-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, h92Tl+X8tPE4tbNVmuoo3/civPz15tLGsfD/tmfSf53FHdnp1FQoT1U9tZ3XU7aP bceWmZm4yIvSNZZpzvesbg== 0000836243-94-000003.txt : 19940328 0000836243-94-000003.hdr.sgml : 19940328 ACCESSION NUMBER: 0000836243-94-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940325 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALCOA INTERNATIONAL HOLDINGS CO CENTRAL INDEX KEY: 0000836243 STANDARD INDUSTRIAL CLASSIFICATION: 2810 IRS NUMBER: 251563111 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 033-23092 FILM NUMBER: 94518023 BUSINESS ADDRESS: STREET 1: 1501 ALCOA BLDG CITY: PITTSBURGH STATE: PA ZIP: 15219 BUSINESS PHONE: 4125532136 10-K 1 1993 AIHC 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K / x / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 /FEE REQUIRED/ FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 33-23092 ALCOA INTERNATIONAL HOLDINGS COMPANY (Exact name of registrant as specified in its charter) Delaware 25-1563111 (State of incorporation) (I.R.S. Employer Identification No.) 5 Burlington Square, Fourth Floor, Burlington, Vermont 05402-1491 (Address of principal executive offices) (Zip Code) Registrant's telephone number--802-658-2726 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None 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, and (2) has been subject to such filing requirements for the past 90 days. Yes / x / No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / x / As of March 15, 1994 there were 2,500,000 shares of voting preferred stock, par value $100.00, of the Registrant outstanding. The aggregate market value of such shares, other than shares held by persons who may be deemed affiliates of the Registrant, was approximately $250 million. Documents incorporated by reference: None ALCOA INTERNATIONAL HOLDINGS COMPANY Unless the context otherwise requires, the "Company" or "AIHC" means Alcoa International Holdings Company and all subsidiaries consolidated for the purposes of presenting its financial statements. "Alcoa" means Aluminum Company of America and its consolidated subsidiaries other than the Company. "AofA" means Alcoa of Australia Limited and all subsidiaries consolidated for the purposes of presenting its financial statements. PART I Item 1. Business. AIHC, formed in 1987 under the laws of the State of Delaware, is a holding company headquartered in Burlington, Vermont. Its principal operating subsidiaries mine bauxite; produce alumina, alumina-based chemicals, primary aluminum, gold and fabricated aluminum products outside the United States (U.S.); and sell these products in world markets. Other subsidiaries of the Company distribute and sell a broad range of alumina and aluminum products in markets outside the U.S. and provide debt financing to related parties. AIHC's principal subsidiary, AofA, accounted for approximately 63% of consolidated revenues for 1993. AofA produces alumina, alumina-based chemical products and primary aluminum ingot, and fabricates aluminum products in Australia. AofA also recovers gold from its mining leases. AofA sells these products to customers worldwide. More than half of AofA's 1993 revenues were derived from alumina, and the balance was derived principally from primary aluminum, aluminum flat rolled products and gold. AIHC holds a 51% interest in AofA. Western Mining Corporation Holdings Limited (Western Mining), a leading Australian mining company, owns approximately 48% of the capital stock of AofA. The Company and Western Mining are parties to a Shareholders' Agreement under which each has given to the other certain rights of first refusal with respect to any future sale or other transfer of their respective ownership interests in AofA. AIHC provides strategic management to its operating, sales and finance subsidiaries, including management of the subsidiaries' relationships with partners and third party investors. It also coordinates or arranges for technical, marketing, operating and financial support as needed or required by the subsidiaries. Operations management for manufacturing facilities is provided locally within each subsidiary. The Company's operations are divided into three segments: Alumina, Aluminum, and Sales and Distribution. Revenues for each segment are listed below and include sales and operating revenues received from Alcoa. For other segment information, see Note I to the consolidated financial statements of AIHC.
1993 Sales and Segment Operating Revenues As a % ($ in millions) of Total Alumina $1007.4 39% Aluminum 1026.7 40 Sales and Distribution 536.1 21 ------- ---- $2570.2 100% ======= ====
Alumina Segment The Alumina segment includes mining bauxite, refining it into smelter-grade alumina, producing alumina-based chemicals and selling of alumina and alumina chemical products by AofA. The segment also includes the mining, refining and selling of gold. Alumina is extracted from bauxite in a chemical refining process and is the principal raw material in the electro-chemical process in which aluminum is produced. Most alumina is designated "smelter- grade alumina" and is used to make aluminum. Alumina produced by AofA generally is shipped either to AofA's smelters at Point Henry and Portland, Australia, or to overseas customers, principally in North America, the Middle East, Europe and the Pacific Rim. Exports, including those to Alcoa, accounted for more than 90% of AofA's total alumina shipments to customers in 1993. AofA has alumina supply contracts with several of its overseas customers. The largest contract is for more than one million metric tons (mt) of alumina per year. AofA also has a long-term alumina supply contract with Alcoa under which Alcoa has the option to purchase up to 800,000 mt of alumina per year. AofA is the largest and one of the lowest cost producers of alumina in the world. Its three alumina refineries, located in the State of Western Australia, have an aggregate annual rated capacity of approximately 6.1 million mt. The refineries have operated at or above rated capacity over the past 5 years. The alumina operations of AofA include the following: Bauxite mining operations in the Darling Range located along Australia's western coast, south of Perth, supply AofA's three alumina refineries in Western Australia. Mined bauxite is transported by rail to the refinery at Kwinana, or by overland conveyor to the Pinjarra and Wagerup refineries. An alumina refinery at Kwinana has an annual rated capacity of approximately 1.7 million mt. The plant has its own shipping facilities. An alumina refinery at Pinjarra has an annual rated capacity of approximately 2.9 million mt and is one of the world's largest alumina refineries. An alumina refinery at Wagerup has an annual rated capacity of more than 1.5 million mt. The site can presently accommodate a refinery with a total annual capacity of 2.0 million mt. A storage and loading facility located at Bunbury Harbor near Wagerup handles most shipping for the Pinjarra and Wagerup refineries. Some Pinjarra production is shipped through the shipping facilities at Kwinana. AofA's rights to operate its bauxite mining and alumina refining operations in Western Australia are established under agreements with the State of Western Australia that are ratified by the Parliament of Western Australia. The bauxite mineral leases expire in 2003. Renewal options allow AofA to extend the leases until 2045. Bauxite reserves held by AofA contain bauxite sufficient to supply its requirements, based on current production rates and refinery capacity, at least through the expiration date of the leases. A 25-year mining plan, established in 1986 and submitted to the State government, addresses the broad direction and sequence of mining AofA's bauxite reserves, taking into account social, environmental and economic factors. Alumina refining is energy intensive and AofA's refineries use natural gas as their energy source. Nearly all of the natural gas requirements for the refineries are supplied by the State Energy Commission of Western Australia under a contract that expires in 2005. AofA is required to purchase a minimum of between 85% to 89% of its daily requirements as defined in the contract. If alumina production were curtailed to the extent that AofA could not take the minimum levels, gas quantities paid for but not taken could be held in reserve and taken later. The pricing mechanisms under the contract are designed to ensure that natural gas remains competitive with alternative fuels. Facilities to recover gold from AofA's mining leases were constructed in 1988, and refined gold was first poured late that year. AofA produced approximately 137,000 fine ounces of gold in 1993. Production has been declining since 1990, and the gold deposit is expected to be depleted by 1997. AofA also has an alumina chemicals business. Small quantities of bulk alumina hydrate are currently produced at the Kwinana refinery and shipped for distribution to the Pacific Rim markets where it is principally used in water treatment filter applications. In 1993 the Company and AofA formed ACAP Australia Pty. Ltd. (ACAP Australia) to market alumina-based and other chemicals in Asia and other regional chemical markets. ACAP Australia purchased a minority equity interest in Australian Fused Materials, Ltd. (AFM) in 1993. AFM manufactures and markets fused alumina as well as other chemicals for sale in Australian, Asian and other regional markets. Fused alumina is used in the manufacture of refractories. In 1993 the Company and The Associated Cement Companies Ltd. of Bombay, India formed a joint venture to import, process and market tabular alumina and alumina-based chemicals for the refractory and ceramic industries in India. The venture plans to build a processing plant in Falta, West Bengal which is scheduled for completion in 1994. Aluminum Segment The Aluminum segment includes the production and sale of primary aluminum and fabricated aluminum products. AofA produces primary aluminum and aluminum rigid container sheet (RCS). Alcoa- Kofem Kft. (A-K) and subsidiaries of Alcoa Nederland Holding B.V. (ANH) produce fabricated aluminum products. Although not included in the financial results of this segment, Norsk Alcoa A/S (Norsk Alcoa) derives equity earnings from its interest in a Norwegian aluminum smelting partnership. Australia. AofA operates the following facilities in the State of Victoria in eastern Australia: An aluminum smelter at Point Henry, near Geelong, has an annual capacity of 180,000 mt. In early 1994, AofA announced a reduction of 25,000 mt of production at its Point Henry smelter. See "Competition" below. A 150 megawatt steam electric generating station at Anglesea supplies over 40% of the power required for the smelter at Point Henry. Fuel for the power plant is brown coal from AofA's deposits at Anglesea, which will last well past the year 2000 at current usage levels. An aluminum fabricating plant at Point Henry has the annual capacity to produce 80,000 mt of aluminum sheet products. As part of the strategy to focus on products where AofA has a competitive advantage, the Point Henry rolling mill produces only RCS for beverage can makers in Australia and the Pacific Rim. Approximately 50% of the sheet products produced at Point Henry are exported to Pacific Rim countries. An aluminum smelter at Portland, approximately 150 miles west of Point Henry, has an annual rated capacity of 320,000 mt. The site can accommodate additional smelting capacity. The Portland smelter is a joint venture currently owned 45% by AofA, 25% by the State of Victoria, and 10% each by First National Resource Trust (FNRT) in Australia, China International Trust and Investment Corporation and Marubeni Aluminium Australia Pty., Ltd. (Portland Smelter Participants). A wholly owned subsidiary of AofA manages the operations of the Portland smelter on behalf of the joint venture. Each participant is required to contribute to the cost of operations and construction in proportion to its interest in the joint venture, and each participant is entitled to its proportionate share of the smelter's output. AofA's share of Portland's production is sold in ingot form in markets outside of Australia. In early 1994, the joint venture smelter in Portland announced a reduction of 26,000 mt of produciton. See "Competition" below. Electricity for the Portland smelter is purchased from the State Electricity Commission of Victoria (SECV)under an agreement which expires in 2016. The tariff applicable under the agreement has a base component which reflects the cost of power generation and transmission and a flexible or adjustable component which would provide for adjustments to the base tariff rate based on fluctuations in the market price for aluminum. The agreement provides for a discount for interruptibility and a demand charge equal to about two-thirds of the total tariff which may be payable whether or not energy is taken. Electricity not otherwise produced by the Anglesea generating station and needed by the Point Henry smelter is available under a contract with the SECV, similar to the Portland power arrangement, that expires in 2014 at rates that change with the world market price for aluminum. The contract includes a standby demand charge for the purchase of electricity for periods when the Anglesea generating station is not operating. An additional energy charge is payable when this power is actually used. The State Government of Victoria has announced its desire to renegotiate the power contracts between AofA, the Portland Smelter Participants and the SECV. AofA and the Portland Smelter Participants have informed the State Government of Victoria that they are willing to discuss ways to improve the operational aspects of the power contracts. The Netherlands. The Company owns 100% of ANH. Subsidiaries of ANH produce aluminum sheet, extrusions and other products. The principal subsidiary, Alcoa Nederland B.V. (ANL), produces aluminum fabricated and semi-fabricated products for European markets. ANL's manufacturing facilities, located in Drunen, The Netherlands, have the capacity to produce approximately 35,000 mt of sheet and 22,000 mt of extrusions annually. ANL also manufactures innovative aluminum and other products such as professional greenhouses, including interior logistical systems, mushroom racks, lighting poles and balcony systems. ANL and other ANH subsidiaries produce office interior wall systems, aluminum louvers, products for the evacuation of industrial and household gases and other building components. These products are sold mainly in Europe, with occasional exports to the U.S. and the Middle East. In early 1993 ANH acquired a 100% interest in Compri- Aluminium B.V. (Compri). Compri manufactures, sells and installs aluminum and steel building products in Belgium and The Netherlands. Norway. Norsk Alcoa A/S is a 50% partner with Elkem A/S (Elkem), a major Norwegian metals producer, in a partnership known as Elkem Aluminium ANS (EA). Elkem is the managing partner of EA. EA owns a 120,000 mt smelter at Mosjoen, Norway and an 80,000 mt smelter at Lista, Norway. Alcoa has agreed with EA to supply, directly or through AofA, approximately 230,000 mt of alumina annually to the EA smelters for a seven year period that began January 1, 1991. Price is determined by a formula which has a fixed component and a London Metal Exchange (LME) based component. The final terms of this alumina arrangement are negotiated between Alcoa and the manager of the partnership. The manager also decides upon expansion of EA's facilities in consultation with Norsk Alcoa. If Norsk Alcoa elects not to participate in a proposed expansion, the expansion may be undertaken unilaterally by Elkem, with a resulting adjustment of the ownership interests in the partnership. Hydro-based electric power for the smelters at Mosjoen and Lista is purchased from the Norwegian state power system under contracts expiring in the years 2007 and 2011, respectively. Both demand and energy usage charges are payable under the contracts. EA has extensive aluminum casting facilities in Norway which are used primarily to produce extrusion billet and slab for sheet. These products, and a small amount of unalloyed aluminum ingot, are sold by EA in Norway and other European countries, including sales to ANL, the principal subsidiary of ANH. Japan. AIHC holds a 50% interest in a joint venture Alcoa formed with Kobe Steel, Ltd. (Kobe) of Tokyo, Japan in 1991. The venture, KSL Alcoa Aluminum Company, Ltd., completed construction of a cold rolling mill which began operation in 1993 adjacent to Kobe's Moka, Japan plant. The facility manufactures and sells RCS to Asian and Pacific Rim countries. Alcoa supplies aluminum ingot to the joint venture. In 1992 Alcoa and Kobe formed Kobe Alcoa Transportation Products Ltd. (KATP) to manufacture and sell aluminum sheet products for transportation markets in Asia. AIHC acquired a 50% interest in KATP. Hungary. In late 1992 AIHC acquired a 50.1% interest in Kofem Kft., a subsidiary of the government-owned Hungarian Aluminium Industrial Corporation (Hungalu). The new venture, A-K, produces common alloy flat and coiled sheet, soft alloy extrusions and end products for building, construction, food and agricultural markets in central and western Europe. A-K will invest up to $146 million, including part of AIHC's initial investment, over the five year period from 1993 to 1998 for product quality and environmental and safety upgrades at the A-K facility. Sales and Distribution Segment The Sales and Distribution segment includes the worldwide sales activities of certain of the Company's wholly owned subsidiaries. These sales subsidiaries handle a broad range of alumina and aluminum products in various markets worldwide. The sales subsidiaries sell certain fabricated aluminum and alumina-based chemical products produced worldwide by Alcoa and by the Company's manufacturing subsidiaries. Fabricated aluminum products sold by the selling companies are principally produced in the U.S. by Alcoa; in Europe by Alcoa Manufacturing (G.B.) Limited; and in Australia by AofA. In 1993 the Company's subsidiary Alcoa International S.A., formerly known as Alcoa International, Inc. (AISA), relocated to Switzerland from the British Virgin Islands and established branch offices in Great Britain and Germany in early 1994. AISA intends to establish other branches in France and The Netherlands in 1994. In 1993, the Company formed N.V. AISC Beligium operating as a warehouse and service center for fabricated aluminum products. Alutodo, S.A. de C.V., a subsidiary, buys and sells aluminum and aluminum products through distribution centers at several locations in Mexico. Alumina-based chemical products sold by the selling companies are produced in Australia by AofA; in the U.S. by Alcoa; and by Alcoa subsidiaries in The Netherlands, Germany and Japan. The regional selling companies purchase U.S.