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<SEC-DOCUMENT>0000004281-00-000007.txt : 20000229
<SEC-HEADER>0000004281-00-000007.hdr.sgml : 20000229
ACCESSION NUMBER: 0000004281-00-000007
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 11
CONFORMED PERIOD OF REPORT: 19991231
FILED AS OF DATE: 20000228
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: ALCOA INC
CENTRAL INDEX KEY: 0000004281
STANDARD INDUSTRIAL CLASSIFICATION: PRIMARY PRODUCTION OF ALUMINUM [3334]
IRS NUMBER: 250317820
STATE OF INCORPORATION: PA
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT:
SEC FILE NUMBER: 001-03610
FILM NUMBER: 555249
BUSINESS ADDRESS:
STREET 1: 201 ISABELLA ST
STREET 2: ALCOA CORPORATE CTR
CITY: PITTSBURGH
STATE: PA
ZIP: 15212
BUSINESS PHONE: 4125532576
MAIL ADDRESS:
STREET 1: 201 ISABELLA ST
STREET 2: ALCOA CORPORATE CTR
CITY: PITTSBURGH
STATE: PA
ZIP: 15212
FORMER COMPANY:
FORMER CONFORMED NAME: ALUMINUM CO OF AMERICA
DATE OF NAME CHANGE: 19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<TEXT>
UNITED STATES
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
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-3610
ALCOA INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0317820
(State of incorporation) (I.R.S. Employer Identification No.)
Alcoa Corporate Center, 201 Isabella Street, Pittsburgh, Pennsylvania 15212-5858
(Address of principal executive offices) (Zip code)
Registrant's telephone number--area code 412
Investor Relations------------553-3042
Office of the Secretary------553-4707
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, par value $1.00 New York Stock Exchange
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 February 17, 2000 there were 371,872,159 shares of common stock, par
value $1.00, 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 $28,450 million.
Documents incorporated by reference.
Parts I and II of this Form 10-K incorporate by reference certain
information from the registrant's 1999 Annual Report to Shareholders. Part III
of this Form 10-K incorporates by reference the registrant's Proxy Statement
dated February 25, 2000, except for the performance graph and Compensation
Committee Report.
1
<PAGE>
ALCOA INC.
Formed in 1888 under the laws of the Commonwealth of Pennsylvania, Alcoa Inc.
has its registered office in Pittsburgh, Pennsylvania. The name of the Company
was changed, effective January 1, 1999, from Aluminum Company of America to
Alcoa Inc. In this report, unless the context otherwise requires, Alcoa or the
Company means Alcoa Inc. and all subsidiaries consolidated for the purposes of
its financial statements.
PART I
Item 1. Business.
Overview
- --------
Alcoa is the world's leading producer of primary aluminum, fabricated aluminum
and alumina and a major participant in all segments of the industry: mining,
refining, smelting, fabricating and recycling. Alcoa serves customers worldwide
primarily in the transportation (including aerospace, automotive, rail and
shipping), packaging, building and industrial markets with a great variety of
fabricated and finished products.
Alcoa is organized into 25 independently managed business units and has over 228
operating locations in 32 countries. Alcoa gives business unit leaders clear
responsibilities that concentrate authority closer to customers.
The U.S. remains the largest market for aluminum. Europe, Asia and Latin
America, however, present opportunities for substantial growth in aluminum use.
To take advantage of these growth opportunities, Alcoa has made acquisitions or
formed joint ventures and strategic alliances in key regional markets.
Recent Developments
- -------------------
In August 1999, Alcoa and Reynolds Metals Company (Reynolds) announced that they
had reached a definitive merger agreement under which Alcoa will acquire all
outstanding shares of Reynolds in a tax-free stock-for-stock transaction.
Reynolds shareholders will receive 1.06 shares of Alcoa common stock for each
share of Reynolds common stock.
The combined company will have about 127,000 employees and will operate in over
300 locations in 37 countries. Based on annualized 1999 results, the combined
company should have annual revenues that exceed $21 billion.
Alcoa and Reynolds have made all of the requisite competition notification
filings with the appropriate U.S. and international governmental authorities. On
February 11, 2000, the Reynolds stockholders voted to approve and adopt the
merger agreement. Completion of the merger is subject to satisfaction of
applicable regulatory requirements.
