 356 $ 501 ===== ===== ===== ===== Denominator: Denominator for basic net income per common share - weighted average of outstanding shares (in millions) 321 210 320 215 Effect of dilutive stock options (in millions) 1 1 1 1 ----- ----- ----- ----- Denominator for diluted net income per common share - adjusted weighted average of outstanding shares (in millions) 322 211 321 216 ===== ===== ===== ===== Net income per common share (basic and diluted) $0.46 $0.85 $1.11 $2.33 ===== ===== ===== =====
10 6. SUPPLEMENTARY INFORMATION
STATEMENT OF CASH FLOWS Third Quarter Nine Months ----------------- ---------------- 2001 2000 2001 2000 ---- ---- ---- ---- Interest paid $ 91 $ 35 $252 $ 95 Income taxes paid $ 28 $ 20 $187 $135
- ------------------------------------------------------------------------------- 7. SALE OF THE JAMAICAN OPERATIONS Effective May 31, 2001, the Company completed the sale of its Jamaican operations. Proceeds from the sale were $153. The total pre-tax loss on the sale was $123 which was recorded in Other (income) expenses - net. An amount of $90 was recorded as an impairment charge in the first quarter with the remaining amount charged in the second quarter. - ------------------------------------------------------------------------------- 8. SALE OF ASSETS PURSUANT TO THE EUROPEAN COMMISSION REQUIREMENTS RELATED TO THE MERGER The following transactions were completed in the second quarter of 2001 as part of the divestment requirements imposed by the European Commission as a condition to its approval of the merger between Alcan and Alusuisse Group Ltd in October 2000. o The Company sold its alumina specialties production plant, Martinswerk, located in Bergheim, Germany. o The Company sold a number of foil container manufacturing assets in Spain and Germany. o The Company sold its lithographic sheet production plant, Star Litho, located in Bridgnorth, United Kingdom. The Company received proceeds of approximately $35 from these sales. - ------------------------------------------------------------------------------- 11 9. ACQUISITION OF 30% OF GOVE ALUMINA REFINERY In the first quarter of 2001, the Company acquired the remaining 30% of the Gove alumina refinery and related bauxite mine at a cost of $379, subject to certain post-closing adjustments. As a result of this transaction, the Company now owns 100% of these assets. The acquisition is accounted for using the purchase method of accounting. The purchase price was allocated in the accounts based on the assigned fair values of the assets acquired and liabilities assumed as follows: Working capital $ 17 Property, plant and equipment 172 ---- 189 Other liabilities - net 41 Long-term debt 1 ---- 42 ---- Fair value of net assets $147 ====
The difference between the total purchase price and the net fair value of all identifiable assets and liabilities acquired was $232 and is accounted for as goodwill, which is being amortized over a period of 40 years using the straight-line method of amortization. - ------------------------------------------------------------------------------- 10. LONG TERM DEBT In the second quarter of 2001, the Company issued Euro 600 million of 5.5% Euro notes due 2006. During the first quarter of 2001, the Company issued $400 of 6.45% debentures due 2011 and $400 of 7.25% debentures due 2031. - ------------------------------------------------------------------------------- 11. CAPITALIZATION OF INTEREST COSTS Total interest costs in the third quarter and nine months were $72 and $220 (2000 : $34 and $84) respectively of which $2 and $30 (2000 : $22 and $56) were capitalized. - ------------------------------------------------------------------------------- 12. PRIOR PERIOD AMOUNTS Certain prior period amounts have been reclassified to conform with the 2001 presentation. - ------------------------------------------------------------------------------- 13. SHARE REPURCHASE PROGRAM Under a normal course issuer bid, which terminated on June 18, 2001, the Company was authorized to repurchase up to 21,800,000 common shares, representing approximately 10% of the outstanding shares. In 2001, nil common shares were purchased under this authorization. In the third quarter and nine months of 2000, 6,938,100 common shares and 11,238,100 common shares, respectively, were purchased under this authorization. 12 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. 13 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The Company reports third quarter consolidated net income, excluding non-recurring items and foreign currency translation effects, of US$121 million (US$0.37 per share) compared to US$141 million (US$0.66 per share) in the third quarter of 2000 and US$128 million (US$0.41 per share) in the second quarter of 2001. Including non-recurring items and foreign currency translation effects, net income for the quarter was US$151 million (US$0.46 per share) compared to US$181 million (US$0.85 per share) a year earlier and to US$74 million (US$0.23 per share) in the previous quarter. For the first nine months of 2001, earnings per share, excluding non-recurring items and foreign currency translation effects, were US$1.29 per share compared to US$2.06 per share during the first nine months of 2000. On an as reported basis, earnings per share were US$1.11 compared to US$2.33 for the comparable period of 2000. The Company expects business conditions to continue to be challenging. However, the Company considers itself to be well positioned given its sound financial situation, the positive contribution from the new smelter in Alma, which has now reached full operating capacity, and the impact of earnings improvement measures presently in place. In addition, the Company is implementing a restructuring program aimed at safeguarding its competitiveness. The restructuring program is expected to have a positive impact of approximately US$200 million on annual pre-tax earnings when fully implemented. The Company expects that the total costs associated with implementing this program will amount to approximately US$250 million. Most of these one-time costs are expected to be provided for during the fourth quarter of 2001. 14 CONSOLIDATED REVIEW