-origin products from Alcoa for resale generally through the local selling companies, other Alcoa-affiliated entities or independent distributors and agents. For products produced in other countries, the regional selling companies generally act as sales representatives or agents. The local selling companies act as distributors or sales representatives (agents) for the products sold, and many deal through their own independent agents and distributors. The regional and local selling companies purchase at prices or receive sales commissions from Alcoa which the Company believes are at least as favorable as those which could be obtained from unaffiliated third parties. Purchases by AIHC's selling companies from Alcoa totaled approximately $451 million in 1993, $506 million in 1992 and $545 million in 1991. Partnership and Minority Interests Australia. The principal shareholders of AofA have reached certain understandings regarding share ownership and control, dividend policies and other shareholder matters. The AofA Shareholders' Agreement provides that at least one-third of the net profits of AofA (determined on the basis of Australian generally accepted accounting principles) will be distributed as dividends each fiscal year unless the directors of AofA unanimously agree to pay a smaller dividend. The Company received cash dividends from AofA in 1993 and 1992 of approximately $131 million and $97 million, respectively. Norway. Norsk Alcoa participates in the profits of EA in direct proportion to its 50% ownership interest. No dividends have been paid to the Company since 1990 due to low aluminum prices. Foreign Laws and Regulations The Company's subsidiaries are subject to the laws of the countries in which they are incorporated or operate. In addition to the general taxing authority of those countries, the operations of the subsidiaries may also be affected by other host country laws and regulations including corporate environmental activities, foreign exchange controls, foreign investment and import and export controls. In many countries in which the subsidiaries operate or are incorporated, companies are required to maintain a legal reserve as a stated percentage of shareholders' capital, including retained earnings. Dividends may not be paid out of the legal reserve, nor may dividends be paid to the extent that the legal reserve is not fully funded. None of the Company's subsidiaries has a legal reserve funding deficiency. Foreign investment laws applicable to the Company's subsidiaries do not currently impose any significant restriction or limitation on the subsidiaries' repatriation of dividends or capital to the Company. However, such laws may limit or otherwise restrict new investments or the transfer of ownership of existing investments. Also, in several of these countries, U.S. dollar remittances may only be made through or with the approval of a central banking institution or other governmental authority. Amounts actually remitted are subject to the availability of sufficient uncommitted U.S. dollar reserves in the host country. A permit is required for the export of alumina from Australia, and the Australian federal government has issued export control guidelines with a view to ensuring that Australian mineral exports are not sold on world markets at less than prevailing world market prices. AofA has not experienced difficulties in obtaining such permits in the past for the export of its products. Competition Alumina. Smelter-grade alumina is produced both at independent refineries and at refineries integrated with or dedicated to aluminum smelting operations. Integrated capacity -- also referred to as "tied" capacity ---- accounts for well over half of world alumina production capacity. The alumina production from "untied" capacity is sold to smelters throughout the world, often through commodity traders. Of AofA's approximately 6.1 million mt of annual alumina capacity for 1993, approximately 18% was dedicated capacity for the smelting operations at Point Henry and Portland. The remainder is "untied" capacity. Aluminum smelters operate on a continuous schedule and must have an assured source of alumina supply to maintain operations. A failure in supply could result in potline shutdown, which can lead to costly business interruption and high restart costs. As a consequence, key competitive factors in the "untied" alumina market include delivery and assurance of supply, as well as price. Most of AofA's alumina supply contracts are negotiated on the basis of agreed volumes over a multi-year time period to assure a continuous supply of alumina to the smelters which receive the alumina. Most alumina is sold under contracts where prices are negotiated periodically or based on formulas related to market prices or to production costs of aluminum ingot. An imbalance of alumina demand and supply has resulted in declining alumina prices. On the spot market, which presently accounts only for incremental alumina sales for AofA, price is the predominant competitive factor. Commodity traders play an important role in the marketing of "untied" alumina. Aluminum. Unalloyed aluminum ingot is a traded commodity. For ingot traded on the LME and U.S. commodity exchanges, the principal competitive factor is price. Quality is defined, and delivery and reliability of supply are secondary factors. For ingot supplied over time and for shaped or alloyed ingot, delivery, reliability of supply and quality also may be significant factors. Price is an important competitive factor in the sale of fabricated aluminum products, although product quality adds an increasingly important competitive dimension for customers whose facilities require uniform product specifications in order to achieve maximum efficiency. RCS markets have become highly competitive. Semi-fabricated and fabricated products are usually manufactured close to final consuming markets since timely delivery, customer service and other commercial considerations are becoming more important in determining sales. Also, competition in aluminum fabricated product markets is more varied than in those for alumina or primary aluminum since the capital costs of entry are lower than those for refining and smelting facilities. The dissolution of the Soviet Union and the lack of a mechanism to integrate successfully its economy with market economies significantly contributed to a global oversupply of aluminum in recent years. Prior to 1991 former Soviet aluminum producers primarily served internal markets. The internal market weakened substantially after the collapse of the Soviet Union. To earn hard currency, former Soviet aluminum producers began exporting significant quantities of aluminum. These exports caused an imbalance in demand and supply and resulted in severe downward pressure on aluminum prices. In late 1993, discussions among the governments of six major primary aluminum producing nations were initiated to address the global aluminum supply situation. A multi-government accord was reached among Australia, Canada, the European Union (EU), Norway, Russia and the U.S. in late January 1994 under which the Russian industry will reduce its annual aluminum exports by 500,000 mt per year for up to two years, the EU will refrain from renewing import quotas on Russian ingot when the quotas expire at the end of February 1994, and certain of the participating governments will create a fund to assist in the modernization of the Russian industry. The accord recognizes that there is currently an excess of supply of between 1.5 and 2.0 million mt of annual production. In February 1994, AofA announced a reduction of 25,000 mt of primary aluminum production at its Point Henry smelter. Also, the joint venture smelter in Portland announced a reduction of 26,000 mt of production. Sales and Distribution. The Company's sales and distribution subsidiaries, which principally sell fabricated aluminum products, compete with independent distributors and agents and with integrated aluminum producers. Key competitive factors are price, reliability and timeliness of supply. Other important considerations include quality, knowledge of the geographical markets served and technical services. The Company's sales subsidiaries have established a reliable distribution network in the various countries in which they sell. Other Risk Factors In addition to the risks inherent in the Company's business and operations as described herein, the Company is exposed generally to financial, market, political, business and economic risks in connection with its worldwide operations. Employees and Labor Relations During 1993 the Company's subsidiaries employed an average of approximately 10,300 persons. A-K employs approximately 2,300 in Hungary. A-K has entered into an agreement with its unions for wages and salaries in 1994. AofA currently employs approximately 6,000 people. The majority of AofA's non-management employees are members of labor unions. Terms and conditions of employment are largely regulated by enterprise agreements. Approximately 1,300 persons are employed by the EA partnership in Norway. Employees in Norway are represented on management boards and work councils while employees in The Netherlands are represented on work councils. Wages and benefits of these employees are established by collective bargaining agreements under which remuneration levels are set every year, usually within levels established by the government. There have been no work stoppages at the facilities of the EA partnership or of ANL in the past decade. Environmental Matters The Company's plants are subject to the environmental laws and regulations of the jurisdictions in which they are located. The Company believes that the environmental standards maintained at its locations meet or exceed all applicable regulatory requirements. Approximately $28 million was spent during 1993 for facilities to control emissions or for the handling or storage of discharge materials, principally by AofA for noise control, dust abatement and residue disposal projects at its Western Australia facilities. Capital expenditures for environmental facilities for 1994 are expected to be about $24 million. The costs of operating these facilities are not included in these figures. Also, remediation expenses being incurred by the Company at certain of its facilities are increasing. The Company's operations, like those of others in manufacturing industries, have in recent years become subject to increasingly stringent legislation and regulations to protect human health and the environment. This trend is expected to continue. Compliance with new laws, regulations or policies could require substantial expenditures by the Company, in addition to those referred to above, could increase operating costs and could affect the marketing of certain products. Certain products, especially packaging, are increasingly being subjected to regulation in markets where they are sold. Environmental laws and regulations are important both to the Company and to the communities where it operates. The Company supports the use of sound scientific research and realistic risk criteria to analyze environmental and human health effects and to develop effective laws and regulations in all countries where it operates. The Company also recognizes that recycling and waste reduction offer real solutions to the solid waste problem and it continues vigorously to pursue efforts in these areas. Item 2. Properties. See "Item 1 - Business." The Company believes that its facilities, substantially all of which are owned, are suitable and adequate for its operations. Item 3. Legal Proceedings. In the ordinary course of its business, the Company is involved in a number of suits and claims, both actual and potential, including some which it has asserted against others. Management currently believes that the outcome of such suits and claims will not have a material effect on the Company's operations or its consolidated financial position. Item 4. Submission of Matters to a Vote of Security Holders. No matters were submitted to a vote of the Company's security holders during the fourth quarter of 1993. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters. There is no established public trading market for the Company's common stock. Alcoa and one of its subsidiaries own all of the outstanding shares of common stock of the Company. The Company has not adopted a policy regarding the payment of dividends on its common stock. A provision in the Company's certificate of incorporation does, however, affect the ability of the Company to pay dividends on the common or preferred stock of the Company. The provision states that AIHC and its subsidiaries may not incur aggregate indebtedness in excess of 150% of the Company's consolidated net worth. The payment of cash dividends by AIHC reduces consolidated net worth. In addition, and for the benefit of the Company's preferred shareholders, the Company does not intend to pay common stock dividends except out of the Company's retained earnings. Applicable law and restrictive provisions in shareholder and partner agreements applicable to certain subsidiaries also may affect the amount or timing of dividend payments. Item 6. Selected Financial Data. ALCOA INTERNATIONAL HOLDINGS COMPANY AND SUBSIDIARIES (in millions, except ratios)
For the year ended December 31 1993 1992 1991 1990 1989 Sales and operating revenues $2,570.2 $2,446.4 $2,838.4 $3,200.6 $3,083.1 Other income (loss)* 78.9 85.5 101.0 127.3 158.0 Cost of goods sold and operating expenses 1,962.5 1,916.0 2,135.5 2,052.3 1,923.2 Selling general administrative and other expenses 88.7 63.7 64.9 64.9 60.8 Provision for depreciation and depletion 117.7 108.2 105.6 121.0 114.0 Interest expense 23.4 20.6 30.3 47.1 51.3 Taxes on income 100.3 147.7 216.0 359.3 418.7 Income before other items 356.5 275.7 387.1 683.3 673.1 Equity earnings (losses) (15.5) (9.7) (.4) (6.7) 24.6 Minority interests (155.0) (105.9) (154.6) (305.5) (303.8) Accounting changes - 27.3 - - - Net income 186.0 187.4 232.1 371.1 393.9 Working capital 540.1 519.6 433.4 490.0 339.8 Properties, plants and equipment, net 1,591.0 1,482.8 1,528.7 1,658.8 1,664.8 Investments 155.0 157.2 137.4 121.2 152.7 Other assets and liabilities, net 869.1 811.5 748.3 704.7 425.6 Total assets 3,872.6 3,581.2 3,770.6 3,908.7 3,413.2 Long-term debt (noncurrent) 302.1 304.6 172.8 179.0 228.3 Minority interests 680.1 596.6 628.1 812.2 729.3 Shareholders' equity 1,949.0 1,800.0 1,696.6 1,629.6 1,274.0 Ratio of earnings to fixed charges and preferred stock dividend requirements 10.0 7.03 8.45 11.94 12.18 *Principally interest income and translation and exchange adjustments
Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition.