Market and Geographic Information
- ---------------------------------
Alcoa serves a variety of customers in a number of markets. Consolidated
sales from these markets during the past three years were:
2
<PAGE>
<TABLE>
<CAPTION>
(dollars in millions)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Transportation $ 3,976 $ 3,738 $ 3,119
Packaging 3,169 3,304 3,201
Distributor and Other 2,896 2,764 2,151
Aluminum Ingot 2,241 2,012 1,521
Alumina and Chemicals 1,842 1,781 1,961
Building and Construction 2,199 1,741 1,366
----- ----- -----
Total $16,323 $15,340 $13,319
======= ======= =======
(dollars in millions)
1999 1998 1997
U.S. $10,392 $ 9,212 $ 7,593
Australia 1,398 1,470 1,875
Spain 1,059 965 44
Brazil 730 934 1,161
Germany 521 554 580
Other 2,223 2,205 2,066
----- ----- -----
Total $16,323 $15,340 $13,319
======= ======= =======
</TABLE>
Alcoa's Financial Reporting Segments
- ------------------------------------
In accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," Alcoa reports four worldwide segments: Alumina and
Chemicals, Primary Metals, Engineered Products and Flat-Rolled Products. All of
the Company's products that do not fall into one of those four segments are
reported in the category entitled Other. See Note O to the Financial Statements
for information on segment and related geographic financial information.
I. Alumina and Chemicals
The Alumina and Chemicals segment includes the production and sale of:
o bauxite
o alumina
o alumina-based chemicals used principally in industrial applications
and
o transportation services for bauxite and alumina.
The segment consists of a group of companies and assets referred to as Alcoa
World Alumina and Chemicals (AWAC). Alcoa owns 60% and WMC Limited (WMC) owns
40% of the AWAC group of companies. AWAC has two businesses with distinct
product lines: Alcoa World Alumina (AWA) produces smelter grade alumina and
Alcoa Industrial Chemicals (AIC) makes alumina-based chemicals. AWA also has two
geographic regions: Alcoa World Alumina - Australia (AWA - Australia) and Alcoa
World Alumina - Atlantic (AWA - Atlantic). Alcoa World Alumina Australia is the
trading name for Alcoa of Australia Limited (AofA); all references throughout
this report will be to AWA - Australia instead of AofA.
Bauxite and Alumina
- -------------------
Bauxite is aluminum's principal raw material. Alcoa refines bauxite into alumina
using a chemical process. Alcoa processes into alumina most of the bauxite that
it mines. All of the Company's active bauxite interests are part of AWAC, except
in Brazil.
3
<PAGE>
Alcoa is the world's leading producer of alumina. The Company sells alumina
principally from operations in Australia, Jamaica and Suriname. Alcoa sold
approximately 53% of its alumina production in 1999 under supply contracts to
third parties worldwide. The Company consumed the remainder of its alumina
production in its smelting and industrial chemical operations. Alcoa negotiates
most of its alumina supply contracts on the basis of agreed volumes over
multi-year periods to assure a continuous supply to the smelters. The parties
negotiate the prices periodically. Prices may be based on formulas related to
aluminum ingot market prices or to alumina production costs.
AWA entities and Sino Mining Alumina Limited (SMAL) have a long-term agreement
for the purchase of alumina for the Chinese aluminum industry. SMAL is
ultimately owned by the China State Nonferrous Metals Industry Administration
(SNMIA), a Chinese state-owned enterprise that has succeeded the China National
Nonferrous Metals Industry Corporation as the entity responsible for the Chinese
aluminum industry as part of the ongoing governmental restructuring in China.
The agreement entitles a subsidiary of SMAL to purchase a minimum of 400,000
metric tons (mt) of alumina per year for 30 years. The ongoing restructuring of
SNMIA and the Chinese aluminum industry has not impacted this agreement. The
SMAL subsidiary also has the option to increase its alumina purchases as the
needs of the Chinese aluminum industry grow.
In November 1999, Alcoa and China Aluminum Corp. (Chalco) signed a memorandum of
understanding to form a strategic partnership. SNMIA witnessed the memorandum of
understanding. The parties are negotiating a master strategic partnership
agreement that is expected to involve an association of several Chalco and Alcoa
aluminum production facilities.