(US$ millions, unless otherwise noted) Third Quarter Nine Months Second Quarter ------------------- -------------------- -------------- 2001 2000 2001 2000 2001 ---- ---- ---- ---- ---- SALES & OPERATING REVENUES 3,157 1,979 9,589 5,966 3,162 Shipments (thousands of tonnes) Ingot products 1 368 203 992 600 328 Rolled products 474 463 1,486 1,377 493 Conversion of customer-owned metal 84 87 262 252 87 Aluminum used in engineered products & packaging 123 71 452 214 143 ----- ----- ---- ----- ----- TOTAL ALUMINUM VOLUME 1,049 824 3,192 2,443 1,051 Ingot product realizations (US$ per tonne) 1,575 1,726 1,623 1,718 1,628 Rolled product realizations (US$ per tonne) 2 2,379 2,420 2,412 2,434 2,409 Average London Metal Exchange 3-month price 1,405 1,587 1,493 1,580 1,511 (US$ per tonne) Net income excluding non-recurring items and foreign exchange translation 121 141 414 449 128 Non-recurring items -- 31 (87) 32 (17) Foreign exchange translation 30 9 35 27 (37) Net income including non-recurring items and foreign exchange translation 151 181 362 508 74 Economic Value Added (EVA(R)), excluding purchase accounting adjustments 3 8 36 88 119 14 Economic Value Added (EVA(R)), including purchase accounting adjustments 3 (111) N/A (268) N/A (110)
1 Includes primary and secondary ingot and scrap, as well as shipments resulting from metal trading activities 2 Excluding conversion of customer owned metal 3 Goodwill and asset revaluation related to the merger with algroup, as well as depreciation and amortization thereon Sales and operating revenues for the quarter were significantly higher than the year-ago quarter, due mainly to the merger with Alusuisse Group Ltd ("algroup"), which was completed in October 2000. This also explains the increase in total aluminum volume over the year-ago quarter. Compared to the preceding quarter, sales and operating revenues were essentially unchanged as lower aluminum selling prices and rolled product shipments were offset by higher shipments of alumina and ingot products. Total aluminum volume was 1,049 thousand tonnes (kt) in the quarter, compared to 824 kt a year earlier and to 1,051 kt in the preceding quarter. This includes shipments of ingot and rolled products, conversion of customer-owned metal, and aluminum used in engineered products and packaging. 15 Ingot products realizations of US$1,575 per tonne decreased by 9% from the year-ago quarter compared with a 11% decrease in the London Metal Exchange (LME) price. Compared to the previous quarter, ingot realizations decreased by 3% versus a 7% decline in the LME price, due mainly to the time lag of about one month in pricing ingot products to customers. Rolled products realizations of US$2,379 per tonne were 2% lower than in the prior-year and only 1% lower than in the previous quarter. For the quarter, net income of US$151 million was US$77 million higher than in the previous quarter. The US$77 million improvement was due mainly to favourable movements in quarter-end foreign currency exchange rates, and to the absence of a loss on disposal that was recorded in the previous quarter. The effect of these two items more than offset the impact of lower aluminum prices and weakening economic conditions during the quarter. During the quarter, EVA(R) excluding purchase accounting adjustments was $8 million compared to $14 million in the second quarter of this year. These adjustments relate to goodwill and asset revaluation arising from the algroup merger. Including purchase accounting adjustments, EVA was a negative US$111 million, essentially unchanged compared to the previous quarter. SEGMENT REVIEW
Third Quarter Nine Months Second Quarter ------------------ ------------------ --------------- (US$ millions) 2001 2000 2001 2000 2001 ---- ---- ---- ---- ---- EBITDA Primary Metal 276 194 913 696 287 Aluminum Fabrication, Americas and Asia 87 95 258 249 79 Aluminum Fabrication, Europe 30 33 155 110 60 Packaging 86 9 264 25 92 EBITDA from operating segments 479 331 1,590 1,080 518 Depreciation & amortization (204) (120) (604) (350) (204) Intersegment and other 46 25 (107) 63 (37) Corporate offices (17) (9) (49) (33) (18) Interest (70) (12) (190) (28) (65) Income taxes (67) (34) (226) (226) (101) Minority interests 3 -- 3 2 (1) Net income before goodwill amortization 170 181 417 508 92 Net income after goodwill amortization 151 181 362 508 74