(in millions, except as noted) Results of Operations 1993 1992 1991 Sales and operating revenues by segment: Alumina $1,007.4 $ 958.3 $1,069.2 Aluminum 1,026.7 891.0 1,120.7 Sales and Distribution 536.1 597.1 648.5 -------- -------- -------- Total $2,570.2 $2,446.4 $2,838.4 ======= ======= ======= Income before accounting changes $ 186.0 $ 160.1 $ 232.1 Net income $ 186.0 $ 187.4 $ 232.1
1993 Overview AIHC's 1993 net income before accounting changes increased 16% from 1992. The 1993 earnings included a favorable adjustment of $26.3, after minority interest, through June from a reduction in Australia's corporate tax rate from 39% to 33%. This credit is AIHC's share of AofA's adjustment, mainly to the provision for future taxes. AIHC's 1993 revenues increased 5% from 1992, primarily reflecting revenues from A-K which began operations at the beginning of 1993. A-K produces flat-rolled and extruded products used mostly in industrial and construction markets, as well as primary aluminum. Higher revenues due to increased alumina shipments from AofA were essentially offset by lower prices on aluminum products sold by AIHC's selling companies. Alumina Segment Revenues from the Alumina segment, which includes alumina, alumina-based chemicals and gold, account for approximately 40% of total revenues. Revenues increased 5% over 1992, primarily reflecting increased alumina shipments by AofA. Revenues in 1992 decreased 10% from 1991, reflecting lower prices for both alumina and alumina-based chemicals. Alumina shipments from AofA rose 9% from 1992, mainly due to additional production from AofA's Wagerup refinery expansion completed late in 1992. Alumina revenues increased 6% from 1992, reflecting the improved shipments offset by a 2% decrease in average realized prices. Revenues in 1992 fell 9% from 1991 due to a 15% drop in average realized price. An imbalance of alumina supply and demand during 1992 continued into 1993. The oversupply of alumina is expected to continue well into 1995, and there is little expectation of improvement in alumina prices in the near term. Revenues from alumina-based chemicals increased 5% from 1992, reflecting higher shipments offset by a minor decline in price. Revenues in 1992 declined 26% from 1991 due to lower shipments and prices of 10% and 18%, respectively. Gold revenues decreased 12% from 1992. Gold production has declined annually since 1990, partly because of lower grade ore which resulted in corresponding shipment reductions. Shipments declined 12% from 1992, following a 6% decrease from 1991 to 1992. With no further exploration discoveries, the gold deposit is expected to be mined out in 1997. Gold prices remained even with 1992 after dropping 9% from 1991 to 1992. Revenues in 1992 were down 15% from 1991. Operating profit for the Alumina segment was $300 in 1993, representing a 37% increase from 1992. Factors contributing to the improvement were increased alumina shipments from the Wagerup refinery expansion, productivity gains, lower raw material costs and a weaker Australian currency. The 1992 operating profit of $220 was 43% lower than 1991. The decrease was principally due to lower alumina prices. Aluminum Segment Revenues from the Aluminum segment increased 15% from 1992. The increase is primarily due to the acquisition of A-K. The 1992 revenues from this segment dropped 20% from 1991 due to lower shipments and prices. Aluminum ingot represented 65% of shipments, and 46% of revenues for this segment in 1993. Ingot shipments increased 10% from 1992, mainly because of higher AofA shipments to Japan and the addition of A-K. Despite the increase in shipments, ingot revenues increased only 3% due to a 7% drop in average realized ingot price. Both lower prices and shipments contributed to a 32% drop in ingot revenues from 1991 to 1992. Revenues from the sale of rigid container sheet (RCS) for beverage cans declined $19, or 11% from 1993. The change was caused by a 4% decrease in shipments combined with a 7% reduction in prices. RCS revenues declined 10% from 1991 to 1992, primarily because of lower prices partially offset by higher shipments to Southeast Asia. Revenues from Alcoa Nederland Holding B.V. (ANH) declined 3% in 1993. Even though local currency revenues increased, strengthening of the U.S. dollar resulted in a decrease in U.S. dollar revenues. The primary cause of the local currency revenue growth was the acquisition of Compri-Aluminium B.V. (Compri) early in 1993. Compri manufactures and sells aluminum building products in Belgium and the Netherlands. Shipments were down 4% from 1992. The decrease reflects weak European demand in the construction, transportation and agricultural markets. Both revenues and shipments improved slightly from 1991 to 1992. The higher shipments and favorable exchange rate changes helped to generate the revenue increase. Operating profit for the Aluminum segment increased $83, or 6% from 1992. The impact of favorable exchange rates from AofA, partly offset by start-up losses from A-K, was the primary cause of the increase. Operating profit in 1992 was $79, or an 8% decrease from 1991. Significantly lower aluminum prices, partly offset by improved production costs, were the major reasons for the decline. Sales and Distribution Segment This segment includes companies that sell aluminum products and alumina-based chemicals purchased from Aluminum Company of America and its subsidiaries (Alcoa), and products produced by AIHC. Revenues in 1993 declined to $536 from $597 in 1992, a decrease of 10%. Even though shipments increased slightly, a decline in unit revenues for aluminum products more than offset the effect of the higher volume. In 1992 revenues for this segment declined 8% from 1991, reflecting lower sales of aluminum products in Canada, primarily those for the aerospace industry, and lower RCS sales in Canada and the Far East. Operating profit for the Sales and Distribution segment dropped 37% from 1992. Lower unit prices on sales of aluminum products, particularly sales of RCS to Latin America, were the major cause of the decrease. Operating profit in 1992 of $44 was 25% lower than in 1991, mostly because of translation losses and higher administrative costs associated with the acquisition of Alutodo S.A. de C.V. Accounting changes In 1992 AIHC implemented two new accounting rules that were applied retroactively to January 1. The first relates to accounting for income taxes and resulted in a one-time, non-cash credit of $29.5. The credit was principally due to adjusting deferred taxes that were accrued at various tax rates in prior years to the current tax rate of the countries where AIHC has operations. The second rule relates to accounting for post retirement benefits other than pensions and requires accruing those benefits over the period the employee provides services to the company. This resulted in a one-time, non-cash charge of $2.2 for the cumulative net liability up to January 1. Other Income and Expense Items Other income was $79 for 1993, an 8% decrease from 1992. The major factors in the decline were lower interest income due to decreased interest rates, and a favorable insurance claim settlement in 1992 by AofA, partially offset by foreign currency exchange gains. Other income in 1992 declined $16 from 1991, principally due to foreign currency exchange losses and lower interest income from AofA. These were partially offset by the insurance claim settlement. Included in other income is interest income earned by a subsidiary of AIHC, Alcoa International Finance Company (AIFC), from loans to ACOA. AIFC earned $32 in 1993, $36 in 1992 and $41 in 1991 from such loans. Cost of goods sold and operating expenses increased 2% from 1992. The impact of lower aluminum product costs to the international selling companies and favorable exchange rate effects from AofA were more than offset by the addition of A-K. Cost of goods sold and operating expenses in 1992 were down 10% from 1991 primarily due to lower aluminum production costs. Cost of goods sold as a percentage of sales and operating revenues was 76% in 1993, 78% in 1992 and 75% in 1991. The improvement in the 1993 ratio is primarily due to improved margins in the alumina segment. The higher ratio in 1992 compared to 1991 was caused by price declines for most products. Selling, general administrative and other expense increased $25 from 1992. Most of the increase was due to the addition of subsidiaries, particularly A-K. Depreciation expense in 1993 increased 9% from 1992. The increase is almost entirely due to the addition of A-K. Depreciation expense increased $3 in 1992, reflecting capitalization of AofA's alumina refinery expansion at Wagerup. Interest expense increased $3 from 1992 reflecting a significant drop in capitalized interest, partially offset by lower interest rates. Capitalized interest in 1993, 1992 and 1991 was $.3, $7.1 and $5.2, respectively. Interest expense in 1992 was down $10 from 1991 largely due to lower interest rates. The provision for taxes on income reflects a weighted average of the statutory tax rates of countries where AIHC operates, primarily Australia and the U.S. Included in 1993 income taxes is the effect of a change in Australia's tax rate from 39% to 33%. The decrease resulted in a $65 reduction in AofA's taxes and primarily related to adjusting deferred taxes initially recorded at the higher rate. The effective tax rate for 1993 was 22.0%. The difference between this rate and the U.S. statutory rate of 35% is due primarily to the Australia tax rate change. Equity losses in 1993 related primarily to AIHC's aluminum ventures in Japan. The ventures manufacture and sell RCS and aluminum products for the transportation industry. In 1992, equity losses primarily related to AIHC's Norwegian smelting partnership. Minority interests' share of earnings in 1993 increased $49 from 1992 and was $49 lower in 1992 compared to 1991. The changes were due primarily to changes in AofA earnings. AIHC continues to participate in environmental assessments and cleanups at a number of locations, including operating facilities and adjoining properties; at previously owned and operated facilities; and at other waste sites. AIHC records a liability for environmental remediation costs or damages when a cleanup program becomes probable and the costs can be reasonably estimated. As assessments and cleanups proceed, these liabilities are adjusted based on progress in determining the extent of remedial actions and related costs and damages. The liabilities can change substantially due to factors such as the nature and extent of contamination, changes in remedial requirements and technological changes. The Company's environmental remediation reserve balance at the end of 1993 was $17 and reflects AIHC's most probable cost to remediate identified environmental conditions. Liquidity and Capital Resources Cash From Operations Cash and cash equivalents at year-end were $164, a $215 decline from 1992. Short-term investments at year-end 1993 included $244 with maturities greater than three months. Such investments do not qualify as cash equivalents. All short-term investments in 1992 were considered to be cash equivalents. Cash from operations and net income were relatively constant in 1993, 1992 and 1991. However, there were some notable changes in components of working capital and minority interests. In 1993, decreases in inventory, prepaid expenses and other current assets, and accounts payable and accrued expenses were significantly lower than in 1992. Receivables went up slightly in 1993 while they declined in 1992. Minority interests' share of 1993 earnings was $155, an increase of $49 from 1992. Financing Activities Dividends to preferred shareholders were $14 in 1993, $16 in 1992 and $21 in 1991. The declines reflect lower dividend rates which are reset periodically by an auction process (see note G on page 25). AIHC has paid no dividends on common stock in the past three years. Dividends paid by AofA were $257 in 1993, $190 in 1992 and $310 in 1991. Of these amounts, AIHC received $131, $97 and $158, respectively. Long-term debt was essentially unchanged from 1992. Long- term debt increased by $83 in 1992, principally to fund forward foreign exchange activities. Debt as a percentage of invested capital was 10.3% in 1993, 11.3% in 1992 and 6.9% in 1991. In 1991 AIHC purchased the remaining interest in ANH for $80. Investing Activities Capital expenditures were $182 in 1993 compared to $205 in 1992 and $245 in 1991. The 1993 capital expenditures were mainly to sustain or improve existing facilities. A large portion of the capital expenditures in 1992 and 1991 were for the Wagerup alumina refinery expansion which was completed in late 1992. AIHC plans to invest up to $146, including part of AIHC's initial investment, over the five year period from 1993 though 1998 for product quality and environmental and safety upgrades at its A-K facilities. Cash held by AIFC is loaned to Alcoa through interest- bearing notes. The amount loaned totaled $915 at year-end 1993, up $155 from 1992. Since Alcoa controls AIHC and currently intends to continue renewing these notes, they are classified as noncurrent. See Note J for information regarding the amounts and terms of the notes. AofA had investments of $244 in short-term securities with maturities greater than three months at the end of 1993. Other investing activities declined significantly from 1992. Acquisitions in 1993 included an Alcoa Nederland subsidiary with operations in Belgium and The Netherlands, which produces aluminum and steel products for the building and construction markets. Investments and acquisitions in 1992 included capital funding for AIHC's investments in Japan for KSL Alcoa Aluminum Company Ltd. and Kobe Alcoa Transportation Products, Ltd., and in Hungary for A-K. In Australia, AofA made an investment in First National Resource Trust, which holds a 10% investment in the Portland Smelter in Australia. Late in 1992 AIHC acquired Alutodo S.A. de C.V. which sells aluminum products through metal distribution centers in Mexico. Subsequent Event In February 1994, AofA announced reductions of 25,000 mt at the Point Henry smelter in Geelong, Australia and 26,000 mt at the Portland, Australia smelter. AofA has a 45% interest in the Portland smelter. Item 8. Financial Statements and Supplementary Data. Independent Auditor's Report To the Shareholders and Board of Directors Alcoa International Holdings Company (AIHC) We have audited the consolidated financial statements and the financial statement schedules of AIHC listed in Item 14(A) of this Form 10-K. These financial statements and financial statement schedules are the responsibility of AIHC's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AIHC at December 31, 1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. As discussed in Notes A and N to the consolidated financial statements, AIHC changed its methods of accounting for income taxes and post retirement benefits other than pensions in 1992. /s/Coopers & Lybrand COOPERS & LYBRAND 600 Grant Street Pittsburgh, Pennsylvania January 11, 1994, except for Note P for which the date is February 7, 1994 STATEMENTS OF CONSOLIDATED INCOME AND RETAINED EARNINGS AIHC and subsidiaries (in millions)
For the year ended December 31 1993 1992 1991 Statement of Consolidated Income REVENUES Sales and operating revenues (I) $2,449.1 $2,321.3 $2,628.9 Revenues from related parties (I and J) 121.1 125.1 209.5 Other income, principally interest (J) 78.9 85.5 101.0 ------- ------- ------- 2,649.1 2,531.9 2,939.4 ======= ======= ======= COSTS AND EXPENSES Cost of goods sold and operating expenses (J) 1,962.5 1,916.0 2,135.5 Selling, general administrative and other expenses (J) 88.7 63.7 64.9 Provision for depreciation, depletion and amortization 117.7 108.2 105.6 Interest expense (K) 23.4 20.6 30.3 ------- ------- ------- 2,192.3 2,108.5 2,336.3 ======= ======= ======= Income before taxes on income 456.8 423.4 603.1 Provision for taxes on income (N) 100.3 147.7 216.0 ------- ------- ------- EARNINGS Income before other items 356.5 275.7 387.1 Equity losses (C) (15.5) (9.7) (.4) Minority interests (155.0) (105.9) (154.6) ------- ------- ------- Income before accounting changes 186.0 160.1 232.1 Cumulative effect of accounting changes for: Income taxes (A and N) - 29.5 - Postretirement benefits, net of $1.6 tax benefit (A) - (2.2) - ------- ------- ------- Net income $ 186.0 $ 187.4 $ 232.1 ======= ======= ======= Statement of Consolidated Retained Earnings Retained earnings at beginning of year $1,655.6 $1,484.3 $1,270.4 Net income for year 186.0 187.4 232.1 ------- ------- ------- 1,841.6 1,671.7 1,502.5 ======= ======= ======= Less: Preferred dividends declared 13.8 16.1 18.2 ------- ------- ------- Retained earnings at year-end $1,827.8 $1,655.6 $1,484.3 ======= ======= =======
The accompanying notes are an integral part of the financial statements. CONSOLIDATED BALANCE SHEET AIHC and subsidiaries (in millions, except share amounts)
December 31 1993 1992 ASSETS Current assets: Cash $ 13.3 $ 17.3 Short-term investments (all cash equivalents except $243.6 in 1993) 394.7 362.1 Receivables from customers, less allowances: 1993-$11.3; 351.5 315.1 1992-$7.6 (J) Inventories (B) 333.0 307.0 Prepaid expenses and other current assets 19.3 32.0 ------- ------- Total current assets 1,111.8 1,033.5 Notes receivable - Aluminum Company of America (J) 914.8 759.8 Investments (C) 155.0 157.2 Properties, plants and equipment (D) 1,591.0 1,482.8 Other assets and deferred charges 100.0 147.9 ------- ------- Total assets $3,872.6 $3,581.2 ======= ======= LIABILITIES Current liabilities: Short-term borrowings (J) $ 129.5 $ 86.3 Accounts payable, trade (J) 197.8 171.9 Accrued compensation and retirement costs 30.1 33.5 Taxes, including taxes on income 167.8 154.9 Future taxes on income 14.1 28.4 Other current liabilities 32.4 38.9 ------- ------- Total current liabilities 571.7 513.9 Long-term debt (E) 302.1 304.6 Noncurrent liabilities and deferred credits 145.7 96.2 Deferred income taxes (N) 224.0 269.9 ------- ------- Total liabilities 1,243.5 1,184.6 ------- ------- MINORITY INTERESTS (A) 680.1 596.6 ------- ------- Contingent liabilities (F) SHAREHOLDERS' EQUITY Preferred stock, $100 par value, 5,000,000 shares authorized; 2,500,000 shares issued and outstanding (G) 250.0 250.0 Common stock, $1 par value, 8,000 shares authorized in 1993, 10,000,000 in 1992; 7,634 shares issued and outstanding in 1993, 7,634,085 in 1992 (G) - 7.6 Additional capital 85.9 78.3 Translation adjustment (A and H) (214.7) (191.5) Retained earnings 1,827.8 1,655.6 ------- ------- Total shareholders' equity 1,949.0 1,800.0 ------- ------- Total liabilities and equity $3,872.6 $3,581.2 ======= =======
