<PAGE> 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 MARCH 31, 1999
Commission file number 1-3677
ALCAN ALUMINIUM LIMITED
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
CANADA Inapplicable
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
</TABLE>
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 ____(check) No ____
At March 31, 1999, the registrant had 217,415,917 shares of common stock
(without nominal or par value) outstanding.
<PAGE> 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)
<TABLE>
<CAPTION>
Three months ended March 31
(IN MILLIONS OF US$, EXCEPT PER SHARE AMOUNTS) 1999 1998
------ ------
<S> <C> <C>
REVENUES
Sales and operating revenues $1,822 $1,953
Other income 19 18
------ ------
1,841 1,971
------ ------
COSTS AND EXPENSES
Cost of sales and operating expenses 1,468 1,497
Depreciation 118 110
Selling, administrative and general expenses 109 104
Research and development expenses 16 17
Interest 22 23
Other expenses 32 10
------ ------
1,765 1,761
------ ------
Income before income taxes and other items 76 210
Income taxes (note 2) 34 78
------ ------
Income before other items 42 132
Equity loss (2) (16)
Minority interests (2) 1
------ ------
NET INCOME $ 38 $ 117
Dividends on preference shares 3 3
------ ------
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 35 $ 114
------ ------
NET INCOME PER COMMON SHARE (note 3) $ 0.16 $ 0.50
------ ------
DIVIDENDS PER COMMON SHARE $ 0.15 $ 0.15
------ ------
</TABLE>
1
<PAGE> 3
ALCAN ALUMINIUM LIMITED
INTERIM CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Three months ended March 31
(IN MILLIONS OF US$) 1999 1998
------ ------
RETAINED EARNINGS - BEGINNING OF PERIOD $4,078 $3,862
Net income 38 117
Amount related to common shares
purchased for cancellation 171 --
Dividends - Common 33 34
- Preference 3 3
------ ------
RETAINED EARNINGS - END OF PERIOD $3,909 $3,942
------ ------
</TABLE>
2
<PAGE> 4
ALCAN ALUMINIUM LIMITED
INTERIM CONSOLIDATED BALANCE SHEET
(unaudited for 1999)
<TABLE>
<CAPTION>
(IN MILLIONS OF US$) MARCH 31 DECEMBER 31
1999 1998
-------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and time deposits $ 623 $ 615
Receivables 1,431 1,401
Inventories - Aluminum 749 826
- Raw materials 310 345
- Other supplies 216 242
------- -------
1,275 1,413
------- -------
TOTAL CURRENT ASSETS 3,329 3,429
------- -------
Deferred charges and other assets 492 517
Investments 44 58
Property, plant and equipment (note 4)
Cost (excluding Construction
work in progress) 11,074 11,758
Construction work in progress 1,053 911
Accumulated depreciation 6,391 6,772
------- -------
5,736 5,897
------- -------
TOTAL ASSETS $ 9,601 $ 9,901
------- -------
</TABLE>
3
<PAGE> 5
ALCAN ALUMINIUM LIMITED
INTERIM CONSOLIDATED BALANCE SHEET (cont'd)
(unaudited for 1999)
<TABLE>
<CAPTION>
(IN MILLIONS OF US$, MARCH 31 DECEMBER 31
EXCEPT PER COMMON SHARE AMOUNTS) 1999 1998
-------- -----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Payables $1,066 $1,104
Short-term borrowings 161 86
Income and other taxes 73 28
Debt maturing within one year 146 166
------ ------
1,446 1,384
------ ------
Debt not maturing within one year 1,499 1,537
Deferred credits and other liabilities 582 604
Deferred income taxes 727 747
Minority interests 111 110
SHAREHOLDERS' EQUITY
Redeemable non-retractable
preference shares 160 160
Common shareholders' equity
Common shares 1,207 1,251
Retained earnings 3,909 4,078
Deferred translation adjustments (40) 30
------ ------
5,076 5,359
Total shareholders' equity 5,236 5,519
------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $9,601 $9,901
------ ------
COMMON SHAREHOLDERS' EQUITY PER COMMON SHARE $23.35 $23.71
------ ------
RATIO OF TOTAL BORROWINGS TO EQUITY 25:75 24:76
------ ------
</TABLE>
4
<PAGE> 6
ALCAN ALUMINIUM LIMITED
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31
(IN MILLIONS OF US$) 1999 1998