16 SEGMENTS Third quarter earnings before interest, taxes, depreciation and amortization (EBITDA) for Primary Metal, at US$276 million, increased by 42% compared to the year-ago quarter, due mainly to higher shipments of ingot products and to the merger with algroup, which more than offset the effect of lower aluminum selling prices. Compared to the preceding quarter, EBITDA was 4% lower as a decrease in selling prices for ingot products and alumina more than offset the favourable change in foreign exchange balance sheet translation and lower production costs in Primary Metal. For Fabrication, Americas and Asia, EBITDA of US$87 million was 8% lower than in the previous year, mainly as a result of lower rolled product shipments in North America and Asia. Compared to the preceding quarter, EBITDA increased by 10%, due mainly to lower production costs in the North American sheet and cable businesses, offset in part by lower shipments of rolled products in all regions. For Fabrication, Europe, EBITDA, at US$30 million was US$3 million lower than in the previous year. Compared to the second quarter of 2001, EBITDA decreased by US$30 million, due mainly to lower rolled product shipments resulting from the weakening economic conditions and seasonal effects, and to higher production costs for rolled products. The Packaging group's EBITDA, at US$86 million, increased by US$77 million compared to the previous year, as a result of the merger with algroup. EBITDA was US$6 million lower than in the previous quarter, as the effect of lower sales volume and a non-recurring gain recorded in the second quarter were offset partly by manufacturing cost reductions, lower material costs and a more favourable sales mix. "Intersegment and other" includes the deferral or realization of profits on intersegment sales of aluminum as well as other non-operating items. The third quarter included a realization of previously deferred profits as aluminum prices and inventories declined during the quarter. The previous quarter included a US$33 million charge relating to the sale of the Company's operations in Jamaica. For the first nine months of 2001, excluding the currency revaluation of Canadian dollar deferred taxes and the tax effect of the business disposal in Jamaica, the Company's effective tax rate was 37%. LIQUIDITY AND CAPITAL RESOURCES OPERATING ACTIVITIES Cash generated from operating activities during the first nine months of 2001 was US$770 million compared to US$749 million in the comparable period of 2000. Higher cash generation was largely offset by an unfavourable change in operating working capital, most of which occurred during the first six months. FINANCING ACTIVITIES Cash from financing activities in the first nine months of 2001 was US$116 million compared to US$29 million in the same period in 2000. During the first nine months of this year, total net debt raised was US$209 million. This 17 includes 17 the issue in March 2001 of US$400 million of 6.45% debentures due 2011 and US$400 million of 7.25% debentures due 2031. The new debt was used mainly to purchase the remaining 30% interest in the Gove alumina refinery and related bauxite mine, and to fund the Alma smelter project. On 2 May 2001, the Company issued Euro 600 million of 5.5% Euro notes due 2006. Net proceeds from the sale of the Notes have been used to repay debt outstanding under bank credit facilities and commercial paper borrowings. The remaining debt repayments were made using cash from operating activities. The debt:equity ratio at September 30, 2001 was 34:66, unchanged compared to the end of the second quarter and 25:75 a year ago. Interest expense for the quarter, at US$70 million, was US$58 million higher compared to the previous year due to increased borrowings following the algroup merger, the investment to complete the new smelter in Alma, and the acquisition of the remaining 30% interest in the Gove alumina refinery and related bauxite mine. Interest expense was US$5 million higher than in the previous quarter as less interest was capitalized in relation to the new Alma smelter. INVESTMENT ACTIVITIES Capital expenditures during the first nine months of 2001 were US$729 million compared to US$975 million a year earlier. The most important project during the period was the construction of the Alma, Quebec aluminum smelter, which reached full operation on September 30, 2001. During the first quarter, the Company acquired the remaining 30% of the Gove alumina refinery and related bauxite mine at a cost of US$379 million, subject to certain post-closing adjustments. As a result of this transaction, the Company owns 100% of these assets. Effective May 31, 2001, the Company completed the sale of the Jamaican operations. Proceeds from the sale were US$153 million. In addition, during the second quarter of 2001, the Company completed the divestment requirements imposed by the European Commission in October 2000 as a condition to its approval of the merger between Alcan and Alusuisse Group Ltd. The Company received proceeds of approximately US$35 million from these sales. CURRENCY HEDGING OF AUSTRALIAN DOLLAR At September 30, 2001, the Company has hedged $AUD969 million of its future Australian dollar commitments in respect of its Australian dollar operating cost exposure, through forward exchange contracts and options maturing over the next three years. CAUTIONARY STATEMENT Readers are cautioned that forward looking statements contained in this Management's Discussion and Analysis should be read in conjunction with "Cautionary Statements for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995" at Exhibit No. 99.3. 18 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 (99.1) Alcan Inc. Stock Price Appreciation Unit Plan (99.2) Alcan Inc. 2001 Deferred Share Unit Plan for Non-Executive Directors (99.3) 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 No reports were filed during the quarter ended 30 September 2001. 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 INC. Dated: November 13, 2001 By: /s/ Richard Genest ---------------------------- Richard Genest Vice President and Controller (A Duly Authorized Officer) 19 EXHIBIT INDEX
Exhibit Number Description (99.1) Alcan Inc. Stock Price Appreciation Unit Plan (99.2) Alcan Inc. 2001 Deferred Share Unit Plan for Non-Executive Directors (99.3) Cautionary statement for purposes of the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995. (Filed herewith.)