The accompanying notes are an integral part of the financial statements. STATEMENT OF CONSOLIDATED CASH FLOWS AIHC and subsidiaries (in millions)
For the year ended December 31 1993 1992 1991 Cash from Operations Net income $186.0 $187.4 $232.1 Adjustments to reconcile net income to cash from operations: Depreciation, depletion and amortization 117.7 108.2 105.6 Increase (reduction) in deferred income taxes (48.6) (17.5) 15.6 Equity losses before additional taxes, net of dividends 16.2 15.0 2.6 Accounting changes - (27.3) - Minority interests 155.0 105.9 154.6 Other 7.9 7.6 (6.6) (Increase) decrease in receivables (2.6) 52.3 109.6 (Increase) decrease in inventories 23.8 75.9 (28.9) (Increase) decrease in prepaid expenses and other current assets 5.3 66.4 (1.6) Decrease in accounts payable and accrued expenses (61.5) (141.2) (9.0) Decrease in taxes, including taxes on income (8.9) (16.3) (154.8) Net change in noncurrent assets and liabilities 60.7 27.2 22.0 ----- ----- ----- Cash from operations 451.0 443.6 441.2 ----- ----- ----- Financing Activities Net additions to (reductions of) short-term borrowings 73.6 (27.3) 59.9 Reductions to minority interests - - (80.0) Dividends paid to shareholders (13.8) (16.3) (21.3) Dividends paid to minority interests (126.1) (93.1) (152.0) Additions to long-term debt 87.5 323.7 264.6 Payments on long-term debt (86.8) (241.2) (191.7) ----- ----- ----- Cash used for financing activities (65.6) (54.2) (120.5) ----- ----- ----- Investing Activities Capital expenditures (182.2) (205.3) (245.0) Loans by finance subsidiary to related parties (172.5) (82.6) (163.9) Payments received on finance subsidiary loans 17.5 39.0 54.4 Acquisition of subsidiaries, net of cash acquired (9.8) (57.7) (3.4) Additions to investments (7.4) (36.2) (18.8) Short-term investments, excluding cash equivalents (243.6) - - ----- ----- ----- Cash used for investing activities (598.0) (342.8) (376.7) ----- ----- ----- Effect of exchange rate changes on cash (2.4) (39.2) (7.0) ----- ----- ----- Changes in Cash Net change in cash and cash equivalents (215.0) 7.4 (63.0) Cash and cash equivalents at beginning of year 379.4 372.0 435.0 ----- ----- ----- Cash and cash equivalents at year-end $164.4 $379.4 $372.0 ===== ===== =====
The accompanying notes are an integral part of the financial statements. NOTES TO FINANCIAL STATEMENTS (dollars in millions, except share amounts) A. Summary of Significant Accounting Policies Principles of Consolidation - The consolidated financial statements include the accounts of Alcoa International Holdings Company (AIHC) and companies more than 50% owned. Also included are joint ventures in which AIHC has an undivided interest. Investments in other entities are accounted for principally on the equity basis. Inventories - Inventories are carried at the lower of average cost or market. Depreciation and Depletion - Depreciation is recorded on the straight-line method at rates based on the estimated useful lives of the assets. The book value of obsolete assets is charged to depreciation expense when they are scrapped. Profits or losses from the sale of assets are included in other income. Repairs and maintenance are charged to expense as incurred. Depletion is taken over the periods the estimated mineral reserves are extracted. Environmental Expenditures - Expenditures that relate to current operations are expensed or capitalized, as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to future revenues, are expensed. Liabilities are recorded when remedial efforts are probable and the costs can be reasonably estimated. The liability for remediation expenditures may include, as appropriate, elements of costs such as site investigations, consultant's fees, feasibility studies, outside contractor expenses and monitoring expenses. Estimates are not discounted, nor are claims for recovery recognized. The liability is periodically reviewed and adjusted to reflect current remediation progress, prospective estimates of required activity, and other factors that may be relevant, including changes in technology or regulations. Interest Costs - Interest related to construction of qualifying assets is capitalized as part of construction costs. Futures Contracts - AIHC periodically enters into forward and futures contracts for foreign exchange, interest rate and commodities which are primarily accounted for as hedges of its revenues and costs. The gains and losses on these contracts are reflected in earnings concurrently with the hedged revenues or costs. The cash flows from these contracts are classified in a manner consistent with the underlying nature of the transactions. Exploration Costs - Exploration costs are generally deferred and amortized over the period during which the resources are extracted on either a time or production basis. Applicable exploration costs are charged to expense in the year any program is abandoned. Income Taxes - Effective January 1992 AIHC adopted SFAS 109 - "Accounting for Income Taxes". A tax credit of $29.5 was recorded as a cumulative effect of an accounting change for the net decrease to the deferred tax liability. See Note N. Postretirement Benefit Plans Other Than Pensions - Effective January 1992 AIHC adopted accounting for these benefits as prescribed by SFAS No. 106. An after tax charge of $2.2 was recorded as a cumulative effect of an accounting change. Footnote disclosure is not presented because these costs are immaterial. Foreign Currency - The U.S. dollar is the functional currency of AIHC, AIFC, Alcoa Inter-America, Inc., Alcoa International, Inc. and Alcoa International (Asia) Limited. As of January 1, 1991, AIHC adopted the Australian dollar as the functional currency for translating financial statements of Alcoa of Australia (AofA). The change had the effect of reducing AIHC's consolidated shareholders' equity at January 1 by $133 and minority interests by $128. As of January 1, 1992, the Norwegian kroner became the functional currency for Norsk Alcoa A/S. The functional currencies of the remaining companies are their local currencies and translation of their financial statements gives rise to a translation adjustment in the balance sheet. The amount of this adjustment varies from year to year based on the exchange rates at the time of translation. Cash Flows - Short-term investments includes items that qualify as cash equivalents. AIHC considers all investments purchased with a maturity of three months or less to be cash equivalents. Cash equivalents were $151.1 and $362.1 in 1993 and 1992, respectively. Cash payments in 1993, 1992 ,and 1991 for interest were $20.1, $29.3 and $32.8, respectively. Cash payments for income taxes for the same respective periods were $131.8, $202.6 and $346.4. Reclassification - Certain amounts in previously issued financial statements were reclassified to conform to 1993 presentations. B. Inventories
December 31 1993 1992 Finished goods $ 67.6 $ 56.9 Work in process 39.2 20.6 Bauxite and alumina 91.5 95.1 Purchased raw materials 58.7 68.2 Operating supplies 76.0 66.2 ------ ------ $ 333.0 $ 307.0 ====== ======
C. Investments AIHC's share of undistributed earnings of less than majority- owned entities was $31.0, $47.6 and $62.0 at December 31, 1993, 1992 and 1991, respectively. D. Properties, Plants and Equipment, at Cost
December 31 1993 1992 Land and land rights, including mines $ 48.0 $ 46.5 Structures 710.3 654.7 Machinery and equipment 1,731.4 1,589.8 ------- ------- 2,489.7 2,291.0 Less accumulated depreciation and depletion 971.4 876.7 ------- ------- 1,518.3 1,414.3 Construction work in progress 72.7 68.5 ------- ------- $1,591.0 $1,482.8 ======= =======
E. Long-term Debt
December 31 1993 1992 AofA: Revolving credit agreements: Euro-Commercial Paper London Programme, due 1996-1997 (average rates: 1993-3.4%, 1992-3.74%) $302.0 $297.0 London Programme - A$, due 1995 (average rate: 1992-5.7%) - 2.1 Hong Kong Programme - due 1995 (average rate: 1992-3.48%) - 4.9 Other .1 .6 ----- ----- Long-term debt $302.1 $304.6 ===== =====
All long-term debt matures in the next five years. Amounts due are less than $.1 in 1994 and 1995, $102 in 1996 and $200 in 1997. AofA issues variable rate notes under a $400 Euro-Commercial Paper Programme (ECP) based in London and a $102 ECP based in Hong Kong. Standby facilities for both ECPs are provided under a $200 Revolving Underwriting Facility and a $102 Australian Bank Bill Facility. AofA has uncommitted lines of credit available with major Australian banks. In addition, AIHC has unused short-term lines of credit aggregating $4 with banks and $4 with related parties (see Footnote J). F. Contingent Liabilities In the ordinary course of its business, AIHC is involved in a number of suits and claims, both actual and potential, including some which it has asserted against others. Management currently believes that the outcome of such suits and claims will not have a material effect on AIHC's operations, liquidity, or its consolidated financial position. G. Preferred and Common Stock Preferred Stock - In 1988 AIHC sold five series of cumulative voting preferred stock with an aggregate value of $250. In 1991 the preferred stock was, by its terms, restructured into four series as follows:
Shares Aggregate Year term Outstanding par value Dividend rate* expires Variable Term Voting: Series A 800,000 $ 80.0 2.6% - Series B 700,000 70.0 4.8% - Voting: Series I 500,000 50.0 8.0% 1994 Series II 500,000 50.0 6.9% 1995 --------- ----- 2,500,000 $250.0 ========= ===== *Annual dividend rates: Series A - The annual dividend rate is a weighted average of an auction rate reset every 49 days. Series B - In 1993 the Series B preferred converted from its initial term to a 49 day auction rate preferred. The annual dividend rate represented a weighted average of 8.625% through May 10 and 49 day auction rates for the balance of the year. Series I and Series II - The annual dividend rate will be reset by an auction process at the end of the respective term.
Common Stock - As a result of an amendment in May 1993 to AIHC's Certificate of Incorporation, its common shares were reverse split at a 1/1,000 ratio, reducing outstanding common shares to 7,634. Authorized common shares were reduced to 8,000 shares and authorized preferred shares were reduced to 2,500,000 shares. H. Translation Adjustment An analysis of the translation adjustment component of shareholders' equity follows.
1993 1992 Balance at beginning of year $(191.5) $(123.6) Functional currency change (See Note A) - (.4) Translation adjustments during the year (23.2) (67.5) ------ ------ Balance at end of year $(214.7) $(191.5) ====== ======
I. Segment and Geographic Area Information AIHC's operations consist of three segments: The Alumina segment includes the mining of bauxite, refining it into smelter-grade alumina, and the production and sale of alumina and alumina-based chemical products. It also includes operations to extract gold present in a portion of AofA's bauxite reserves. The Aluminum segment includes the production and sale of primary aluminum and fabricated aluminum products. Also included are power and other services. The Sales and Distribution segment consists of an international network of regional and local selling companies which act as distributors or agents for both AIHC's and Alcoa's products. Segment information
1993 1992 1991 Sales and operating revenues: Alumina Customers (1) $ 968.8 $ 910.6 $ 928.6 Alcoa and affiliated companies 38.6 47.7 140.6 Intersegment (2) 104.6 103.7 130.2 ------- ------- ------- 1,112.0 1,062.0 1,199.4 ------- ------- ------- Aluminum Customers 1,011.6 876.0 1,117.8 Alcoa and affiliated companies 15.1 15.0 2.9 ------- ------- ------- 1,026.7 891.0 1,120.7 ------- ------- ------- Sales and distribution Customers 468.7 534.7 582.5 Alcoa and affiliated companies 67.4 62.4 66.0 ------- ------- ------- 536.1 597.1 648.5 ------- ------- ------- Eliminations (104.6) (103.7) (130.2) ------- ------- ------- Total sales and operating revenues $2,570.2 $2,446.4 $2,838.4 ======= ======= ======= Operating profit: Alumina $ 300.3 $ 219.8 $ 388.6 Aluminum 83.1 78.6 85.7 Sales and distribution 28.1 44.3 58.7 ------- ------- ------- Total operating profit 411.5 342.7 533.0 Other income 69.8 102.5 102.0 Interest expense 23.4 20.6 30.3 Corporate (1.1) (1.2) (1.6) ------- ------- ------- Income before taxes on income $ 456.8 $ 423.4 $ 603.1 ======= ======= ======= Identifiable assets: Alumina $1,471.3 $1,411.6 $1,443.9 Aluminum 1,159.3 1,068.5 1,319.7 Sales and distribution 168.1 183.9 153.2 Corporate assets 925.8 760.0 716.4 Investments 148.1 157.2 137.4 ------- ------- ------- Total assets $3,872.6 $3,581.2 $3,770.6 ======= ======= ======= Depreciation and depletion: Alumina $ 59.7 $ 55.4 $ 56.8 Aluminum 57.5 52.3 48.3 Sales and distribution .5 .5 .5 ------- ------- ------- Total depreciation and depletion $ 117.7 $ 108.2 $ 105.6 ======= ======= ======= Capital expenditures: Alumina $ 146.9 $ 156.2 $ 188.6 Aluminum 34.1 47.8 56.0 Sales and distribution 1.2 1.3 .4 ------- ------- ------- Total capital expenditures $ 182.2 $ 205.3 $ 245.0 ======= ======= ======= (1) Includes sales to one U.S. customer of $201.9 in 1993, $213.2 in 1992, and 234.5 in 1991. (2) Transfers between segments are based on generally prevailing market prices.
Geographic area information
1993 1992 1991 Revenues from customers and related parties: Pacific $1,674.5 $1,647.9 $1,977.2 Europe 496.2 374.7 382.2 The Americas (1) 399.5 423.8 479.0 ------- ------- ------- Total sales and operating revenues $2,570.2 $2,446.4 $2,838.4 ======= ======= ======= Operating profit: Pacific $ 390.2 $ 301.7 $ 466.4 Europe (1.6) .6 19.7 The Americas 22.9 40.4 46.9 ------- ------- ------- Total operating profit $ 411.5 $ 342.7 $ 533.0 ======= ======= ======= Identifiable assets: Pacific $2,298.7 $2,260.9 $2,559.0 Europe 400.3 308.1 289.3 The Americas 99.7 95.0 68.5 Corporate assets 925.8 760.0 716.4 Investments 148.1 157.2 137.4 ------- ------- ------- Total assets $3,872.6 $3,581.2 $3,770.6 ======= ======= ======= Capital expenditures: Pacific $ 159.6 $ 181.6 $ 228.3 Europe 22.2 22.6 16.6 The Americas .4 1.1 .1 ------- ------- ------- Total capital expenditures $ 182.2 $ 205.3 $ 245.0 ======= ======= ======= (1) Principally export sales
J. Related Party Transactions AIHC is controlled by Alcoa. The terms for all transactions between Alcoa and AIHC were established by negotiation between the parties and reflect terms comparable to transactions with unrelated third parties. AIHC incurred charges of $452.7 in 1993, $507.3 in 1992 and $549.5 in 1991 from Alcoa, principally for products purchased by the selling companies. Receivables from Alcoa totaled $28.5 at year-end 1993 and $30.9 at year-end 1992. Trade accounts payable to Alcoa totaled $52.5 at year-end 1993 and $58.3 at year-end 1992. AIFC earned interest income of $31.9 in 1993, $35.6 in 1992 and $41.0 in 1991 from loans to Alcoa which totaled $914.8 at year-end 1993. Since Alcoa controls AIHC, and currently intends to continue renewing these notes, they have been classified as noncurrent. The terms of the notes are:
Face amount Maturity date Annual Interest rate $400.0 June 30, 1996 3.64% * 100.0 March 31, 1994 3.75% 50.0 March 31, 1994 3.66% 50.0 March 31, 1994 3.92% 314.8 On Demand 3.91% ** ----- $914.8 ===== * Effective rate as of December 31, 1993. Rate varies quarterly based on market rates. **Effective rate as of December 31, 1993. Rate varies monthly based on market rates.
Alcoa Nederland Finance B.V. (ANF), an Alcoa subsidiary, has loan commitments to subsidiaries of AIHC for 50 million Dutch guilders, 11 million pounds sterling, 5 million deutschmarks and 25 million Belgian francs. At December 31, 1993 ANF had loaned 44 million Dutch guilders at 6.09%, 6.7 million pounds sterling at 5.8%, 4 million deutschmarks at 6.81% and 15 million Belgian francs at 6.74%, or the equivalent of $35.7. K. Interest Cost Components
1993 1992 1991 Charged to expense $ 23.4 $ 20.6 $ 30.3 Capitalized .3 7.1 5.2 ----- ----- ----- Total $ 23.7 $ 27.7 $ 35.5 ===== ===== =====
L. Lease Expense Certain equipment, and warehousing and office space, are under operating lease agreements. Total expense for all leases was $13.5 in 1993, $14.8 in 1992 and $12.6 in 1991. Under long-term leases, minimum annual rentals are $5.5 in 1994, $4.6 in 1995, $4.6 in 1996, $3.4 in 1997, $4.4 in 1998 and a total of $5.3 for 1999 and thereafter. M. Pension Plans AofA maintains pension plans covering most of its employees. Pension benefits generally depend upon length of service, job grade or remuneration and certain other benefits. Substantially all benefits are paid through pension trusts that are sufficiently funded to ensure that all plans have adequate funds to pay benefits to retirees as they become due. Pension costs for AofA's plans include the following components:
1993 1992 1991 Benefits earned $21.0 $20.3 $21.5 Interest accrued on projected benefit obligation 13.3 13.5 14.3 Net amortization (1.4) (1.8) .1 ---- ---- ---- 32.9 32.0 35.9 Less: Expected return on plan assets* 17.0 17.9 15.7 Employee contributions 5.5 6.1 6.2 ---- ---- ---- Total $10.4 $ 8.0 $14.0 ==== ==== ==== *The actual returns were higher than the expected return by $29.5 in 1993, $1.8 in 1992 and $15.0 in 1991 and were deferred as actuarial gains.