------ ------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $38 $117
Adjustments to determine cash from
operating activities:
Depreciation 118 110
Deferred income taxes (3) 15
Equity loss - net of dividends 2 17
Change in operating working capital 39 (209)
Change in deferred charges,
other assets, deferred credits
and other liabilities - net 25 (41)
Loss (gain) on sales of businesses - net 4 --
Other - net 7 3
------ ------
CASH FROM OPERATING ACTIVITIES 230 12
------ ------
FINANCING ACTIVITIES
New debt 2 8
Debt repayments (26) (12)
------ -----
(24) (4)
Short-term borrowings - net 81 (65)
Common shares purchased for cancellation (219) --
Common shares issued 4 3
Dividends - Alcan shareholders
(including preference) (36) (37)
------ -----
CASH USED FOR FINANCING ACTIVITIES (194) (103)
------ -----
INVESTMENT ACTIVITIES
Property, plant and equipment (206) (130)
Investments -- (2)
Net proceeds from disposal
of businesses, investments and other assets 191 --
------ -----
CASH USED FOR INVESTMENT ACTIVITIES (15) (132)
Effect of exchange rate changes
on cash and time deposits (11) --
------ ------
INCREASE (DECREASE) IN CASH AND TIME DEPOSITS 10 (223)
Cash of companies deconsolidated (2) --
Cash and time deposits - beginning of period 615 608
------ ------
Cash and time deposits - end of period $623 $385
------ ------
</TABLE>
5
<PAGE> 7
ALCAN ALUMINIUM LIMITED
INFORMATION BY OPERATING SEGMENT *
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31
(IN MILLIONS OF US$)
SALES AND OPERATING REVENUES OPERATING INCOME
---------------------------- ----------------
INTERSEGMENT THIRD PARTIES
------------ -------------
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1999 1998 1999 1998
----- ----- ------ ------ ---- ----
Primary metal group $ 313 $ 373 $ 409 $ 490 $47 $169
Global fabrication
group - - 1,410 1,460 61 76
Intersegment and
other items (313) (373) 3 3 24 19
----- ----- ------ ------ ---- ----
$ - $ - $1,822 $1,953 $132 $264
----- ----- ------ ------ ---- ----
Reconciliation to Net income
Equity loss (2) (16)
Corporate offices (36) (30)
Interest (22) (23)
Income taxes (34) (78)
---- ----
Net income $ 38 $117
---- ----
</TABLE>
* In March 1999, the Company announced the creation of two global operating
segments, the Primary metal group and the Global fabrication group.
Comparative information for 1998 has been restated to conform to the new
corporate structure.
6
<PAGE> 8
ALCAN ALUMINIUM LIMITED
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
(IN MILLIONS OF US$, EXCEPT PER SHARE AMOUNTS)
1. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (GAAP)
Differences relate principally to accounting for foreign currency
translation and accounting for "available for sale" securities.
RECONCILIATION OF CANADIAN AND U.S. GAAP
<TABLE>
<CAPTION>
FIRST QUARTER
-------------
1999 1998
---- ----
AS U.S. AS U.S.
REPORTED GAAP REPORTED GAAP
-------- ---- -------- ----
<S> <C> <C> <C> <C>
Net income $ 38 $ 38 $ 117 $ 117
------ ------ ------ ------
Net income attributable
to common shareholders $ 35 $ 35 $ 114 $ 114
------ ------ ------ ------
Net income per common share
(basic and diluted) $ 0.16 $ 0.16 $ 0.50 $ 0.50
------ ------ ------ ------
Comprehensive income * n/a $ (28) n/a $ 111
------ ------ ------ ------
Deferred income taxes
- March 31 $ 727 $ 727 $ 703 $ 703
------ ------ ------ ------
Retained earnings
- March 31 $3,909 $3,960 $3,942 $3,975
------ ------ ------ ------
Deferred translation
adjustments - March 31 $ (40) $ (94) $ 37 $ (3)
------ ------ ------ ------
</TABLE>
* U.S. GAAP requires the disclosure of comprehensive income which, for
the Company, is Net income under U.S. GAAP plus the movement in
Deferred translation adjustments under U.S. GAAP plus the unrealized
gain or loss for the period on "available for sale" securities. The
concept of comprehensive income does not exist under Canadian GAAP.