Alcoa World Alumina - Australia
- -------------------------------
AWA - Australia's bauxite mineral lease is due for renewal in 2002, but renewal
options allow AWA - Australia to extend the lease until 2044.
AWA - Australia's three alumina refineries, located in Kwinana, Pinjarra and
Wagerup, in Western Australia, have an aggregate annual capacity of 7.3 million
mt at the end of 1999. In October 1999, AWA - Australia announced that it had
completed its 440,000 mt per year expansion of the Wagerup refinery. This
expansion increased Wagerup's production capacity from approximately 1.7 million
mt per year to approximately 2.2 million mt per year. This is the first stage of
a planned expansion to 3.3 million mt per year at Wagerup, for which AWA -
Australia has obtained environmental approval.
AWA - Australia meets most of the energy requirements of its Australian
refineries through a contract with the North West Shelf Gas Joint Venture. The
contract extends through 2020.
In May 1999, AWA announced that it had applied for a patent for a
high-efficiency causticization invention for use in the alumina refining
process. A research team at the Kwinana refinery developed the new process,
which improves productivity at a refinery by reducing the amount of sodium
carbonate in the chemical solution for processing the bauxite ore.
AWA - Australia is exploring the possibility of selling three power stations in
Western Australia and has requested bids from interested parties. The three
natural gas-fired cogeneration power stations are located within each of AWA -
Australia's three alumina refineries in Western Australia.
Alcoa World Alumina - Atlantic
- ------------------------------
Suriname
Suriname Aluminum Company, L.L.C. (Suralco) mines bauxite in Suriname under
rights that expire in 2032. Suralco also holds a 24% minority interest in a
bauxite mining joint venture managed by the
4
<PAGE>
majority owner, an affiliate of Billiton plc (Billiton). Bauxite from both
mining operations serves Suralco's share of a refinery in Suriname. Suralco
expects to deplete the current mine reserves at both operations in the period
2005-2010.
Suralco owns 55% of a 1.7 million mt per year alumina refinery in Paranam,
Suriname and operates the plant. An affiliate of Billiton holds the remaining
45% interest.
Jamaica
Bauxite mining rights in Jamaica expire after the year 2020. The bauxite mining
rights are held in a joint venture (Jamalco) with the Government of Jamaica. In
January 2000, Jamalco entered into a cost-sharing and production-sharing joint
venture with Aluminum Partners of Jamaica to mine the bauxite.
An Alcoa subsidiary and a corporation owned by the Government of Jamaica are
equal participants in an alumina refinery in Clarendon Parish, Jamaica. The
Alcoa subsidiary manages the joint venture. At the end of 1999, the refinery's
annual capacity was approximately one million mt.
Brazil
Alcoa owns 59% of Alcoa Aluminio S.A. (Aluminio). Aluminio manages the operation
of the Alumar Consortium (Alumar), a cost-sharing and production-sharing venture
that owns a large refining and smelting project near Sao Luis, in the
northeastern state of Maranhao. For the refining project, Aluminio owns 35.1% of
Alumar, an affiliate of Billiton owns 36%, Abalco S.A. (owned 60% by Alcoa and
40% by WMC) owns 18.9% and an affiliate of Alcan Aluminium Limited (Alcan) owns
10%.
In 1999, the Alumar refinery completed an expansion of 260,000 mt, bringing the
total annual capacity to approximately 1.25 million mt. The smelter consumes
most of this alumina production.
Aluminio holds an 8.6% interest and Abalco S.A. holds a 4.6% interest in
Mineracao Rio do Norte S.A. (MRN), a mining company jointly owned by affiliates
of Alcan, Companhia Brasileira de Aluminio, Companhia Vale do Rio Doce,
Billiton, Norsk Hydro and Reynolds. Aluminio and Abalco S.A. purchase bauxite
from MRN under long-term supply contracts.
At Pocos de Caldas, Aluminio mines bauxite and operates a refinery. The refinery
has an annual capacity of 275,000 mt and primarily supplies Aluminio's nearby
smelter.
Spain
Alcoa and a WMC affiliate hold 60% and 40% interests, respectively, in the
refinery at San Ciprian. The refinery's current annual capacity is 1.1 million
mt. A modernization plan for the San Ciprian plant will increase alumina
production capacity by 220,000 mt per year. Basic engineering of the project has
been completed and the work is expected to finish by March 2001.