The status of AofA's pension plans at December 31 follows.
1993 1992 Accumulated benefit obligation, primarily vested $185.8 $168.4 ===== ===== Plan assets, primarily stocks and bonds, at market 222.5 175.4 Projected benefit obligation 201.8 176.9 ----- ----- Plan assets greater (less) than projected benefit obligation 20.7 (1.5) Unrecognized: Transition (assets) obligations (19.3) (22.1) Prior service costs 6.0 6.9 Actuarial losses, net (2.8) 20.3 ----- ----- Prepaid (accrued) pension cost $ 4.6 $ 3.6 ===== =====
The following assumptions were used to determine the projected benefit obligation and plan assets.
December 31 1993 1992 1991 Settlement discount rate 8.0% 8.5% 9.0% Long-term rate for compensation increases 6.0% 6.5% 8.0% Long-term rate of return on plan assets 9.5% 10.0% 10.5%
N. Provision for Income Taxes As discussed in Note A, AIHC implemented SFAS 109 as of January 1, 1992 and the cumulative effect of this change is reported in 1992 earnings. Prior years' financial statements have not been restated. The components of income before taxes on income were:
1993 1992 1991 U.S. $ 30.8 $ 34.8 $ 40.9 Foreign 426.0 388.6 562.2 ----- ----- ----- $456.8 $423.4 $603.1 ===== ===== =====
The provision for taxes on income consisted of:
1993 1992 1991 Current U.S. Federal* $ 14.5 $ 32.2 $ 30.6 Foreign 134.3 132.1 168.6 State and local .1 .9 1.2 ----- ----- ----- 148.9 165.2 200.4 Deferred Foreign (48.6) (17.5) 15.6 ----- ----- ----- Total $100.3 $147.7 $216.0 ===== ===== ===== * Includes U.S. taxes related to foreign income
Deferred taxes in 1993 included a credit of $41.6 for statutory tax rate adjustments in Australia. The reconciliation of the effective tax rate to the U.S. federal statutory rate follows.
1993 1992 1991 U.S. federal statutory rate (%) 35.0 34.0 34.0 Taxes on foreign income (2.7) (1.3) 1.2 Adjustment of prior years' U.S. tax (.2) 2.1 .6 Australia tax rate change (9.1) - - Other (1.0) .1 - ---- ---- ---- Effective tax rate (%) 22.0 34.9 35.8
The components of net deferred tax assets and liabilities at December 31,1993 and 1992 follow.
1993 Deferred 1993 Deferred 1992 Deferred 1992 Deferred tax assets tax liabilities tax assets tax liabilities Depreciation - $255.8 - $293.1 Employee benefits $23.4 - $19.5 - Loss provisions 15.7 - 9.1 - Deferred income 16.1 28.8 15.7 51.5 Tax loss carryforwards 22.1 - 19.7 - Other 3.3 12.9 12.1 9.2 ---- ----- ---- ----- 80.6 297.5 76.1 353.8 Valuation allowance (21.3) - (9.1) - ---- ----- ---- ----- $59.3 $297.5 $67.0 $353.8 ==== ===== ==== =====
Of the tax loss carryforwards, $16.5 expire over the next 10 years and $5.6 is unlimited. A substantial portion of the valuation allowance is for these carryforwards because the ability to utilize a portion of them is uncertain. Deferred income taxes provided for timing differences in the recognition of revenue and expenses for tax and financial statement purposes prior to the new accounting rules follow.
1991 Depreciation $ 25.6 Other (10.0) ----- $ 15.6 =====
The cumulative amount of undistributed earnings for which no deferred taxes have been provided was $892.9 at December 31, 1993. Management has no plans to distribute such earnings in the foreseeable future. It is not practicable to determine the deferred tax liability on these earnings. O. Financial Instruments At December 31, 1993 AIHC had open currency exchange commitments consisting of purchase contracts of $291.6 and sell contracts of $864.0. These contracts are part of a worldwide program to minimize volatility in foreign exchange operating income and balance sheet exposure. These contracts generally mature within twelve months and are principally unsecured forward exchange contracts. The methods used to determine the fair value of certain financial instruments follow. Cash and Short-term Investments. The carrying amount approximates fair value because of the short maturity of the instruments. Investments and Non-current Receivables. The majority of AIHC's investments represent equity interests in various companies and joint ventures for which there is no quoted market price. To estimate the fair value of these investments, AIHC would have had to incur excessive costs. The fair value of non- current receivables is based on anticipated cash flows. Long-term Debt. The fair value of long-term debt is based on interest rates that are currently available to AIHC for issuance of debt with similar terms and remaining maturities. The fair value of recorded financial instruments, excluding investments, does not materially differ from the values reflected on the books. P. Subsequent Event In February 1994, AofA announced reductions of 25,000 mt at the Point Henry smelter in Geelong, Australia and 26,000 mt at the Portland, Australia smelter. AofA has a 45% interest in the Portland smelter. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of the Registrant. The information regarding Executive Officers and Directors is set forth below. Richard L. Fischer--Director and President of AIHC. Mr. Fischer, 57, has served as a director since the Company's formation in 1987 and as Vice President until 1991 when he was elected President of the Company. He is Executive Vice President- Chairman's Counsel of Alcoa and served as Senior Vice President and General Counsel from 1984 to 1991. From 1985 through 1989 Mr. Fischer also had responsibility for Government and Public Affairs for Alcoa. He was given additional responsibilities in 1986 for Corporate Development and in 1989 for Alcoa's expansion activities in Europe and Asia. Jeffrey J. Hodgman--Director of AIHC. Mr. Hodgman, 50, is Senior Vice President - Corporate Investmenst of Metropolitan Life Insurance Company. He has served as a director of the Company since August 1988. He became Senior Vice President - Corporate Investments of Metropolitan on January 1, 1993 after having served as Senior Vice President - Corporate Planning of Metropolitan since January 1990, Senior Vice President - Portfolio Strategies since 1986 and Vice President - Asset Management Group since 1983. He is President and Chief Executive Officer of Metropolitan Series Fund, Inc., and is a director of several other Metropolitan subsidiaries. Jan H. M. Hommen--Director and Executive Vice President of AIHC. Mr. Hommen, 50, is Executive Vice President and Chief Financial Officer of Alcoa. He served as Alcoa Vice President and Treasurer from 1986 to 1991 and Assistant Treasurer-Corporate Finance beginning in 1979. Prior to 1979, Mr. Hommen was Financial Director of Alcoa Nederland B.V. John E. Wilson, Jr.--Director, Vice President and Treasurer of AIHC (not an executive officer). Mr. Wilson, 38, was elected to his current positions in 1991. Prior to that, he served as an employee of Alcoa in various positions including Manager of Finance from 1990-1991, Analyst-Corporate Finance from 1985-1990, Credit Representative from 1982-1985 and Product Accountant from 1980-1982. Prior to working for Alcoa, Mr. Wilson was Adjunct Professor of Finance and Economics at Clarkson College. Item 11. Executive Compensation. One individual who serves as a director and officer receives compensation from the Company in his capacity as an officer. The remaining directors and executive officers of the Company do not and will not receive any compensation from the Company except that directors who are not also employees or officers of Alcoa or one of Alcoa's subsidiaries may be entitled to directors' fees in amounts established from time to time by the Board. All directors will be reimbursed for expenses reasonably incurred in connection with their services as directors of the Company. None of the directors and executive officers of the Company receives or will receive any additional compensation from Alcoa or any of its affiliates for services rendered on behalf of the Company. The Company will compensate Alcoa for the time during which any salaried officer or employee of Alcoa performs services for the Company. There are no family relationships among or between the Company's directors and officers. Item 12. Security Ownership of Certain Beneficial Owners and Management. No officer or director of the Company owns any shares of its capital stock. The following table sets forth information regarding beneficial ownership of the Company's voting securities as of March 15, 1994 by each person who is known to the Company to be the owner of more than five percent of either class of the Company's voting securities, based on the records of the Company and the position listing of such securities held in nominee name.
Title of Class Name and Address of Number of Percent Owner or Participant Shares Owned of Class Common Stock Aluminum Company of America *7,634 100 425 Sixth Avenue Alcoa Building Pittsburgh, PA 15219-1850 Preferred Stock Metropolitan Life Insurance 1,000,000 40 Company One Madison Avenue New York, NY 10010 Chemical Bank/MHT 295,000 11.8 270 Park Avenue 31st Floor New York, NY 10017 Chase Manhattan Bank, N.A. 220,000 8.8 1 Chase Manhattan Plaza 3-B/Proxy Department New York, NY 10081 Citibank, N.A. 201,000 8.0 111 Wall Street 20th Floor, Zone 9 New York, NY 10043 Bankers Trust Company 171,000 6.8 Corporate Securities Services 16 Wall Street - Level D New York, NY 10005 Continental Bank, National 150,000 6.0 Association-Trust 231 S. LaSalle Street Proxy/18th Floor Chicago, IL 60697 *Alcoa Securities Corporation, a wholly owned Alcoa subsidiary, holds a portion of the securities.
Item 13. Certain Relationships and Related Transactions. AIHC and its subsidiaries are parties to certain purchase, sale, administrative service, management, loan and other agreements and arrangements with Alcoa. Alcoa is the principal supplier of products sold by the Company's sales and distribution subsidiaries. Alcoa is one of the largest customers for alumina produced by AofA. In 1993 purchases by Alcoa from and fees paid to subsidiaries of the Company totaled $121 million; sales by Alcoa to such entities (principally for resale) and commissions on agency sales totaled $453 million. At February 28, 1994 outstanding loans of $891 million had been made to Alcoa by a wholly owned Delaware subsidiary, AIFC, on terms, including interest rates, believed by the Company to approximate those available to Alcoa for comparable short-term borrowings from unrelated parties. See Note J. In order to address certain potential conflicts of interest between the Company and Alcoa, the Company's Restated Certificate of Incorporation contains provisions regulating and defining the conduct of certain affairs of the Company as they may involve Alcoa and its officers and directors, and the powers, rights, duties and liabilities of the Company and its officers, directors and stockholders in connection therewith. In general, these provisions recognize that from time to time the Company and Alcoa may engage in the same or similar activities or lines of business, have an interest in the same areas of corporate opportunities, and enter into contracts and otherwise transact business with each other. The provisions also describe the obligations of officers and directors of the Company with respect to corporate opportunities and contracts and limit the liability of directors of the Company to the Company or its stockholders to the fullest extent permitted by the law. Directors of the Company who are also officers or directors of Alcoa will not be liable to the Company or its stockholders for breach of any fiduciary duty if the directors comply with the provisions of the Restated Certificate of Incorporation. The Company's By-laws contain detailed indemnification rights and procedures for its directors and officers and the Company has entered into or will enter into individual indemnity agreements with each of its present and future directors and officers which provide for indemnification to the fullest extent permitted by law. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) The financial statements, financial statement schedules and exhibits listed below are filed as part of this Form 10-K. (1) Financial Statements. Report of Independent Certified Public Accountants Statements of consolidated income and retained earnings for the years ended December 31, 1993, 1992 and 1991 Consolidated balance sheet, December 31, 1993 and 1992 Statement of consolidated cash flows for the years ended December 31, 1993, 1992 and 1991 Notes to financial statements (2) Financial Statement Schedules. Schedules V, VI, VIII, IX and X for the fiscal years ended December 31, 1993, 1992 and 1991. Schedule No. Schedule Title V Properties, Plants and Equipment VI Accumulated Depreciation, Depletion and Amortization of Properties, Plants and Equipment VIII Valuation and Qualifying Accounts IX Short-Term Borrowings X Supplementary Income Statement Information Schedules other than those referred to above are omitted because they are not required or the information is included in the notes to financial statements. (b) Reports on Form 8-K. None were filed in the fourth quarter of 1993. (c) Exhibits. Exhibit Number Description* 3(i). Amended Certificate of Incorporation of the Registrant. 3(ii). By-Laws of the Registrant. 4(a). Certificate of Designation with respect to the Registrant's Variable Term Voting Preferred Stock (Exchange), Series A, Series B and Series C, as amended, incorporated by reference to exhibit 4(a) to the Company's Annual Report on Form 10-K for the year ended December 31, 1988. 4(b). Certificate of Designation with respect to the Registrant's Voting Preferred Stock, Series I and Series II, incorporated by reference to exhibit 4.3 to Registration Statement No. 33-23092 on Form S-4. 4(c). Revolving Underwriting Facility Agreement, dated January 12, 1990, among Alcoa of Australia Limited and various financial institutions, incorporated by reference to exhibit 4(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 1989. 4(d). Euro-Commercial Paper Programme, dated January 12, 1990, among Alcoa of Australia Limited and various financial institutions, incorporated by reference to exhibit 4(d) to the Company's Annual Report on Form 10-K for the year ended December 31, 1989. 4(e). Dealer Agreement with respect to the Euro-Commercial Paper Programme, dated June 20, 1990, among Alcoa of Australia Limited and various financial institutions, incorporated by reference to exhibit 4(e) the Company's Annual Report on Form 10-K for the year ended December 31, 1990. 4(f). Certificate of Amendment of Certificate of Designations with respect to the Registrant's Variable Term Voting Preferred Stock (Exchange), Series A, Series B and Series C, as amended, incorporated by reference to exhibit 4(f) of the Company's Annual Report on Form 10-K for the year ended December 31, 1991. 10(a). Alcoa of Australia Limited Shareholders' Agreement, dated December 16, 1987, between the Registrant and Western Mining Corporation Holdings Limited, incorporated by reference to exhibit 10.1 to Registration Statement No. 33-23092 on Form S-4. 10(b). Form of Indemnity Agreement between the Registrant and each of its directors and officers, incorporated by reference to exhibit 10.2 to Registration Statement No. 33-23092 on Form S-4. 10(c). Amended and Restated Term Loan Agreement, dated as of December 1, 1991, between Alcoa International Finance Company and Aluminum Company of America, incorporated by reference to exhibit 10(c) of the Company's Annual Report on Form 10-K for the year ended December 31, 1991. 10(d). Management Services Agreement between the Registrant and Aluminum Company of America, effective as of December 31, 1987, incorporated by reference to exhibit 10.5 to Registration Statement No. 33-23092 on Form S-4. 10(e). Secret Process and Technical Information Agreement, dated November 13, 1961, between Alcoa of Australia Proprietary Limited (now Alcoa of Australia Limited) and Aluminum Company of America, incorporated by reference to exhibit 10.6 to Registration Statement No. 33-23092 on Form S-4. 10(f). Alumina Refinery Agreements--Western Australia, incorporated by reference to exhibit 10.7 to Registration Statement No. 33-23092 on Form S-4. 10(g). Alumina Supply Agreement, dated January 3, 1989, between Alcoa of Australia Limited and Aluminum Company of America, incorporated by reference to exhibit 10(h) to the Company's Annual Report on Form 10-K for the year ended December 31, 1988. 10(h). Third Amendment, effective as of September 1, 1991, to the Management Services Agreement between the Registrant and Aluminum Company of America dated as of December 31, 1987, incorporated by reference to exhibit 10(h) of the Company's Annual Report on Form 10-K for the year ended December 31, 1991. 10(i). Amended and Restated Demand Loan Agreement, dated as of April 1, 1990, between Alcoa International Finance Company and Aluminum Company of America, incorporated by reference to exhibit 10(j) to the Company's Annual Report on Form 10-K for the year ended December 31, 1990. 10(j). Amendment to Amended and Restated Demand Loan Agreement, dated as of December 1, 1991, between Alcoa International Finance Company and Aluminum Company of America, incorporated by reference to exhibit 10(j) of the Company's Annual Report on Form 10-K for the year ended December 31, 1991. 10(k). Management Services Agreement between the Registrant and Three Rivers Insurance Company, effective as of September 1, 1991, incorporated by reference to exhibit 10(k) of the Company's Annual Report on Form 10-K for the year ended December 31, 1991. 10(l). Management Services Agreement between Three Rivers Insurance Company and the Registrant, effective as of September 1, 1991, incorporated by reference to exhibit 10(l) of the Company's Annual Report on Form 10-K for the year ended December 31, 1991. 10(m). Amendment to the Dealer Agreement with respect to the Euro-Commercial Paper Programme, dated January 14, 1991, among Alcoa of Australia Limited and various financial institutions, incorporated by reference to exhibit 10(m) of the Company's Annual Report on Form 10-K for the year ended December 31, 1991. 12. Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividend Requirements. 21. Subsidiaries of the Registrant. *There are no management contracts or compensatory plans filed as Exhibits to this Form 10-K. Amendments and modifications to other Exhibits previously filed have been omitted when in the opinion of the Registrant such Exhibits as amended or modified are no longer material or, in certain instances, are no longer required to be filed as exhibits. No other instruments defining the rights of holders of long- term debt of the Registrant or its subsidiaries have been filed as exhibits because no such instruments met the threshold materiality requirements under Regulation S-K. The Registrant agrees, however, to furnish a copy of any such instruments to the Commission upon request. (d) Financial Statement Schedules. SCHEDULE V - PROPERTIES, PLANTS AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31 (in millions)