7
<PAGE> 9
2. INCOME TAXES
<TABLE>
<CAPTION>
FIRST QUARTER
---------------------
1999 1998
---- ----
<S> <C> <C>
Current $ 37 $ 63
Deferred (3) 15
---- ----
$ 34 $ 78
---- ----
</TABLE>
The Composite of the applicable statutory corporate income tax rates in
Canada is 40.4%.
The difference between income taxes calculated at the composite rate and
the amounts shown as reported is primarily attributable to the currency
revaluation of deferred income taxes, partially offset by reduced rate or
tax exempt items. In 1998, the difference is attributable to investment
and other allowances, and tax exempt items.
3. NET INCOME PER COMMON SHARE
Net income per common share is based on the average number of shares
outstanding during the period (first quarter 1999: 222.0 million; 1998:
227.4 million). As at March 31, 1999, there were 217.4 million common
shares outstanding.
4. SALE OF THE AUGHINISH ALUMINA REFINERY
During the first quarter of 1999, the Company completed the sale of the
Aughinish alumina refinery. The net book value of the assets sold had been
written down to net realizable value in the fourth quarter of 1998 in
anticipation of completion of the sale in 1999.
5. SUPPLEMENTARY INFORMATION
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FIRST QUARTER
---------------------
1999 1998
---- ----
<S> <C> <C>
Interest paid $ 33 $ 28
Income taxes paid $ 2 $ 89
---- ----
</TABLE>
8
<PAGE> 10
5. SUPPLEMENTARY INFORMATION (cont'd)
SUMMARIZED FINANCIAL INFORMATION
The following is summarized consolidated financial information for Alcan
Aluminum Corporation, a wholly-owned subsidiary in the United States.
<TABLE>
<CAPTION>
FIRST QUARTER
------------------
1999 1998
------ ------
<S> <C> <C>
RESULTS OF OPERATIONS
Revenues $ 875 $ 912
Costs and expenses 808 847
------ ------
Income before incomes taxes 67 65
Income taxes 25 26
------ ------
Net income $ 42 $ 39
------ ------
</TABLE>
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1999 1998
------ ------
<S> <C> <C>
FINANCIAL POSITION
Current assets $ 772 $ 883
Current liabilities 563 483
------ ------
Working capital 209 400
Property, plant and equipment - net 695 714
Other assets (liabilities) - net 185 (67)
------ ------
1,089 1,047
Debt not maturing within one year 2 2
------ ------
Net assets $1,087 $1,045
------ ------
</TABLE>
In the above figures, inventories have been valued principally by the
last-in, first-out (LIFO) method. In the Company's consolidated financial
statements, the average cost method is used.
9
<PAGE> 11
In the opinion of management, all adjustments necessary for a fair presentation
of interim period results have been included in the financial statements.
These interim results are not necessarily indicative of results for the full
year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
FIRST FOURTH
Highlights (US$ millions, QUARTER QUARTER
except per share amounts) -------------- -------
1999 1998 1998
---- ---- ----
<S> <C> <C> <C>
Sales and operating revenues 1,822 1,953 1,900
Net income 38 117 89
Net income per common share 0.16 0.50 0.38
</TABLE>
The Company reports first quarter consolidated net income of US$38 million
compared to $117 million in the corresponding quarter of 1998 and $89 million in
the fourth quarter. After preference share dividends, net income per common
share for the quarter is 16 cents compared to 50 cents a year earlier and 38
cents in the last quarter of 1998.
Despite the Company's profit improvement initiatives, earnings in the quarter
were impacted by an 18% decline in the average price of aluminum on the London
Metal Exchange compared to a year earlier. Results were also adversely affected
by the severe economic downturn and currency devaluation in Brazil, which
resulted in a loss for the quarter of $9 million from South American operations
compared to a profit of $5 million a year earlier. In addition, the stronger
Canadian dollar led to a revaluation of deferred income tax liabilities,
resulting in a non-cash charge of $9 million. The 1998 first quarter included a
net after-tax charge of $11 million related to contract losses and restructuring
at the Company's former Japanese affiliate.
This was a difficult first quarter with average aluminum prices about $270/tonne
lower than a year ago, coupled with the economic crisis in Brazil and weaker
conditions in some European markets. Nevertheless, Alcan continues to improve
the underlying profitability of its business and has recently announced an
aggressive new target to improve earnings by $700 million pre-tax over the next
three years.
Despite continued strength in North America, the outlook for growth in aluminum
demand remains muted until there are clear signs of recovery in Asia and
stabilization in Brazil.