20 EX-99.1 3 m20214ex99-1.txt ALCAN INC. STOCK PRICE APPRECIATION UNIT PLAN EXHIBIT NO. 99.1: ALCAN INC. STOCK PRICE APPRECIATION UNIT PLAN ALCAN INC STOCK PRICE APPRECIATION UNIT PLAN THE PLAN 1. PURPOSE The purposes of the Plan are to provide a means for encouraging key employees to obtain an increased proprietary interest in the enterprise and an additional incentive to further its growth and development and to assist the Company in retaining and attracting executives with experience and ability. The Plan provides for the granting to key employees of the Company and its Subsidiaries of Stock Price Appreciation Unit ("SPAU") on terms and subject to the conditions set forth in this Plan. The Committee which administers the Plan may determine in its sole discretion which employees of the Company and its Subsidiaries are eligible to be granted SPAUs. 2. DEFINITIONS "Alcan Group" means the Company together with its consolidated subsidiaries and other companies in which the Company owns, directly or indirectly, less than 50% of the voting stock but has significant influence over management; "Board of Directors" means the Board of Directors of the Company; "Committee" means those members of the Personnel Committee of the Board of Directors who are not employees of the Company or of any Subsidiary; "Common Share" or "Share" means a Common Share of the Company; "Company" means Alcan Inc; "Director" means a Director of the Company; "Effective Date" means the date on which a SPAU is granted or any subsequent date so designated by the Committee at the time the SPAU is granted; "Executive" means a person who has been or is to be granted a SPAU; "Majority Acquisition" means the acquisition by any person through an unsolicited take-over bid of more than 50% of the voting shares of the Company; "Majority Election" means any election of Directors at which any person who has made an unsolicited take-over bid succeeds (together with others) in obtaining the election of a majority of the members of the Board of Directors of his choice; "Market Value" means the average of the high and low prices of Shares on The Toronto Stock Exchange on the relevant day, or if two or more sales of Shares shall not have been reported for that day, on the next preceding day for which there have been two or more reported sales; 21 "Plan" means the Alcan Inc Stock Price Appreciation Unit Plan adopted by the Company on 27 of September 2001, as amended from time to time; "Retirement" means (unless otherwise determined by the Committee): (i) retirement in accordance with the provisions of those employee benefit plans of the Company or any Subsidiary covering the Executive, or (ii) if the Executive is not covered by any such plan, as determined by the Committee, or (iii) the placing of a terminated Executive on the Company's non-active payroll in order to permit such Executive to attain early retirement age. "SPAU" means a right to receive from the Company cash in an amount equal to the excess of the Market Value of a Share on the date of exercise of a SPAU over the Market Value of a Share as of the date of the grant of such SPAU; "SPAU Period" has the meaning set out in paragraph 7 below; "Subsidiary" means any company in which the Company owns, directly or indirectly, more than 50% of the voting stock; "Waiting Period" means a period of at least three months commencing on the Effective Date and such additional period, if any, as may be established by the Committee at the time of the grant of the SPAU, such additional period to be subject to such terms and conditions, including conditions for the earlier termination of such additional period, as the Committee may determine. 3. ADMINISTRATION The Plan shall be administered by the Committee. The Committee shall have full and complete authority to interpret the Plan and to prescribe such rules and regulations and make such other determinations as it deems necessary or desirable for the administration of the Plan. The Committee shall determine the grant of SPAU as set out in paragraph 5 below. 4. ELIGIBILITY In order to be eligible for the grant of SPAUs by the Committee as provided herein, a person must be an employee of the Company or one of its Subsidiaries. No member of the Committee shall be eligible to participate in the Plan nor shall have been eligible so to participate within the one-year period immediately prior to membership on the Committee. 22 5. GRANT OF SPAUS The Committee shall from time to time designate the Executives as well as the number of SPAUs to be covered by each grant and shall fix the Effective Date of the SPAU. Any Executive may hold more than one SPAU. 6. EXERCISE OF A SPAU A SPAU may be exercised in the manner prescribed by the Committee in whole at any time or in part from time to time during the SPAU Period or in such amounts and at such times during the SPAU Period as the Committee may determine. 