Col. A Col. B Col. C Col. D Col. E Col. F Balance at Other Balance at beginning of Additions changes add end of Classification period at cost Retirements (deduct) (C) period Year 1993: Land and land rights, $ 46.5 $ .8 $ .2 $ (1.2) $ 48.0 including mines 2.1 (E) Structures 654.7 37.0 .7 (18.4) 710.3 (13.1)(D) 50.8 (E) Machinery and equipment 1,589.8 138.8 24.1 (39.9) 1,731.4 (9.4)(D) 76.2 (E) Construction work in progress 68.5 5.3(B) - (2.4) 72.7 1.3 (E) ------- ----- ---- ----- ------- $2,359.5 $181.9 $25.0 $ 46.0 $2,562.4 ======= ===== ==== ===== ======= Year 1992: Land and land rights, $ 50.4 $ .4 $ .1 $ (4.2) $ 46.5 including mines Structures 664.8 52.6 .9 (61.8) 654.7 Machinery and equipment 1,504.6 243.1 17.7 (140.2) 1,589.8 Construction work in progress 180.9 (90.9)(B) - (21.2) 68.5 (.3)(D) ------- ----- ---- ----- ------- $2,400.7 $205.2 $18.7 $(227.7) $2,359.5 ======= ===== ==== ====== ======= Year 1991: Land and land rights, $ 63.4 $ .2 $ .1 $ (14.2) $ 50.4 including mines 1.1 (E) Structures 846.8 20.0 1.6 (202.2) 664.8 .1 (D) 1.7 (E) Machinery and equipment 1,790.8 88.8 21.4 (339.8) 1,504.6 (14.6)(D) .8 (E) Construction work in progress 50.4 135.4(B) - (4.9) 180.9 ------- ----- ---- ------ ------- $2,751.4 $244.4 $23.1 $(572.0) $2,400.7 ======= ===== ==== ====== ======= Notes: (A) Depreciation of structures, machinery and equipment is provided on the straight-line method at rates ranging from 2% to 25% (B) Net increase (decrease) during period (C) Translation (including AofA functional currency change in 1991), unless otherwise noted (D) Transfers from other accounts (E) Sale or acquisition of subsidiaries
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTIES, PLANTS AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31 (in millions)
Col. A Col. B Col. C Col. D Col. E Col. F Additions Other Balance at charged to changes Balance at beginning of costs and add end of Classification period expenses Retirements (deduct) (A) period Year 1993: Land and land rights, including mines $ 5.8 $ .6 - $ (.1) $ 6.3 Structures 256.2 25.7 $ .5 (4.9) 280.2 2.9 (C) .8 (D) Machinery and equipment 614.7 87.9 21.2 (15.2) 684.9 14.2 (C) 4.5 (D) ------- ----- ---- ------- ----- $ 876.7 $114.2(B) $21.7 $ 2.2 $971.4 ======= ===== ==== ======= ===== Year 1992: Land and land rights, including mines $ 5.6 $ .7 - $ (.5) $ 5.8 Structures 255.7 25.7 $ .6 (24.6) 256.2 Machinery and equipment 610.7 77.9 15.7 (58.2) 614.7 ------- ----- ---- ------ ----- $ 872.0 $104.3(B) $16.3 $ (83.3) $876.7 ======= ===== ==== ====== ===== Year 1991: Land and land rights, including mines $ 6.7 $ .8 - $ (1.9) $ 5.6 Structures 326.0 25.5 $ 1.0 (95.1) 255.7 .3 (C) Machinery and equipment 759.9 75.2 16.3 (206.1) 610.7 .4 (C) (2.4)(D) ------- ----- ---- ------ ----- $1,092.6 $101.5(B) $17.3 $(304.8) $872.0 ======= ===== ==== ====== ===== Notes: (A) Translation (including AofA functional currency change in 1991), unless otherwise noted (B) Depreciation expense shown on the income statement includes amortization of patents and other intangibles of $3.5 in 1993, $3.9 in 1992 and $4.1 in 1991 (C) Sale or acquisition of subsidiaries (D) Transfers from other accounts
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31 (in millions)
Col. A Col. B Col. C Col. D Col. E Additions Balance at Charged to Charged to beginning of costs and other Balance at Description period expenses accounts (A) Deductions (B) end of period Allowance for doubtful accounts: 1993 $7.6 $ 4.7 $ (.4) $ .7 $11.3 .1 (C) 1992 $7.5 $ 1.4 $ (.6) $ .7 $ 7.6 1991 $7.3 $ 1.1 $ .1 (C) $ 1.0 $ 7.5 Income tax valuation allowance: 1993 $9.1 $12.2 - - $21.3 1992 - $ 9.1 - - $ 9.1 Notes: (A) Translation adjustments, unless otherwise noted (B) Uncollectible accounts written off (C) Acquisition of subsidiaries
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE YEARS ENDED DECEMBER 31 (in millions)
Col. A Col. B Item Charged to costs and expenses 1993 1992 1991 Maintenance and repairs $214.1 $222.5 $228.1
SCHEDULE IX - SHORT-TERM BORROWINGS FOR THE YEARS ENDED DECEMBER 31 (in millions)
Col. A Col. B Col. C Col. D Col. E Col. F Maximum Average Weighted amount amount average Balance at Weighted outstanding outstanding interest rate Category of aggregate end of average during the during the during the short-term borrowings (A) period interest rate period period (B) period (C) Year 1993: Payable to banks: Australia $ - - $ 14.4 $ 9.9 4.77% Other 19.1 7.91% 19.0 8.6 7.41 Related Parties 34.5 6.06 46.2 40.2 6.79 Commercial paper 75.9 3.39 132.8 87.7 3.41 ----- $129.5 ===== Year 1992: Payable to banks: Australia $ 12.8 10.00% $ 15.7 $12.0 10.67% Other 3.2 8.99 13.0 7.1 10.22 Related parties 37.2 8.94 47.2 40.4 9.60 Commercial paper 33.1 3.48 50.0 28.4 5.85 ----- $ 86.3 ===== Year 1991: Payable to banks: Australia $ 21.6 12.25% $ 83.4 $19.9 14.25% Other 3.3 12.33 51.7 42.7 15.31 Related parties 48.4 10.00 48.4 33.0 9.50 Commercial paper 40.3 12.45 64.7 23.0 9.62 ----- $113.6 ===== Notes: (A) Terms range from demand to 90 days (B) Computed by calculating an arithmetical average of month- end borrowings during the year (C) Computed by dividing interest expense applicable to the debt by average borrowings outstanding
SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ALCOA INTERNATIONAL HOLDINGS COMPANY March 24, 1994 By /s/John E. Wilson, Jr. John E. Wilson, Jr. Vice President and Treasurer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date /s/ RICHARD L. FISCHER Richard L. Fischer President and Director March 24, 1994 (Principal Executive Officer) /s/ JAN H. M. HOMMEN Jan H. M. Hommen Director and March 24, 1994 Executive Vice President (Principal Financial Officer and Principal Accounting Officer) /s/ JOHN E. WILSON, JR. John E. Wilson, Jr. Director March 24, 1994 /s/ JEFFREY J. HODGMAN Jeffrey J. Hodgman Director March 24, 1994 Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act. No annual report, proxy statement, form of proxy or other proxy soliciting materials have been sent to the Company's security holders. The Company intends to furnish to security holders subsequent to the filing of this Annual Report on Form 10-K a copy of this Annual Report along with proxy soliciting materials. The Company intends to provide the Commission with copies of such proxy materials at a later date when they have been sent to security holders. Exhibit 12 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS (in millions, except ratios)
For the years ended December 31 1993 1992 1991 1990 1989 Earnings: Income before taxes on income, equity income and accounting changes $456.8 $423.4 $603.1 $1,042.6 $1,091.8 Fixed charges added to net income 31.0 30.6 41.4 58.1 61.5 Proportionate share of income (loss) of 50%-owned persons (15.1) (13.5) (2.5) (6.8) 24.6 Distributed income of less than 50%-owned persons - - - - - Amortization of capitalized interest 4.8 5.4 5.0 .9 5.9 ----- ----- ----- ------- ------- Total earnings $477.5 $445.9 $647.0 $1,094.8 $1,183.8 ===== ===== ===== ======= ======= Fixed Charges: Interest expense: Consolidated $ 23.4 $ 20.6 $ 30.3 $ 47.1 $ 51.3 Proportionate share of 50%-owned persons 4.6 6.0 7.6 7.1 7.5 ----- ----- ----- ------- ------- 28.0 26.6 37.9 54.2 58.8 ----- ----- ----- ------- ------- Amount representative of the interest factor in rent: Consolidated 3.0 3.9 3.2 3.8 2.5 Proportionate share of 50%-owned persons - .1 .3 .1 .2 ----- ----- ----- ------- ------- 3.0 4.0 3.5 3.9 2.7 ----- ----- ----- ------- ------- Fixed charges added to net income 31.0 30.6 41.4 58.1 61.5 Interest capitalized .3 7.1 5.2 - - Preferred stock dividend requirements 16.6 25.7 30.0 33.6 35.7 ----- ----- ----- ------- ------- Total fixed charges $ 47.9 $ 63.4 $ 76.6 $ 91.7 $ 97.2 ===== ===== ===== ======= ======= Ratio 10.0 7.03 8.45 11.94 12.18 ===== ===== ===== ======= =======
Exhibit 21 SUBSIDIARIES AND EQUITY ENTITIES OF THE REGISTRANT (As of December 31, 1993) State or country of Name organization Alcoa Asia Limited Delaware Alcoa Inter-America, Inc. Delaware Alcoa International Finance Company Delaware Alcoa International, S.A. Switzerland Alcoa International (Asia) Limited Hong Kong Alcoa S.A. Switzerland Alcoa Italia S.p.A. Italy Alcoa Japan Limited Japan Alcoa-Kofem Kft Hungary Alcoa Nederland Holding B.V. The Netherlands Alcoa Extruded Products (UK) Limited United Kingdom Alcoa Systems (UK) Limited United Kingdom Alcoa Nederland France S.A.R.L. France Alcoa Nederland Investments B.V. The Netherlands Alcoa Nederland B.V. The Netherlands Alcoa Systems B.V. The Netherlands Allpro B.V. The Netherlands Alumet Etten B.V. The Netherlands Burgerhout B.V. The Netherlands Intal B.V. The Netherlands Intransit B.V. The Netherlands Sypla Systeem-Planning B.V. The Netherlands Extrusion De Aluminio S.A. Spain Alcoa of Australia Limited Australia A.F.P. Pty. Limited Australia Hedges Gold Pty. Ltd. Australia Alcoa of Australia (Asia) Limited Hong Kong Coala Insurance Company Limited Cayman Islands Portland Smelter Services Pty. Ltd. Australia Alutodo, S.A. de C.V. Mexico Kobe Alcoa Transportation Products, Ltd. Japan KSL Alcoa Aluminum Company, Ltd. Japan Norsk Alcoa A/S Norway Elkem Aluminium ANS Norway The names of certain subsidiaries which, considered in the aggregate, would not constitute a significant subsidiary, have been omitted from the above list. EXHIBIT INDEX Exhibit Number Description 3(i). Amended Certificate of Incorporation of the Registrant. 3(ii). By-Laws of the Registrant. 4(a). Certificate of Designation with respect to the Registrant's Variable Term Voting Preferred Stock (Exchange), Series A, Series B and Series C, as amended, incorporated by reference to exhibit 4(a) to the Company's Annual Report on Form 10-K for the year ended December 31, 1988. 4(b). Certificate of Designation with respect to the Registrant's Voting Preferred Stock, Series I and Series II, incorporated by reference to exhibit 4.3 to Registration Statement No. 33-23092 on Form S-4. 4(c). Revolving Underwriting Facility Agreement, dated January 12, 1990, among Alcoa of Australia Limited and various financial institutions, incorporated by reference to exhibit 4(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 1989. 4(d). Euro-Commercial Paper Programme, dated January 12, 1990, among Alcoa of Australia Limited and various financial institutions, incorporated by reference to exhibit 4(d) to the Company's Annual Report on Form 10-K for the year ended December 31, 1989. 4(e). Dealer Agreement with respect to the Euro-Commercial Paper Programme, dated June 20, 1990, among Alcoa of Australia Limited and various financial institutions, incorporated by reference to exhibit 4(e) the Company's Annual Report on Form 10-K for the year ended December 31, 1990. 4(f). Certificate of Amendment of Certificate of Designations with respect to the Registrant's Variable Term Voting Preferred Stock (Exchange), Series A, Series B and Series C, as amended, incorporated by reference to exhibit 4(f) of the Company's Annual Report on Form 10-K for the year ended December 31, 1991. 10(a). Alcoa of Australia Limited Shareholders' Agreement, dated December 16, 1987, between the Registrant and Western Mining Corporation Holdings Limited, incorporated by reference to exhibit 10.1 to Registration Statement No. 33-23092 on Form S-4. 10(b). Form of Indemnity Agreement between the Registrant and each of its directors and officers, incorporated by reference to exhibit 10.2 to Registration Statement No. 33-23092 on Form S-4. 10(c). Amended and Restated Term Loan Agreement, dated as of December 1, 1991, between Alcoa International Finance Company and Aluminum Company of America, incorporated by reference to exhibit 10(c) of the Company's Annual Report on Form 10-K for the year ended December 31, 1991. 10(d). Management Services Agreement between the Registrant and Aluminum Company of America, effective as of December 31, 1987, incorporated by reference to exhibit 10.5 to Registration Statement No. 33-23092 on Form S-4. 10(e). Secret Process and Technical Information Agreement, dated November 13, 1961, between Alcoa of Australia Proprietary Limited (now Alcoa of Australia Limited) and Aluminum Company of America, incorporated by reference to exhibit 10.6 to Registration Statement No. 33-23092 on Form S-4. 10(f). Alumina Refinery Agreements--Western Australia, incorporated by reference to exhibit 10.7 to Registration Statement No. 33-23092 on Form S-4. 10(g). Alumina Supply Agreement, dated January 3, 1989, between Alcoa of Australia Limited and Aluminum Company of America, incorporated by reference to exhibit 10(h) to the Company's Annual Report on Form 10-K for the year ended December 31, 1988. 10(h). Third Amendment, effective as of September 1, 1991, to the Management Services Agreement between the Registrant and Aluminum Company of America dated as of December 31, 1987, incorporated by reference to exhibit 10(h) of the Company's Annual Report on Form 10-K for the year ended December 31, 1991. 10(i). Amended and Restated Demand Loan Agreement, dated as of April 1, 1990, between Alcoa International Finance Company and Aluminum Company of America, incorporated by reference to exhibit 10(j) to the Company's Annual Report on Form 10-K for the year ended December 31, 1990. 10(j). Amendment to Amended and Restated Demand Loan Agreement, dated as of December 1, 1991, between Alcoa International Finance Company and Aluminum Company of America, incorporated by reference to exhibit 10(j) of the Company's Annual Report on Form 10-K for the year ended December 31, 1991. 10(k). Management Services Agreement between the Registrant and Three Rivers Insurance Company, effective as of September 1, 1991, incorporated by reference to exhibit 10(k) of the Company's Annual Report on Form 10-K for the year ended December 31, 1991. 10(l). Management Services Agreement between Three Rivers Insurance Company and the Registrant, effective as of September 1, 1991, incorporated by reference to exhibit 10(l) of the Company's Annual Report on Form 10-K for the year ended December 31, 1991. 10(m). Amendment to the Dealer Agreement with respect to the Euro-Commercial Paper Programme, dated January 14, 1991, among Alcoa of Australia Limited and various financial institutions, incorporated by reference to exhibit 10(m) of the Company's Annual Report on Form 10-K for the year ended December 31, 1991. 12. Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividend Requirements. 21. Subsidiaries of the Registrant. EX-3 2 EXHIBIT 3I TO 1993 AIHC 10-K EXHIBIT 3(i) AMENDED CERTIFICATE OF INCORPORATION of ALCOA INTERNATIONAL HOLDINGS COMPANY FIRST: The name of the Company is Alcoa International Holdings Company (hereinafter the "Company"). SECOND: The address of the registered office of the Company in the State of Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle. The name of its registered agent at that address is Corporation Service Company. THIRD: The purpose of the Company is to engage in any lawful act or activity for which a Company may be organized under the General Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware Code of (the "GCL"). FOURTH: The total number of shares of stock which the Company shall have authority to issue is 2,508,000 shares consisting of 2,500,000 shares of Preferred Stock, of the par value of $100.00 per share, in one or more series, each such series having such rights, powers, preferences and limitations as may be established therefor by the Board of Directors pursuant to Article FIFTH hereof; and 8,000 shares of Common Stock, of the par value of $1.00 per share. The holders of Common Stock shall have 1,000 votes per share. FIFTH: The Board of Directors is authorized, subject to limitations prescribed by law and the provisions of this Article, to provide for the issuance of the shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. The authority of the Board with respect to each series shall include, but not be limited to, determination of the following: (a) The number of shares constituting that series and the distinctive designation of that series; (b) The dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series; (c) Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; provided, however, that no series shall be granted voting rights which exceed one vote for each $100 liquidation preference pertaining to such stock; provided further, that if shares of Preferred Stock are purchased or otherwise acquired by any affiliate of the Company, such affiliate may not exercise the voting rights attached to such shares, if any; for purposes of this paragraph (c), "affiliate" shall mean any entity controlled by, in control of, or under common control with the Company; (d) Whether that series shall have conversion or exchange privileges, and, if so, the terms and conditions of such conversion or exchange rate in such events as the Board of Directors shall determine; (e) Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (f) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund; (g) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Company, and the relative rights or priority, if any, of payment of shares of that series; provided, that assets of the Company consisting of capital stock in subsidiary or affiliated companies that are subject to rights (including but not limited to rights of first refusal) held by other parties (except ALCOA, as defined in Article SEVENTH) will not be distributed in any such distribution or sold in connection with or in contemplation of any such distribution prior to the exercise or expiration of such rights in accordance with their terms; (h) Any other relative rights, preferences and limitations of that series. Dividends on outstanding shares of Preferred Stock shall be paid or declared and set apart for payment before any dividends shall be paid on the Common Stock with respect to the same dividend period. Whenever any shares of Preferred Stock are acquired by the Company, whether by purchase, redemption, conversion or exchange