10
<PAGE> 12
<TABLE>
<CAPTION>
FIRST QUARTER FOURTH QUARTER
--------------- --------------
Volumes (thousands of tonnes) 1999 1998 1998
----- ----- -----
<S> <C> <C> <C>
Shipments
Ingot products* 221 202 207
Fabricated products 461 436 451
Fabrication of customer-owned metal 66 68 69
---- ---- ---
Total volume 748 706 727
---- ---- ---
Ingot product realizations (US$ per tonne) 1,385 1,670 1,493
Fabricated product realizations (US$ per tonne) 2,702 3,010 2,882
</TABLE>
*Includes primary and secondary ingot and scrap
Sales and operating revenues for the first quarter of 1999 were adversely
affected by lower metal prices, offset in part by higher sales volumes.
Total fabricated product volumes, which include products fabricated from
customer-owned metal, were 527 thousand tonnes (kt) in the first quarter, some
5% higher than a year earlier and slightly ahead of the fourth quarter of 1998.
Price realizations for fabricated products were $180/tonne down from the fourth
quarter and some $300/tonne below the year-ago level. As well as lower metal
prices, the change from the fourth quarter reflects a weakening during the
quarter of European currencies against the U.S. dollar.
OPERATING SEGMENT REVIEW
The Company reports selected information by major product sector, viewed on a
stand-alone basis. Transactions between product sectors are conducted on an
arm's length basis and reflect market-related prices. Thus, income from primary
metal operations is mainly profit on metal produced by the Company, whether
sold to third parties or used in the Company's fabricating operations. Income
from fabricated product businesses represents only the fabricating profit on
rolled products and downstream businesses.
11
<PAGE> 13
<TABLE>
<CAPTION>
FIRST QUARTER FOURTH QUARTER
--------------- --------------
(US$ millions) 1999 1998 1998
---- ---- ----
<S> <C> <C> <C>
Operating income
Primary metal group 47 169 78
Global fabrication group 61 76 61
Intersector and other items 24 19 30
---- ---- ----
132 264 169
Equity loss (2) (16) -
Corporate offices (36) (30) (41)
Interest (22) (23) (27)
Income taxes (34) (78) (12)
---- ---- ----
Net income 38 117 89
==== ==== ====
</TABLE>
Operating profits from the primary metal group declined from both the year
earlier and the fourth quarter of 1998 due primarily to lower aluminum prices.
The average LME 3-month price was $89/tonne below the fourth quarter level and
$273 lower than the first quarter of 1998. This was offset in part by lower
conversion costs for both primary metal and alumina.
For the global fabrication group, operating profits were unchanged from the
fourth quarter but $15 million below a year ago. In North America, volumes and
margins continue to show year-over-year improvement, although margins were below
the fourth quarter level. Europe recovered from the fourth quarter, which had
been affected by weak shipments at the end of the year, but profits remain below
those of the first quarter 1998 reflecting generally weaker demand for rolled
products. In South America, shipments and profits were sharply lower due to the
recession in Brazil. Improved results from Asia compared to a year ago reflect
the inclusion of Indian Aluminium Company, Limited which has been majority-owned
since July 1998.
"Intersector and other items" includes the deferral or realization of profits on
intersector sales of metal. In 1998 and the first quarter of 1999 previously
deferred profits on intersector sales were realized as ingot prices decreased.
Also included in this category is interest earned on surplus cash.
The loss from equity-accounted companies in the quarter arose as a result of the
currency devaluation in Brazil. For the previous year equity losses related to a
former affiliate in Japan.
Income taxes for the quarter include a charge of $9 million relating to the
currency revaluation of the deferred income tax liability that results from the
stronger Canadian dollar. This compares to a gain of $11 million in the fourth
quarter of 1998.
12
<PAGE> 14
Geographic Review
<TABLE>
<CAPTION>
FOURTH
FIRST QUARTER QUARTER
--------------- -------
Net income (Loss) (US$ millions) 1999 1998 1998
---- ---- ----
<S> <C> <C> <C>
Canada (27) 47 7
United States 34 31 31
South America (9) 5 7
Europe 8 24 (121)*
Asia and Pacific 16 (6) 145 **
Other (including eliminations) 16 16 20
--- -- ----
38 117 89
=== === ====
</TABLE>
[FN]
* Includes write-down of Aughinish alumina refinery of $120 million
** Includes gain on sale of shares in a former affiliate of $140 million
</FN>
In Canada, the decline in net income reflects the impact of lower aluminum
prices.