Africa
Alcoa has long-term contracts to purchase bauxite mined by a partially-owned
entity in the Republic of Guinea in Western Africa. This bauxite services most
of the requirements of the Pt. Comfort, Texas and San Ciprian, Spain alumina
refineries. The contracts expire after 2011.
United States
AWA, through a majority-owned entity, St. Croix Alumina, L.L.C., owns a 600,000
mt per year alumina refinery located on St. Croix, U.S. Virgin Islands. In
February 1998, AWA restarted the refinery due to
5
<PAGE>
an increase in worldwide demand for alumina. The refinery had been inactive as a
result of world alumina market conditions.
AWA owns an alumina refinery at Pt. Comfort, Texas with an annual capacity to
2.3 million mt.
Alcoa Industrial Chemicals
- --------------------------
Alcoa sells industrial chemicals to customers in a broad spectrum of markets.
These markets include:
o refractories
o ceramics
o abrasives
o chemicals processing and
o other specialty applications.
Alcoa produces or processes industrial chemicals, principally alumina-based
chemicals, at the following locations. Except for the plants located in Brazil,
all of the following facilities are part of AIC:
o Bauxite, Arkansas
o Dalton, Georgia
o Falta, India (joint venture)
o Ft. Meade, Florida
o Iwakuni and Naoetsu, Japan
o Kwinana and Rockingham, Australia
o Leetsdale, Pennsylvania
o Ludwigshafen, Germany
o Moerdijk and Rotterdam, the Netherlands
o Pocos de Caldas and Salto, Brazil
o Port Allen and Vidalia, Louisiana
o Pt. Comfort, Texas and
o Singapore.
In late 1998, AIC began construction of a facility in China to process tabular
alumina and other alumina-based materials for sale to the Chinese refractory
market. This facility is scheduled for completion in the first half of 2000.
Alcoa produces aluminum fluoride at two locations, Pt. Comfort and Ft. Meade,
both in the U.S. At Pt. Comfort, the aluminum fluoride is produced from
fluorspar and at Ft. Meade it is produced from hydrofluosilicic acid. Aluminum
fluoride is used in the aluminum smelting process.
AIC and PR Minerals, LLC formed a joint venture company named Great Lakes
Minerals, L.L.C. The new company processes industrial mineral products,
primarily refractory aggregates such as calcined bauxite and brown fused
alumina. A newly constructed processing facility in Wurtland, Kentucky began
operating in January 2000.
II. Primary Metals
The Company smelts primary aluminum from alumina obtained principally from its
alumina refineries. Alcoa's consolidated primary aluminum capacity is
approximately 3.2 million mt per year. When operating at capacity, Alcoa's
smelters satisfy most of the primary aluminum requirements of its fabricating
operations. Alcoa operations used most of the Company's primary aluminum
production in 1999 for alloying and/or further fabricating. Purchases of
aluminum scrap, principally used beverage cans, supplemented by purchases of
ingot when necessary, satisfy additional aluminum requirements.
6
<PAGE>
Since 1994, Alcoa has had 450,000 mt of its worldwide smelting capacity idle
because of an oversupply of ingot on world markets. In January 2000, Alcoa
announced that it will restart approximately 200,000 mt of its currently idled
aluminum smelting capacity. The Company plans to bring this capacity into
production over the course of the year. Alcoa will have approximately 250,000 mt
of aluminum smelting capacity that remains idle following this restart.
Alcoa produces aluminum from alumina by an electrolytic process requiring large
amounts of electric power. Electric power accounts for approximately 25% of the
Company's primary aluminum costs. Alcoa generates approximately 25% of the power
used at its smelters worldwide. Most purchase contracts for firm power tie
prices to aluminum prices or to prices based on various indices.
In February 1999, the Company entered into a 50/50 joint venture with C.C. Pace
Resource Management, LLC, an energy management and consulting company, to form
Pace Global Energy Services, LLC. The new company will provide a variety of
energy-related management and consulting services to Alcoa and to other
unaffiliated companies.
Australia
AWA - Australia is a participant in a joint venture smelter at Portland, in the
State of Victoria, with an annual capacity of 345,000 mt. The owners of the
smelter are:
o AWA - Australia (45% interest)
o China International Trust and Investment Corporation (22.5% interest)
o Marubeni Aluminium Australia Pty., Ltd. (22.5% interest) and
o Eastern Aluminum Ltd. (10% interest).