for other shares of the Company, or otherwise, they shall resume the status of authorized and unissued Preferred Stock without designation or series. SIXTH: The following provisions are inserted for the management of the business and the conduct of the affairs of the Company, and for further definition, limitation and regulation of the powers of the Company and of its directors and stockholders: (1) The business and affairs of the Company shall be managed by or under the direction of the Board of Directors. (2) The number of directors of the Company shall be as from time to time fixed by, or in the manner provided in, the By-Laws of the Company. Election of directors need not be by written ballot unless the By-Laws so provide. (3) To the fullest extent permitted by the GCL as the same exists or may hereafter be amended, a director of the Company shall not be liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director. If the GCL is amended after the filing of the Certificate to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Company shall be eliminated or limited to the fullest extent permitted by the GCL, as so amended. No amendment to or repeal of this Subsection (3) to Article SIXTH shall have any adverse effect on any right or protection of a director of the Company existing at the time of such amendment or repeal or with respect to any acts or omissions of such director occurring prior to such time. Notwithstanding anything contained in this Certificate to the contrary, the affirmative vote of the holders of not less than 66-2/3 percent of all votes entitled to be cast by the holders of stock of the Company entitled to vote in the election of directors, voting together as a single class, shall be required to amend or repeal this Subsection (3) to Article SIXTH or to adopt any provision inconsistent herewith. (4) In addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Company, subject, nevertheless, to the provisions of the GCL, this Certificate of Incorporation, and any By-Laws adopted by the stockholders; provided, however, that no By-Laws hereafter adopted by the stockholders shall invalidate any prior act of the directors which would have been valid if such By-Laws had not been adopted. SEVENTH: In anticipation that (i) ALCOA will be and will remain a substantial stockholder in the Company, (ii) the COMPANY and ALCOA may engage in the same or similar activities or lines of business and have an interest in the same areas of corporate opportunities, (iii) the COMPANY and ALCOA may enter into contracts or otherwise transact business with each other and that the Company may derive benefits therefrom and (iv) the Company may from time to time enter into contractual, corporate or business relations with one or more of its directors or one or more corporations, partnerships, associations or other organizations in which one or more of its directors have a financial interest (collectively, "Related Entities"), and in recognition of the benefits to be derived by the COMPANY through its continued contractual, corporate and business relations with ALCOA (including service of officers and directors of Alcoa as officers and directors of the Company), the provisions of this Article SEVENTH are set forth to regulate and define the conduct of certain affairs, contractual relationships and other business relations of the COMPANY as they may involve ALCOA, Related Entity and the respective officers and directors of the Company and Alcoa, and the powers, rights, duties and liabilities of the Company and its officers, directors and stockholders in connection therewith. The following provisions of this Article SEVENTH are in addition to, and not in limitation of, the provisions of the GCL and the other provisions of this Certificate: (1) ALCOA shall have no duty to refrain from (i) engaging in the same or similar activities or lines of business as the COMPANY, (ii) doing business with any customer of the COMPANY, or (iii) employing or otherwise engaging any officer, director or employee of the COMPANY and neither Alcoa nor any officer or director thereof (except as provided in Subsection (2) below) shall be liable to the Company or its stockholders for breach of any fiduciary duty by reason of any such activities of ALCOA or of such person's participation therein. In the event that ALCOA acquires knowledge of a potential transaction or matter which may be a corporate opportunity for both ALCOA and the COMPANY, ALCOA shall have no duty to communicate or offer such corporate opportunity to the COMPANY and shall not be liable to the Company or its stockholders for breach of any fiduciary duty as a stockholder of the Company by reason of the fact that ALCOA pursues or acquires such corporate opportunity for itself, directs such corporate opportunity to another person, or does not communicate information regarding such corporate opportunity to the COMPANY. (2) In the event that a director or officer of the Company who is also a director or officer of Alcoa requires knowledge of a potential transaction or matter which may be a corporate opportunity for both the COMPANY and ALCOA, such director or officer of the Company (a) shall have fully satisfied and fulfilled the fiduciary duty of such director or officer to the Company and its stockholders with respect to such corporate opportunity, (b) shall not be liable to the Company or its stockholders for breach of any fiduciary duty by reason of the fact that ALCOA pursues or acquires such corporate opportunity for itself or directs such corporate opportunity to another person or does not communicate information regarding such corporate opportunity to the COMPANY, (c) shall be deemed to have acted in good faith and in a manner such person reasonably believes to be in and not opposed to the best interests of the Company and (d) shall be deemed not to have breached his duty of loyalty to the Company or its stockholders and not to have derived an improper personal benefit therefrom, if such director or officer acts in a manner consistent with the following policy: When a corporate opportunity is offered to an officer and/or director of the Company who is also an officer and/or director of Alcoa in writing, solely in his or her designated capacity with one of the two companies, such opportunity shall belong to whichever corporation was so designated. Otherwise, (i) a corporate opportunity offered to any person who is an officer or officer and director of the Company, and who is also a director of Alcoa shall belong to the COMPANY, (ii) a corporate opportunity offered to a person who is a director of the Company and who is also an officer and/or director of Alcoa shall belong to ALCOA, (iii) a corporate opportunity offered to any person who is an officer, but not a director, of both the Company and Alcoa shall belong to ALCOA, (iv) a corporate opportunity offered to any person who is an officer and director of both the Company and Alcoa shall belong to ALCOA, and (v) a corporate opportunity offered to any person who is an officer or an officer and director of the Company and who is also an officer or an officer and director of Alcoa shall belong to ALCOA. (3) If any contract, agreement, arrangement or transaction between the COMPANY and ALCOA involves a corporate opportunity and is approved in accordance with the procedures set forth in Subparagraph (4) of this Article SEVENTH, Alcoa and its officers and directors shall have fully satisfied and fulfilled their fiduciary duties to the Company and its stockholders with respect thereto under this Article SEVENTH. Any such contract, agreement, arrangement or transaction involving a corporate opportunity not so approved shall not by reason thereof result in any breach of any fiduciary duty, but shall be governed by the other provisions of this Article SEVENTH, this Certificate, the By-Laws, the GCL and by law. (4) No contract, agreement, arrangement or transaction between the COMPANY and ALCOA or between the COMPANY and one or more of the directors or officers of the Company, Alcoa or any Related Entity or between the COMPANY and any Related Entity shall be void or voidable for the reason that ALCOA, any Related Entity or one or more of the officers or directors of the Company, Alcoa or any Related Entities are parties thereto, or because any such directors or officers are present at or participate in the meeting of the Board of Directors or committee thereof which authorizes the contract, agreement, arrangement or transaction, or because his, her or their votes are counted for such purpose, and Alcoa, any Related Entity and such directors and officers (a) shall have fully satisfied and fulfilled their fiduciary duties to the Company and its stockholders with respect thereto, (b) shall not be liable to the Company or its stockholders for any breach of fiduciary duty by reason of any entering into, performance or consummation of any such contract, agreement, arrangement or transaction, (c) shall, in the case of officers and directors of the Company, be deemed to have acted in good faith and in a manner such person reasonably believes to be in and not opposed to the best interests of the Company and (d) shall, in the case of officers and directors of the Company, be deemed not to have breached their duties of loyalty to the Company and its stockholders and not to have derived an improper personal benefit therefrom, if: (i) The material facts as to the contract, agreement, arrangement or transaction are disclosed or are known to the Board of Directors or the committee thereof which authorizes the contract, agreement, arrangement or transaction, and the Board of Directors or such committee in good faith authorizes the contract, agreement, arrangement or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) The material facts as to the contract, agreement, arrangement or transaction are disclosed or are known to the holders of capital stock entitled to vote thereon, and the contract, agreement, arrangement or transaction is specifically approved in good faith by vote of the holders of a majority of the voting power of the stock of the Company entitled to vote thereon. (5) Contracts, agreements, arrangements or transactions entered into by the COMPANY or any Related Entity with ALCOA or any Related Entity that confer or execute equal benefits on or to the parties are deemed to be arms length and the officers and directors of the Company that approve and execute such contracts, agreements, arrangements or transaction shall be deemed to have acted in good faith and in and not opposed to the best interests of the Company. (6) Directors of the Company who are also directors or officers of Alcoa or any Related Entity may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract, agreement, arrangement or transaction. (7) Any person purchasing or otherwise acquiring any interest in shares of the stock of the Company shall be deemed to have notice of and to have consented to the provisions of this Article SEVENTH. (8) For purposes of this Article SEVENTH: (a) A director of the Company who is Chairman of the Board of Directors of the Company or chairman of a committee thereof shall not be deemed to be an officer of the Company by reason of holding such position (without regard to whether such position is deemed an office of the Company under the By-Laws of the Company), unless such person is a full-time employee of the Company; and (b) "ALCOA" shall include Aluminum Company of America and all its successors by way of merger, consolidation or sale of all or substantially all of its assets, and all subsidiary corporations and all partnerships, joint ventures, associations and other entities in which Aluminum Company of America owns (directly or indirectly) fifty percent or more of the outstanding voting stock, voting power, partnership interests or similar ownership interests, but shall not include the COMPANY; (c) "Alcoa" shall include Aluminum Company of America and all its successors by way of merger, consolidation or sale of all or substantially all of its assets; (d) The "COMPANY" shall include the Company and all subsidiary corporations and all partnerships, joint ventures, associations and other entities in which the Company owns (directly or indirectly) fifty percent or more of the outstanding voting stock, voting power, partnership interests or similar ownership interests; and any contract, agreement, arrangement or transaction with any such entity, or with any officer or director thereof, shall be deemed to be a contract, agreement, arrangement or transaction with the COMPANY; and (e) "Corporate opportunities" shall include, but not be limited to, business opportunities which the COMPANY and ALCOA, as the case may be, are financially able to undertake, which are, from their nature, in the line of the COMPANY's or ALCOA's business and are of practical advantage to them, which are ones in which the COMPANY or ALCOA, as the case may be, have an interest or a reasonable expectancy, and as to which by embracing the opportunity, the self-interest of the Company or Alcoa or the officer or director, as the case may be, will be brought into conflict. (9) Notwithstanding anything in this Certificate to the contrary and in addition to any vote of the Board of Directors required by this Certificate, the affirmative vote of at least 66-2/3% of all votes entitled to be cast by the holders of stock of the Company entitled to vote in the election of directors, voting together as a single class, shall be required to alter, amend or repeal, or adopt any provision inconsistent with, any provision of this Article SEVENTH. Neither the alteration, amendment or repeal of this Article SEVENTH, nor the adoption of any provision inconsistent with this Article SEVENTH, shall eliminate or reduce the effect of this Article SEVENTH in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article SEVENTH would accrue or arise, prior to such alteration, amendment, repeal or adoption. (10) Any Contract or business relation which does not comply with the rules set forth in this Article SEVENTH shall not by reason thereof be deemed void or voidable or result in any breach of any fiduciary duty, but shall be governed by the provisions of this Certificate, the By-Laws, the GCL and by law. EIGHTH: In the event of a Change in Control, the holders of Preferred Stock, by the affirmative vote of a majority of the outstanding shares of Preferred Stock entitled to vote in the election of directors, voting together as a single class, may require the Company to redeem such Preferred Stock at redemption price per share in cash equal to the liquidation preference plus an amount equal to all unpaid dividends thereon, including all accrued dividends, whether or not declared through the redemption date. Within five Business Days following the occurrence of a Change in Control, the Company shall notify the holders of such Preferred Stock of the Change in Control. (1) For purposes of this Article EIGHTH: (a) "Change in Control" shall mean the acquisition by any person or group of persons of (i) beneficial ownership of a majority of the voting power of the outstanding voting stock of the Company or Alcoa, or (ii) all or substantially all of the assets of the Company or Alcoa; and (b) "Alcoa" shall mean Aluminum Company of America and all its successors by way of merger, consolidation or sale of all or substantially all of its assets. (c) "Business Day" shall mean a day on which the New York Stock Exchange is open for trading and which is not a Saturday, Sunday or other day on which commercial banks in The City of New York, New York are authorized or required by law to close. (2) Notwithstanding the availability of any other remedies, whether at law or in equity, the remedies provided to the holders of Preferred Stock in this Article EIGHTH shall be the sole and exclusive remedies arising upon the failure of the Company to comply with the provisions of this Article EIGHTH; provided, however, that this paragraph (2) shall not prohibit any such holder from taking any action to prevent such failure prior to its occurrence. (3) Notwithstanding anything in this Certificate to the contrary and in addition to any vote of the Board of Directors required by this Certificate, an 85% Vote shall be required to alter, amend or repeal, or adopt any provision inconsistent with, any provision of this Article EIGHTH. "85% Vote" shall mean the affirmative vote of at least 85% of all votes entitled to be cast by the holders of stock of the Company entitled to vote in the election of directors, voting together as a single class; provided, however, that the affirmative vote of votes entitled to be cast by the holders of Preferred Stock entitled to vote in the election of directors, if any, must constitute at least 10% of the total votes entitled to be cast. Neither the alteration, amendment or repeal of this Article EIGHTH, nor the adoption of any provision inconsistent with this Article EIGHTH, shall eliminate or reduce the effect of this Article EIGHTH in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article EIGHTH would accrue or arise, prior to such alteration, amendment, repeal or adoption. NINTH: Without Approval of Shareholders, the Company will not, and will not permit its subsidiaries to, tell, transfer or otherwise dispose of in one or more transactions, except in the ordinary course of business, assets having an aggregate book value of more than 50% of the Consolidated Assets of the Company. The provisions of this Article NINTH shall not apply to sales, transfers or other dispositions of assets by the Company or one of its subsidiaries to another such subsidiary or to the Company. The provisions of this Article NINTH shall expire and shall be of no further force and effect after June 30, 1992. (1) For purposes of this Article NINTH: (a) "Consolidated Assets" of the Company shall mean the total of all assets of the Company and its Consolidated Subsidiaries (as defined in Article TENTH) which in accordance with United States generally accepted accounting principles would be included in determining total assets as shown on the balance sheet of the Company for the latest fiscal year prior to the date as of which Consolidated Assets are to be determined; and (b) "Approval of Sha eholders" shall mean an 85% Vote (as defined in Article EIGHTH). (2) Notwithstanding anything in this Certificate to the contrary and in