In the United States, net income from operations is ahead of both the previous
and year-ago quarters reflecting strong fabricated products results.
Operating losses in South America in the quarter result from the severe economic
recession and currency devaluation in Brazil. Shipments, which were severely
curtailed in the immediate aftermath of the currency crisis, are improving.
European operating results improved from the fourth quarter but were weaker than
a year ago. The fourth quarter of 1998 also included a non-recurring charge of
$120 million to write down the value of the Aughinish Alumina investment.
Earnings in the Asia and Pacific region for the quarter reflect improved
operating results. The fourth quarter of 1998 included a non-recurring gain of
$140 million on the sale of shares in the Company's former Japanese affiliate.
The profit from "Other" in the quarter includes the recognition of previously
deferred profits on inter-regional sales of ingot.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
Cash generated from operating activities during the first quarter of 1999 was
$230 million, compared to $12 million in the comparable period of 1998. The
lower net income was offset by an improvement in working capital, which was
reduced by $39 million in the 1999 period but had increased by $209 million in
the prior year.
13
<PAGE> 15
FINANCING ACTIVITIES
Cash used for financing activities in the first quarter of 1999 was $194 million
compared to $103 million in the comparable period of 1998. In the first quarter
of the current year, this is due to the expenditure of $219 million to
repurchase for cancellation 8.8 million common shares, offset in part by an
increase in short-term borrowings of $81 million. Total shares repurchased to
date under the current authorization amount to 10,575,000. The 1998 period
reflects a reduction in short-term borrowings of $65 million. The debt:equity
ratio at March 31, at 25:75, compares to 24:76 at 31 December 1998 and 21:79 a
year ago. Total debt at March 31, 1999, was $1,806 million versus $1,436 million
at the same date last year.
At the end of the first quarter of 1999, the Company had cash and time deposits
of $623 million compared to $385 million a year earlier.
INVESTMENT ACTIVITIES
Capital expenditures during the first quarter of 1999 were $206 million,
compared to $130 million a year earlier. Major projects during the quarter were
the expansion of the rolling mill at Pindamonhangaba, Brazil, scheduled for
start-up later this year, and the Alma, Quebec aluminum smelter, which is due to
begin production in the fourth quarter of 2000.
Net proceeds from the disposal of businesses were $191 million, principally the
sale of the alumina plant in Aughinish, Ireland.
YEAR 2000 COMPLIANCE
Alcan is addressing the Year 2000 issue through a formal program (the "Project")
designed with the assistance of outside consultants. Products made and sold by
Alcan do not contain date-sensitive software or electronic components. The
Project is therefore focused on evaluation and remediation of systems hardware
and related software used in business applications, process controls and
instrumentation used in the manufacturing process, and on risks associated with
suppliers and other third-parties not being Year 2000 compliant.
Remediation of all critical systems was approximately 95% complete at 31 March
1999. Remediation means an item has been repaired or replaced and has been unit
tested or otherwise demonstrated to be compliant. Alcan expects to complete
remediation of the remaining critical systems in a timely manner.
Other key Project phases are generally on target with Alcan's milestone dates.
Implementation of remediated critical systems, which includes system testing, is
approximately 75% complete as of 31 March 1999 and is expected to be completed,
with minor exceptions, by the end of the second quarter 1999. All critical
systems are being evaluated for full integration testing; however, integration
testing will not necessarily be undertaken for all systems.
Alcan is dependent upon a number of third parties including utilities and raw
material suppliers. Alternate suppliers are not available in all cases. Alcan
operates or controls, through direct ownership or joint ventures, the supply of
a majority of its requirements for bauxite and alumina. This enables Alcan to
assess and manage risk directly with respect to these key raw materials.
Additionally, Alcan generates its own power for its core North American smelter
facilities which enables Alcan to deal directly with those power supply risks.