Each participant in this smelter contributes to the cost of operations and
construction in proportion to its interest in the venture. Each participant also
then receives a proportionate share of the output. AWA - Australia supplies the
alumina through individual commercially negotiated contracts and operates the
smelter.
Power is generated from extensive brown coal deposits covered by a long-term
mineral lease held by AWA - Australia, and that power currently provides
approximately 40% of the electricity for the Company's 180,000 mt per annum
smelter in Point Henry, Victoria. The State Electricity Commission of Victoria,
under contracts with AWA - Australia, provides the remaining power for this
smelter and all power for the Portland smelter. Using a formula, the parties
determine the power prices based on the price of aluminum. Negotiations have
been finalized to permit power interuptibility at both Point Henry and Portland
that will contribute to accommodating peak demands in the power grid serving the
State of Victoria.
Brazil
The Alumar smelter at Sao Luis, Brazil has an annual capacity of 365,000 mt.
Based on the cost-sharing and production-sharing structure, Aluminio receives
about 54% of the production from this smelter. The alumina requirements for its
share of the smelter production are supplied from Aluminio's share of the nearby
refinery. Aluminio purchases electric power from Central Eletricas de Minas
Gerais S.A. (CEMIG), the government-controlled electric utility, at a small
discount from the applicable industrial tariff price. There is a protective cap
on the price of the electric power based on the London Metal Exchange (LME)
aluminum price.
In February 1999, Aluminio and CEMIG entered into a new power purchase
agreement. Similar to the previous agreement, Aluminio purchased the plant's
anticipated full power requirements for 38 months, beginning April 1999, through
a single payment based on the price of energy on the date of the agreement.
7
<PAGE>
Aluminio participates in a consortium that is building the new Machadinho
hydroelectric power plant in Southern Brazil. In early 1998, after all of the
necessary environmental and other approvals had been obtained, the consortium
began construction of the dam and related facilities. At the end of 1999, over
40% of the project was completed. Aluminio will share in the output of the plant
beginning in 2002. Aluminio expects its share to be sufficient to supply
approximately one-half of the power requirements for the Pocos de Caldas
smelter.
Europe
The Company's aluminum smelters at Portovesme and Fusina, Italy have a combined
annual capacity of 187,000 mt. The owners of the Eurallumina refinery, located
on the island of Sardinia adjacent to the Portovesme smelter, supply
approximately 40% of the alumina for the smelters under an evergreen agreement.
The balance of the alumina requirements for the smelters is supplied by AWA.
ENEL, Italy's state-owned utility, supplies power for these smelters.
The Company also operates smelters at San Ciprian, La Coruna and Aviles, Spain,
with a combined annual capacity of 360,000 mt. The San Ciprian refinery supplies
alumina, and the government-controlled power grid currently supplies electric
power at the lowest applicable industrial tariff rate.
The Company reports equity earnings from its interest in two smelters in Norway.
Elkem Aluminium ANS, 50%-owned by an Alcoa subsidiary, is a partnership that
owns and operates the smelters.
North America
In May 1999, the Company filed with the Federal Energy Regulatory Commission,
and the states of New York and North Carolina, indicating its intent to combine
five of its wholly-owned utility subsidiaries, Yadin, Inc., Tapoco, Inc., Alcoa
Generating Corporation, Long Sault, Inc. and Colockum Transmission Company into
a single entity, to be called Alcoa Power Generating Inc. (APGI). The mergers
into APGI were effective January 1, 2000.
The Company generates approximately 35% of the power requirements for its 11
North American smelters and generally purchases the remainder under long-term
contracts. Alcoa obtains approximately 12% of the self-generated power from its
entitlement to a fixed percentage of the output from Chelan County Public
Utility District's Rocky Reach hydroelectric power facility located in the State
of Washington.
In addition, Alcoa has a contract with the Bonneville Power Administration (BPA)
that services the Wenatchee, Washington smelter. Several contractual provisions
allow power supply restrictions when power is in short supply. Beginning in
1995, power purchased from a local public utility district replaced a portion of
the power supplied under the BPA contract. The Wenatchee facility currently uses
no power from BPA, but instead purchases its additional power needs from the
local public utility district.