7. SPAU PERIOD Each SPAU shall be exercisable by the Executive during a period ("SPAU Period") established by the Committee at the time the SPAU is granted which shall commence after the Waiting Period and shall terminate not later than ten years after the Effective Date, except that: 7.1 in the case of certain Executives who are, or may be deemed to be, insiders of the Company in accordance with any applicable law, the Waiting Period shall not be shorter than the period prescribed by such law; 7.2 subject to the SPAU Period stated above, the SPAU Period shall terminate not later than five years after the earlier of: (a) the death of the Executive, and (b) the Retirement of the Executive; and 7.3 the SPAU Period shall (unless otherwise determined by the Committee) terminate immediately upon the resignation of the Executive or other termination (except if paragraph 7.2 applies) of employment of the Executive by the Company. In the case of death, the Executive's estate shall have the right to exercise the SPAUs at any time with respect to all or from time to time with respect to any portion of the SPAUs which the Executive had not previously exercised. All rights under a SPAU unexercised in whole or in part at the termination of the SPAU Period shall be forfeited. 8. NON-ASSIGNABLE No SPAU or any interest therein shall be assignable by the Executive otherwise than by will or the laws of descent and distribution. During the life of the Executive, a SPAU shall be exercisable only by the Executive or the Executive's legal representative. 23 9. EFFECTS OF CERTAIN TRANSACTIONS In the event of any change in the outstanding Shares by reason of any stock dividend, stock split, recapitalization, merger, consolidation, combination or exchange of Shares or other similar corporate change, an equitable adjustment shall be made in the formula for determining cash payable upon the exercise of SPAUs. Such adjustment shall be made by the Committee and shall be conclusive and binding for all purposes of the Plan. 10. AMENDMENT AND TERMINATION The Board of Directors may at any time and from time to time amend, suspend or terminate the Plan in whole or in part. No such amendment, suspension or termination may, without the consent of the Executive to whom SPAUs shall theretofore have been granted, adversely affect the rights of such Executive. 11. CHANGE OF CONTROL Upon the occurrence of a Majority Acquisition or a Majority Election, all SPAUs shall become immediately exercisable and all Waiting Periods shall be waived, provided that Executives who are, or may be deemed to be, insiders of the Company in accordance with any applicable law shall be subject to such law. 12. INSIDERS Notwithstanding anything contained herein, if an Executive is, or becomes an insider of the Company for the purposes of any applicable law, the exercise of a SPAU is deemed, for the purposes of this Agreement and all aspects of the Executive's relationship with the Company, to be a disposal of a Share as if subject to trading restrictions under such law and corresponding Company's policies. 24 EX-99.2 4 m20214ex99-2.txt ALCAN INC. 2001 DEFERRED SHARE UNIT PLAN--N/E DIR EXHIBIT NO. 99.2: ALCAN INC. 2001 DEFERRED SHARE UNIT PLAN FOR NON-EXECUTIVE DIRECTORS. ALCAN INC. 2001 DEFERRED SHARE UNIT PLAN FOR NON-EXECUTIVE DIRECTORS ADOPTED WITH EFFECT FROM 1 APRIL 2001 25 1. PURPOSE AND DEFINITIONS 1.1 Purpose The purpose of this Plan is to enhance the Company's ability to attract and retain talented individuals to serve as members of the Board of Directors of the Company and to promote a greater alignment of interests between Members and the shareholders of the Company. 1.2 Definitions Unless the context indicates otherwise, the following terms have the following meanings: (a) "Account" means a book account maintained by the Company reflecting the Units credited to each Member pursuant to Article 4.1. (b) "Average Share Price" means the average of the closing sale prices for board lots for the Shares on The Toronto Stock Exchange and for record lots for the Shares as reported on the New York Stock Exchange - Consolidated Trading, on each day during the last five trading days prior to the date on which Units are awarded with respect to a Quarter pursuant to Articles 4.1.1 and 4.1.2, the dividend declaration date (pursuant to Article 4.1.3) or the redemption date (pursuant to Articles 4.2, 4.3 and 4.4, as applicable), any currency conversion being made at the Bank of Canada noon rate of exchange on the relevant day. (c) "Board" means the board of directors of the Company. (d) "Committee" means any committee of the Board and any successor committee (and includes the Personnel Committee). (e) "Company" means Alcan Inc. and any successor corporation whether by amalgamation, merger or otherwise. (f) "Director" means a director of the Company. (g) "Employee" means an employee (otherwise than in the capacity of a director) of the Company or of any company in which the Company holds more than fifty percent of the outstanding voting shares. (h) "Director's Annual Remuneration" means all amounts payable to a Non-Executive Director by the Company in respect of the services provided to the Company by the Non-Executive Director in a calendar year. (i) "Member" means an individual who joins the Plan in accordance with Article 3. (j) "Non-Executive Director" means a Director of the Company who is not an Employee. (k) "Personnel Committee" means the Personnel Committee of the Board and any