14
<PAGE> 16
The Project Office has developed and communicated contingency planning policies,
guidelines and risk management strategies to the business units and other
stakeholders. Each business unit is developing contingency plans related to
specifically identified year 2000 risks. The goal of the contingency plans is to
minimize any property damage, business interruptions and the associated
financial implications. Alcan anticipates completion of contingency plans by the
end of the second quarter. Once developed, contingency plans will be tested and
refined as additional information becomes available. A risk management and loss
prevention engineering company associated with Alcan's insurers is conducting an
operations level audit of the contingency plans at smelters, company-owned power
generating stations and other major production facilities. These audits are
helpful in verifying that contingency plans address property damage exposures
related to possible loss of power and other utilities, and failure of automated
control equipment. Alcan has established a corporate level Business Continuity
Team to identify and assess, based on consolidated information from the business
units, Alcan's exposure to Year 2000 business continuity risk at the corporate
level.
With respect to quality issues and Project related controls, each business unit
has incorporated a quality assurance component into its year 2000 activities. In
addition, the Company's internal auditors verify that business units have
followed the mandatory Year 2000 Project requirements. The internal audit
department conducted 72 verification audits in 1998 and there are 56
verification audits planned for 1999.
Alcan believes that the most reasonably likely worst case scenario to result
from a Year 2000 failure by Alcan, its suppliers or customers would be a
temporary reduction in manufacturing capability at one or more of Alcan's
manufacturing or smelter facilities. If a Year 2000 failure disrupted
Alcan-owned or third party electrical utilities for more than a few hours then
the resulting reasonably likely worst case scenario or impact could be a
temporary closure of affected facilities and potential significant damage to
production equipment. This would impact deliveries and customer expectations as
well as cause costly downtime and equipment repair. Alcan believes that the
Project, including related contingency planning, continues to reduce
significantly the possibility of material interruptions in normal operations.
Nonetheless, third party failures or unexpected failures in Alcan's Year 2000
remediation could result in business interruptions or delays that could have a
material adverse effect on Alcan's business and financial condition.
Costs of repair and replacement of systems at Alcan facilities are expensed as
incurred and are estimated at US$50 million. Costs from the beginning of the
project to 31 March 1999 were US$30 million. Our cost projection does not
include costs associated with testing, implementation and contingency planning;
however, we do not expect these costs will have a material adverse effect on
Alcan's liquidity, results of operation or financial condition or represent a
significant increase to the original US$50 million estimate. These projections
also do not include any costs of business disruptions from supplier or customer
non-performance.
The information contained in this Year 2000 update is a "Year 2000 Readiness
Disclosure" under the Year 2000 Information and Readiness Disclosure Act of
1998.
THE EURO CURRENCY
Aluminum is a commodity traded on the London Metal Exchange ( LME ) in US
dollars. The great majority of Alcan's sales are priced based on the LME price
and therefore there is currently no deviation in price between countries in
Europe. The cost of converting the Company's systems to be Euro-compliant is
currently estimated to be $5 million.
15
<PAGE> 17
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.
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) 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
None were filed in the quarter ended March 31, 1999.
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: May 5, 1999 By: /s/ Glenn R. Lucas
--------------------------
Glenn R. Lucas
Treasurer
(A Duly Authorized Officer)
16
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
(27) Financial Data Schedule.
(99) Cautionary statement for purposes of the "Safe Harbor" provisions
of the Private Securities Litigation Reform Act of 1995.
(Filed herewith.)
</TABLE>
17
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT NO. 27: FINANCIAL DATA SCHEDULE
Article 5
This schedule contains summary financial information extracted from the Form
10-Q of Alcan Aluminium Limited for the quarter ended 31 March 1999 and is
qualified in its entirety by reference to such financial statements.
Multiplier 1,000,000
<S> <C>
Period-Type 3-Mos.
Fiscal-Year-End Dec-31-1999
Period-Start Jan-01-1999
Period-End March-31-1999
Cash 623
Securities 0
Receivables 1,431
Allowances 0
Inventory 1,275
Current-Assets 3,329
PP&E 12,127
Depreciation 6,391
Total-Assets 9,601
Current-Liabilities 1,446
Bonds 1,499
Preferred-Mandatory 0
Preferred 160
Common 1,207
Other-SE 3,869
Total-Liability-and-Equity 9,601
Sales 1,822
Total-Revenues 1,841
CGS 1,468
Total-Costs 1,468
Other-Expenses 118
Loss-Provision 0
Interest-Expense 22
Income-Pretax 76
Income-Tax 34
Income-Continuing 38
Discontinued 0
Extraordinary 0
Changes 0
Net-Income 38
EPS-Primary 0.16
EPS-Diluted 0.16
18
</TABLE>
<PAGE> 1
EXHIBIT NO. 99: 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 March 31, 1999,
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.
19