The Company has generated substantially all of the power used at its Warrick,
Indiana smelter using nearby coal reserves. A 1996 coal supply contract
satisfies 40% of the smelter's fuel requirements through 2006. Low-sulfur coal
contracts satisfied an additional 35% of the requirement through 1999.
Short-term contracts of less than two years satisfy the remainder of the fuel
requirements.
The Rockdale, Texas smelter uses lignite to generate power. Company-owned
generating units supply about one-half of the total requirements. Texas
Utilities Company supplies the balance through a long-term power contract
expiring in 2013.
8
<PAGE>
APGI owns and operates hydroelectric facilities under Federal Energy Regulatory
Commission licenses. These facilities provide electric power for the aluminum
smelters at Alcoa, Tennessee and Badin, North Carolina. The Tennessee smelter
also purchases firm and interruptible power from the Tennessee Valley Authority
under a contract recently extended to 2010. In mid-1999, APGI entered into a
power sales contract with Carolina Power & Light Company (CP&L), under which
APGI sells the capacity and energy produced at its hydroelectric units to CP&L
and, in return, CP&L supplies the power requirements of the Badin plant. This
arrangement continues through the end of August 2000.
The purchased power (primarily hydroelectric) contract for the Massena, New York
smelter expires not earlier than 2003. Alcoa, however, may terminate this
contract with one year's notice.
The Lauralco smelter located in Deschambault, Quebec purchases electricity under
a long-term contract that expires in 2014, subject to certain extension
provisions. The power rates are linked to the prevailing price of aluminum.
Alcoa also has ownership interests in the following smelters: Intalco, located
in Ferndale, Washington (61.00%); Eastalco, located in Frederick, Maryland
(61.00%); Mt. Holly, located in Goose Creek, South Carolina (50.33%); and
Becancour, located in Becancour, Quebec (24.95%). A Japanese consortium, led by
a subsidiary of Mitsui & Co. Ltd., owns an aggregate 39% interest in each of the
Intalco and Eastalco facilities. Subsidiaries of Century Aluminum Company, a
publicly traded domestic corporation, and Sudelektra Holding, AG, a Swiss
corporation, together own 49.67% of Mt. Holly. On February 7, 2000, Century
Aluminum Company announced that it had reached agreement in principle to acquire
Sudelektra Holding's 23% interest in Mt. Holly. The transaction is expected to
be completed by the end of the first quarter of 2000. Subsidiaries of Reynolds
own an aggregate 50% interest, and a subsidiary of Pechiney owns a 25.05%
interest in Becancour and operates the smelter. Intalco, Eastalco, Mt. Holly,
and Becancour are all cost-sharing and production-sharing joint ventures.
Intalco, Eastalco, Mt. Holly, and Becancour purchase electricity under long-term
contracts that expire in the years 2001, 2003, 2005 and 2014, respectively,
subject to certain extension provisions. Except for Intalco, each facility's
contract is with a single supplier. The power rate for all of the electricity
supplied to the Becancour facility is linked to the prevailing price of
aluminum. In late 1995, Intalco entered into a series of new long-term power
contracts with the BPA and British Columbia Power Exchange Corporation to
provide all of its electricity needs from September 1996 through 2001. Under
these contracts, Intalco's power costs are no longer linked to the price of
aluminum but are set at a fixed rate. Mt. Holly entered into a new electric
power supply agreement in 1997, while Eastalco amended its existing power supply
agreement during the same year. For the foreseeable future, these contracts are
expected to meet the power requirements of these facilities.
In addition, Alcoa produces and markets aluminum paste, particles, flakes and
atomized powder. The Company also produces high-purity aluminum.
Suriname
In March 1999, Alcoa shut down its 30,000 mt per year smelter in Paranam,
Suriname.
III. Flat-Rolled Products
Alcoa's flat-rolled products serve three principal markets: packaging,
transportation and building and construction. Light gauge sheet products, mainly
rigid container sheet and foil, serve the packaging market, and mill products
(sheet and plate) serve the other markets. Alcoa employs its own sales force for
most flat-rolled products.
9
<PAGE>
Rigid Container Sheet (RCS)
- ---------------------------
RCS accounted for most of the 1999 revenues in the packaging market. Can
companies purchase RCS for production of beverage and food cans and can ends.
The number of RCS customers in the U.S. is relatively small. Use of aluminum
beverage cans continues to increase by approximately 3% annually worldwide.