successor committee. (l) "Plan" means this Alcan Inc. 2001 Deferred Share Unit Plan for Non-Executive Directors, as amended by the Board from time to time. 26 (m) "Quarter" means a period of three consecutive calendar months commencing on the first day of the months of January, April, July or October, as the case may be. (n) "Retirement Date" means the date on which a Member ceases to be a Director (subject to Article 4.5). (o) "Secretary" means the Secretary of the Company. (p) "Share" means a common share of the Company. (q) "Spouse" means the person, who, on the day preceding the death of a Member, is the person who has been designated in accordance with Article 5.1 of the Plan and who is legally married to the Member or, in the event the Member is not married, the person who qualifies as a spouse under the laws applying to the Plan. (r) "Unit" means a unit of measurement for record-keeping purposes under the Plan, and shall include fractional units. 2. CONSTRUCTION AND INTERPRETATION 2.1 The effective date of the Plan shall be 1 April, 2001. 2.2 The Plan shall be governed and interpreted in accordance with the laws of the Province of Quebec and the applicable laws of Canada. 2.3 If any provision of the Plan is determined to be void or unenforceable in whole or in part, such determination shall not affect the validity or enforcement of any other provision or part thereof. 2.4 Headings are for reference purposes only and do not limit or extend the meaning of the provisions of the Plan. 2.5 References to the masculine include the feminine; references to the singular shall include the plural and vice versa. 3. ELIGIBILITY MEMBERSHIP AND RETIREMENT 3.1 Every person who is a Non-Executive Director on 1 April, 2001 shall be eligible to become a Member as of that date. 3.2 Every person who becomes a Non-Executive Director after 1 April, 2001 shall be eligible to become a Member as of the date he becomes such a Director. 3.3 Upon becoming eligible to become a Member, the Director shall signify his intention of becoming a Member by signing a form prescribed for this purpose and delivering it to the Secretary. Membership in the Plan becomes effective upon receipt by the Secretary of such duly executed prescribed form. 3.4 Subject to Article 4.5, a Member shall be deemed to retire on the date he ceases to be a Director. 27 3.5 Nothing herein shall be deemed to give any Member the right to be retained as a Director of the Company. 4. BENEFITS 4.1 Calculation of Benefits 4.1.1 Annual Compensation of Non-Executive Directors Effective 1 April, 2001, each Member will receive his Director's Annual Remuneration payable quarterly for the Quarter commencing 1 April, 2001 and for each subsequent Quarter as follows: (a) 50% in Units; and (b) 50% in Units or cash, as elected by the Member pursuant to Article 4.1.2 Notwithstanding the provisions set out above in this Article 4.1.1, the Personnel Committee shall have the right, in its sole discretion, to require payment of a Member's Director's Annual Remuneration solely in cash or Units or a combination of cash and Units as determined by the Personnel Committee. Units granted to a Member pursuant to this Article 4.1.1 or Article 4.1.2 shall be credited to the Member's Account on the first day following the end of every applicable Quarter. The portion of Director's Annual Remuneration payable in cash in respect of a Quarter pursuant to this Article 4.1.1 shall be paid as soon as practicable after the last day of the applicable Quarter. The number of Units (including fractional Units) to be credited on each of the dates prescribed in this Article 4.1.1 shall be determined by dividing the amount of the Director's Annual Remuneration to be satisfied by Units on such date by the Average Share Price on such date. Any currency conversion required for the purposes of this Article 4.1 shall be made at the Bank of Canada noon rate of exchange on the relevant day. 4.1.2 Election to Receive Units To elect a form or forms of payment of Director's Annual Remuneration pursuant to Article 4.1.1(b) for the year in which this Plan becomes effective, the Member shall complete and deliver to the Secretary an initial written election by no later than 15 business days before the last day of the Quarter commencing on or immediately after the effective date of this Plan, respecting the Director's Annual Remuneration payable for such Quarter and the remaining Quarters for that year. To elect a change in the form of payment of Director's Annual Remuneration for subsequent years, the Member shall complete and deliver to the Secretary a new written election by no later than the last business day of the year preceding the first year in which the Director's Annual Remuneration to which such election applies becomes payable. The Member's election under this Article 4.1.2 should be in a form prescribed by the Personnel Committee and shall designate the percentage of his Director's Annual Remuneration that is (i) to be satisfied by Units, and (ii) to be paid in cash, such designation to be in whole percentages only. 28 In the absence of a new election made in accordance with this Article 4.1.2, the Member's election for the latest