addition to any vote of the Board of Directors required by this Certificate, an 85% Vote shall be required to alter, amend or repeal, or adopt any provision inconsistent with, any provision of this Article NINTH. Neither the alteration, amendment or repeal of this Article NINTH, nor the adoption of any provision inconsistent with this Article NINTH, shall eliminate or reduce the effect of this Article NINTH in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article NINTH would accrue or arise, prior to such alteration, amendment, repeal or adoption. TENTH: The aggregate principal amount of (i) the Indebtedness of the Company and its Consolidated Subsidiaries, after eliminating intercompany items, plus (ii) all other liabilities of the Company and its Consolidated Subsidiaries, after eliminating intercompany items, in respeet of any guaranty or endorsement (except negotiable instruments for deposit or collection or similar transactions in the normal course of business) of the Indebtedness of any person, firm or corporation (other than the Company or a Consolidated Subsidiary), shall not exceed one hundred fifty percent (150%) of the Consolidated Net Worth of the Company. (1) For purposes of this Article TENTH: (a) "Indebtedness" shall include all obligations for borrowed money, obligations (other than accounts payable and other similar items arising in the normal course of business) for the deferred payment of the purchase price of property, and lease obligations which in accordance with United States generally accepted accounting principles would be included in determining total liabilities as shown on the liability side of the balance sheet of the respective company on the date as of which Indebtedness is to be determined; and (b) "Consolidated Subsidiaries" means and includes only those subsidiaries whose acc unts are consolidated with the accounts of the Company in accordance with the Company's policy of consolidated as in effect from time to time and as reflected in the Company's audited statements; (c) "Consolidated Net Worth" means the sum of (i) consolidated shareholders' equity, (ii) consolidated minority interests, and (iii) preferred stocks not included in shareholders' equity, determined in accordance with United States generally accepted accounting principles. (2) Notwithstanding anything in this Certificate to the contrary and in addition to any vote of the Board of Directors required by this Certificate, an 85% Vote (as defined in Article EIGHTH) shall be required to alter, amend or repeal, or adopt any provision inconsistent with, any provision of this Article TENTH. Neither the alteration, amendment or repeal of this Article TENTH, nor the adoption of any provision inconsistent with this Article TENTH, shall eliminate or reduce the effect of this Article TENTH in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article TENTH would accrue or arise, prior to such alteration, amendment, repeal or adoption. ELEVENTH: Meetings of stockholders may be held within or without the State of Delaware, as the By-Laws may provide. The books of the Company may be kept (subject to any provision contained in the GCL) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the Company. TWELFTH: The Company reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. Except as provided in this Certificate or as otherwise provided by law, the affirmative vote of a majority of all votes entitled to be cast by the holders of stock of the Company entitled to vote generally in the election of directors voting together as a single class shall be required to alter, amend, change or repeal any provision contained in this Certificate of Incorporation. EX-3 3 EXHIBIT 3II TO 1993 AIHC 10-K EXHIBIT 3(ii) BY-LAWS of ALCOA INTERNATIONAL HOLDINGS COMPANY ARTICLE I GENERAL PROVISIONS Section 1. Offices. The registered office of the company shall be at 1209 Orange Street, Wilmington, Delaware 19801. The company may also have offices at such other locations as the business of the company may require. Section 2. Seal. The company shall have a corporate seal in such form as the board of director shall from time to time approve. Section 3. Fiscal Year. The fiscal year of the company shall end on the 31st day of December. Section 4. Stock Certificates. Stock certificates shall be in such form as the board of directors shall from time to time approve. Each certificate shall be signed by the president or a vice president and by the treasurer or secretary, and shall be sealed with the corporate seal. ARTICLE II STOCKHOLDERS' MEETING Section 1. Place of Meetings. Meetings of the stockholders of the company shall be held at the principal office of the company or at such other place as may be designated in the notice of the meeting or duly executed waivers of notice thereof. Section 2. Annual Meeting. The annual meeting of the stockholders shall be held on the third Thursday in April of each year at 10:00 a.m. local time or on such other day or at such other time as may be designated in the notice of the meeting or duly executed waivers of notice thereof. Section 3. Special Meeting. A special meeting of the stockholders may be called by the board of directors of the company. Section 4. Notice. Written notice of the time and place of each meeting of the stockholders, and in the case of a special meeting the purpose or purposes thereof, shall be given to each stockholder of record either in person or by mail to the record address of the stockholder, not less than ten nor more than sixty days before the meeting. Such notice shall be given by the president or the secretary. Section 5. Chairman of Meeting. All meetings of the stockholders shall be called to order and presided over by the chairman of the board, or in the absence of the chairman of the board, by the president, or in the absence of both, by the vice president present having the most seniority in that position, or if none of these be present, by a chairman elected by the stockholders present. Section 6. Quorum. The holders of a majority of the shares entitled to vote, present in person or by proxy, shall constitute a quorum for the transaction of business at a meeting of the stockholders. The stockholders present at a duly organized meeting can continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. If at any meeting a quorum shall not be present, a majority vote of the shares represented may adjourn the meeting from time to time for up to 30 days until a quorum shall be present. Section 7. Voting. Each question shall be decided by the vote of a majority of the shares represented at any duly organized meeting of the stockholders and entitled to vote on such question, unless otherwise specially provided by law. ARTICLE II BOARD OF DIRECTORS Section 1. Number. Until the number of the directors has been increased or decreased as hereinafter provided, the number of the directors shall be four. The board of directors is hereby authorized to increase or decrease the number of the directors, from time to time, without a vote of the stockholders, provided however that such number shall not be less than three nor more than twelve. Notwithstanding the foregoing, upon any annual election by the stockholders of a number of directors different than that in effect immediately prior to such election, the number of the directors shall automatically be increased or decreased to the number so elected. Section 2. General Powers. The board of directors shall have power in general to manage the business and affairs of the company consistent with the law, the Certificate of Incorporation of the company and these by-laws, and may from time to time adopt such regulations regarding the powers, duties and compensation of the respective officers, assistant officers and agents and the conduct of the company's business as the board may deem proper and expedient. Section 3. Election. At each annual meeting of the stockholders, the stockholders shall elect directors each of whom shall hold office until the next annual meeting of the stockholders and until the successors to such director shall have been elected and qualified, except in the case of earlier death, resignation or removal. Section 4. Vacancies. Any vacancies in the board of directors, including those resulting form an increase in the number of directors, may be filled by the remaining directors, though less than a quorum. Section 5. Annual Meeting. The board of directors shall without notice meet each year upon adjournment of the annual meeting of the stockholders, or at such other time or place as shall be designated in a notice given to all nominees for director, for the purposes of organization, election of officers and consideration of any other business that may properly be brought before the meeting. Section 6. Special Meeting. Special meetings of the board of directors may be called by the chairman of the board, the president, the secretary or any two directors. Section 7. Quorum. A majority of the directors in officer shall be necessary to constitute a quorum for the transaction of business at a meeting of the board of directors, provided that at least one-third of the total number of directors shall be necessary to constitute a quorum. If at any meeting a quorum shall not be present, a majority of the directors present may adjourn the meeting from time to time until a quorum shall be present. Section 8. Voting. The acts of a majority of the directors present at a meeting at which a quorum is present shall be the acts of the board of directors. Section 9. Committee Meetings. A majority of the members of any committee of the board of directors shall constitute a quorum for the transaction of business by such committee, and the acts of a majority of the committee members present at a meeting at which a quorum is present shall be the acts of the committee; provided, however, that in the absence or disqualification of any member of any such committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Section 10. Participation by Conference Telephone. One or more directors may participate in a meeting of the board or of a committee of the board by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. ARTICLE IV GENERAL MEETING PROVISIONS Section 1. Waiver of Notice. A written waiver of notice of a meeting, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Neither the business to be transacted at, nor the purpose of, any meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice thereof. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Section 2. Director Action by Written Consent. Any action required or permitted to be taken at any meeting of the board of directors or a committee thereof may be taken without meeting if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed by the secretary with the minutes of proceedings of the board or committee. Section 3. Stockholder Action by Written Consent. Any action required or permitted to be taken at any meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of the outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt written notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to the stockholders who have not consented in writing. ARTICLE V OFFICERS Section 1. Election. The board of directors at its annual meeting shall elect a president, a secretary and a treasurer, and may elect a chairman of the board, one or more vice presidents, a controller, and such other officers and assistant officers as the board may deem appropriate. The board of directors may also, from time to time, elect such other officers and assistant officers and appoint such agents as it may deem appropriate. Section 2. Term of Office. Each officer and assistant officer shall hold office until the annual meeting of the board of directors following the end of the term of the board by which such officer or assistant officer is elected, except in the case of earlier death, resignation or removal. Any officer or assistant officer may be removed, with or without cause, at any time by the vote of a majority of the members of the board then in office. Section 3. Chairman of the Board. The chairman of the board shall preside at all meetings of the board of directors at which such chairman is present. Section 4. President. The president shall, in general, perform all duties incident to the office of president, and shall be a member ex officio of all committees of management appointed by the president. In the absence of the chairman of the board, the president shall preside at meetings of the board of directors. Section 5. Vice Presidents. Each vice president shall have such powers and perform such duties as the president may from time to time delegate to such vice president, except as otherwise determined by the board of directors. Section 6. Secretary. The secretary will attend meetings of the stockholders and the board of directors, shall keep minutes thereof in suitable books, and shall send out all notices of meetings as required by law or these by-laws. The secretary shall be ex officio an assistant treasurer. The secretary shall, in general, perform all duties incident to the office of secretary. Section 7. Treasurer. The treasurer shall receive all money paid to the company and keep or cause to be kept accurate accounts of all money received or payments made in books kept for that purpose. The treasurer shall deposit all money received by him in the name and to the credit of the company in such bank or other place or places of deposit as the board of directors or any officer or assistant officer of the company duly authorized by the board of directors shall designate. The treasurer shall be ex officio an assistant secretary. The treasurer shall, in general, perform all duties incident to the office of treasurer. Section 8. Controller. The controller shall be responsible for the implementation of accounting policies and procedures, the installation and supervision of all accounting records, including the preparation and interpretation of financial statements, the compilation of production costs and cost distributions and the taking and valuation of physical inventories. The controller shall also be responsible for the maintenance of adequate records of authorized appropriations and the approval for payment of all checks and vouchers. The controller shall, in general, perform all duties incident to the office of controller. Section 9. Assistant Officers. Each assistant officer shall have such powers and perform such duties as may be delegated to such assistant officer by the officer to whom such assistant officer is an assistant or, in the absence or inability to act of such officer, by the officer to whom such officer reports or by the president. Section 10. Signing and Endorsing Checks, etc. The treasurer or any assistant treasurer, and any other person or persons who shall be designated by or in accordance with a procedure adopted by the board of directors, shall have the power, in the name and on behalf of the company, (a) to sign checks, voucher and drafts, and (b) to endorse for collection all checks and other negotiable instruments. ARTICLE VI INDEMNIFICATION Section 1. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer, of the company or is or was serving at the request of the company as a director, officer, employee or agent of another company or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the company to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the company to provide broader indemnification rights than said law permitted the company to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, witness expenses, judgments, fines, excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Section 2 of this Article VI, the company shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person against the company only (i) if the person seeking indemnification is successful in such proceeding (or part thereof) for which indemnification is claimed or (ii) if the indemnification for expenses is included in a settlement of the proceeding or is awarded by a court. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the company the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law, By-law, or agreement requires, the payment of such expenses in advance of the final disposition of a proceeding, shall be made only upon delivery to the company of an undertaking to repay all amounts so advanced if it shall ultimately be determined that the person seeking indemnification is not entitled to be indemnified under this Article VI or otherwise. The company may, by action of its board of directors, provide indemnification to employees and agents of the company with the same scope and effect as the foregoing indemnification of directors and officers. Section 2. Right of Claimant to Bring Suit. If a claim under Section 1 of this Article VI is not paid in full by the company within thirty days after a written claim has been received by the company, the claimant may at any time thereafter bring suit against the company to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the company) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the company to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the company. Neither the failure of the company (including its board of directors, legal counsel, or its stockholders) to have a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the company (including its Board of Directors, legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not me the applicable standard of conduct. Section 3. Insurance. The company may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the company or another company, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the company would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. Section 4. Non-Exclusivity of Rights. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred to in this Article VI shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-law, agreement, vote of stockholders or disinterested directors or otherwise. The company may enter into indemnity agreements with directors, officers and other persons which the company may, by action of the board of directors, determine. The right of indemnification provided for herein may not be amended or repealed so as to limit in any way the indemnification provided for herein with respect to any acts or omissions occurring prior to any such amendment or repeal. -----END PRIVACY-ENHANCED MESSAGE-----