year with respect to the percentage of the Director's Annual Remuneration that is to be satisfied by Units and paid in cash shall continue to apply to all subsequent Director's Annual Remuneration payments payable pursuant to the Plan until the Member submits another written election in accordance with this Article 4.1.2. An election shall be irrevocable for the year commencing immediately following the date of the election and for any subsequent year unless the Member makes a new election in accordance with this Article 4.1.2 by the last business day of the year immediately prior to the year in respect of which the new election is intended to apply. If no election is made, and no prior election remains effective, or if the Member does not make an initial election in accordance with this Article 4.1.2, the Member shall be deemed to have elected the Director's Annual Remuneration payable to him pursuant to Article 4.1.1(b) to be paid in cash. 4.1.3 Dividends In respect of every cash dividend declared on the Shares, each Member's Account will be credited with an additional number of Units, determined as follows: Units held in each respective Account on dividend declaration date multiplied by a dollar amount equal to the dividend declared per Share divided by the Average Share Price. The credit of such additional Units shall be made on the dividend declaration date. 4.1.4 Certain Adjustments In the event of a reorganization, recapitalization, reclassification, stock split, stock dividend, combination of shares, merger, amalgamation or consolidation, or the sale, conveyance, lease or other transfer by the Company of all or substantially all of the assets of the Company, pursuant to any of which such events the then outstanding Shares are split or combined or changed into, become exchangeable at the holder's election for, or entitle the holder thereof to, other shares of stock, or any similar change in the Shares or other similar event, each Member's Account shall be adjusted in an equitable manner to reflect such change or other event. Such adjustment shall be made by the Personnel Committee and shall be conclusive and binding for all purposes of the Plan. Except as provided for in this Article, Members shall have no other rights as a result of any change in the Shares or of any other event. For greater certainty, no amount will be paid to, or in respect of, a Member under the Plan or pursuant to any other arrangement, and no additional Units will be granted to such Member to compensate for a downward fluctuation in the price of Shares, nor will any other form of benefit be conferred upon, or in respect of, a Member for such purpose. 29 4.2 Payment of Benefits on Retirement 4.2.1 On a Member's Retirement Date, the Member will be able to redeem the Units credited to his Account by filing a written notice of redemption with the Secretary, specifying a redemption date of at least 5 business days from the delivery of the said notice to the Company but no later that 15 December of the first calendar year commencing after the Director's Retirement Date. The Units credited to such Member's Account will then be multiplied by the Average Share Price on such redemption date. In any event, the payment of the Member's benefits under the Plan will take place no later than 31 December of the first calendar year commencing after the Director's Retirement Date. If a Member fails to advise the Company of his selection of a redemption date within the above-mentioned period, the redemption date shall be considered to be 15 December of the first calendar year commencing after the Director's Retirement Date. 4.2.2 The value of the redeemed Units shall be paid by the Company to the Member as soon as possible after the determination of the redemption date and the deduction of appropriate taxes and other required withholdings (if any), at the Member's option, in either: (a) cash, (b) Shares, or (c) a combination thereof. In the case of a payment in Shares, the Company will purchase the Shares on the open market, through a broker, on behalf of the Member. If, after the broker applies the value of a Member's Units to the purchase of whole Shares as provided in this Article 4.2.2, an amount remains payable under the Plan in respect of a Member, the Company shall pay such amount in cash, net of applicable withholdings, to the Member or the Member's spouse or legal representative, as applicable. 4.3 Benefits Before Retirement 4.3.1 Death In the event of death of a Member prior to the Retirement Date, the Spouse of such Member, or where there is no surviving Spouse, the Member's legal representative, shall be able to redeem the Units credited to the Member's Account by filing a written notice of redemption with the Secretary, specifying a redemption date of at least 5 business days from the delivery of the said notice to the Company but no later than 15 December of the first calendar year commencing after the death of the Member. The same conditions of payment will then apply to the Spouse (or the Member's legal representative, as the case may be) as they would have applied to the Member had he retired on that date. 30 4.4 Death After Retirement In the event that a Member dies after the Retirement Date, the Spouse of such Member, or where there is no surviving Spouse the Member's legal representative, shall, provided the Member had not already done so, be able to redeem the Units credited to the Member's Account by filing a written notice of redemption with the Secretary, specifying a redemption date of at least 5 business days from the delivery of the said notice to the Company but no later than 15 December of the first calendar year commencing after the death of the Member. The same conditions of payment will then apply to the Spouse (or the Member's legal representative, as the case may be) as they would have applied to the Member. 4.5 Suspension of Benefits upon becoming an Employee 4.5.1 Director becoming an Employee If a Member becomes an Employee but continues to be a Director, his membership in the Plan shall be suspended effective the date of the commencement of his employment and shall resume upon termination of such employment. If prior to the termination of his employment, such Employee Director ceases to be a Director, such Member will be deemed to retire on the date he ceases to be an Employee. 4.6 Taxes All benefits paid under the Plan or in respect of a Member who is not a resident of Canada to the extent attributable to services performed in Canada are subject to applicable tax legislation. 4.7 Currency 4.7.1 Unless Article 4.7.2 applies, all benefits under the Plan shall be determined in the same currency as the Director's Annual Remuneration. 4.7.2 A Member or his Spouse, or where there is no surviving Spouse the Member's legal representative, may request the Company to pay his benefits in a currency other than the designated currency under Article 4.7.1, in which event the currency conversion shall be made at the Bank of Canada noon rate of exchange on the day preceding the date of payment. 5. BENEFICIARIES AND CLAIMS FOR BENEFITS 5.1 Every Member, upon becoming a Member, shall advise the Secretary in writing of the name and address of his Spouse on a prescribed form. Every Member shall advise the Company of any change in such information. 5.2 In the event of death of a Member and provided that there is a surviving Spouse, the benefits under the Plan shall only be paid to the Spouse of such Member as named on the latest filing on the prescribed form which has been delivered to the Secretary. Where there is no surviving Spouse, the benefits under the Plan shall be paid to the Member's legal representative pursuant to Articles 4.3 and 4.4. 31 6. ADMINISTRATION 6.1 Unless otherwise determined by the Board, the Plan shall remain an unfunded obligation of the Company and all benefits payable to or in respect of Members under the Plan represent merely unfunded, unsecured promises of the Company to pay a sum of money to the Members in the future. 6.2 The Plan shall be administered by the Personnel Committee and any question regarding the proper administration of the Plan or the construction of any term of the Plan shall be resolved by the Personnel Committee, in its sole discretion. 6.3 The Plan may be amended or terminated at any time by the Board, except as to rights already accrued hereunder by the Members. Notwithstanding the foregoing, any amendment or termination of the Plan shall be such that the Plan continuously meets the requirements of paragraph 6801(d) of the regulations under the Income Tax Act (Canada) or any successor to such provision. 6.4 For the purpose of the above Article 6.3, the accrued right in respect of a Member prior to his Retirement Date shall be a right to receive benefits in accordance with the terms of the Plan up to but excluding the date of the amendment or termination of the Plan. 6.5 The Company shall keep accurate and detailed records of all transactions for all Accounts and provide quarterly benefit statements to Members. 6.6 All expenses associated with the establishment, maintenance and termination of this Plan shall be borne by the Company. 7. NON-ALIENATION 7.1 Except as provided for herein, no transfer by a Member of any right to any payment or benefit under the Plan, whether voluntary or involuntary, by operation of law or otherwise, and whether by means of alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind, shall vest the transferee with any interest or right, and any attempt to so alienate, sell, transfer, pledge, attach, charge or otherwise encumber any such amount, whether presently or thereafter payable shall be void and of no force or effect. 32 EX-99.3 5 m20214ex99-3.txt CAUTIONARY STATEMENT RE: SAFE HARBOR EXHIBIT NO. 99.3: 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 September 30, 2001, 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 actions or 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 for aluminum and other products, changes in the relative values of various currencies, 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, relationships with and financial and operating conditions of customers and suppliers, the effect of integrating acquired businesses and ability to obtain expected benefits 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. 33 -----END PRIVACY-ENHANCED MESSAGE-----