Aluminum's diverse characteristics, particularly its light weight, recyclability
and flexibility for package designs, are significant factors in packaging
markets. Aluminum competes with materials such as steel, plastic and glass in
these markets. Alcoa maintains leadership in the packaging markets by improving
processes and facilities. Alcoa also provides marketing, research and technical
support to its customers. Alcoa produces RCS at the following locations:
o Warrick, Indiana
o Alcoa, Tennessee
o Point Henry and Yennora, Australia (joint venture facilities)
o Moka, Japan (joint venture facility) and
o Swansea, U.K.
Kaal Australia Pty., Ltd., 50%-owned by Alcoa, owns and operates the former AWA
- - Australia rolling mill at Point Henry and the former Comalco Limited rolling
mill at Yennora. These mills produce RCS for the Australian and Asian markets.
AWA - Australia supplies Kaal Australia with aluminum ingot.
A subsidiary of Alcoa participates in a 50/50 joint venture with Kobe Steel,
Ltd. that produces RCS for markets in Japan and other Asian countries. In
connection with this venture, Alcoa has a long-term contract to supply metal to
Kobe Steel.
Used aluminum beverage cans are an important source of metal for RCS. Recycling
aluminum conserves raw materials, reduces litter and saves energy -- about 95%
of the energy needed to produce aluminum from bauxite. In addition, recycling
capacity costs much less than new primary aluminum capacity. The Company has can
recycling or remelt facilities at or near its plants in:
o Warrick, Indiana
o Alcoa, Tennessee and
o Yennora, Australia.
Foil
- ----
Alcoa's Lebanon, Pennsylvania facility produces industrial foil, laminated foil
and brazing sheet. The building and construction, packaging and automotive
markets use these products. Continuous casting facilities in Hawesville,
Kentucky and Badin, North Carolina produce reroll stock in support of the
Lebanon facility. The Company also owns and operates an additional casting
facility in St. Louis, Missouri. Foil products from this facility are sold
primarily to commercial users in the flexible packaging, converter, food service
and pharmaceutical industries. Alcoa also owns and operates a facility in
Russellville, Arkansas. The Russellville plant, which is supported by the
casting facility in St. Louis, produces foodservice and converter foil products.
Aluminio, near Recife, Brazil, manufactures light gauge sheet, foil products and
laminated evaporator panels. The Yennora, Australia plant also produces light
gauge sheet. In addition, the facilities at Alicante and Sabinanigo, Spain
produce foil products.
Alcoa and Shanghai Aluminum Fabrication Plant (SAFP) have a joint venture, owned
60% by Alcoa and 40% by SAFP, that operates the former SAFP aluminum foil
production facility in Shanghai, China. With
10
<PAGE>
the addition of a second caster in April 1998, the annual output of the joint
venture facility is now over 15,000 mt.
The Company owns a 56% interest in a foil mill in Kunming, Yunnan, China.
In August 1999, Alcoa and Kibar Holding Co. of Turkey signed a letter of intent
to form a strategic alliance with Kibar's Turkish aluminum business. Kibar's
aluminum business, known as Assan Aluminyum, is the leading rolled products
business in Turkey.
In November 1999, Alcoa purchased substantially all the assets of Golden
Aluminum Company, a subsidiary of ACX Technologies, Inc. Golden Aluminum's
operations include a shuttered rolling facility in San Antonio, Texas and a
rolling facility in Ft. Lupton, Colorado. Alcoa will retain the San Antonio
plant for development work and non-can sheet production. In January 2000, Alcoa
sold the Ft. Lupton facility to Quanex Corporation.
Mill Products
- -------------
Alcoa produces sheet and plate products that are used in the following markets:
o aerospace
o auto and truck
o lithographic
o railroad
o shipbuilding
o building and construction
o defense and
o other industrial and consumer markets.
The Company maintains its own sales force for most of the sheet and plate
products.
Differentiation of material properties, price and service are significant
competitive factors in these markets. Aluminum's diverse characteristics are
important in markets where competitive materials include steel and plastics for
automotive and building applications; magnesium, titanium, composites and
plastics for aerospace and defense applications; and wood and vinyl in building
and construction applications. Alcoa continues to develop alloys and products
for aerospace and defense applications, such as those developed for the Boeing
777 aircraft, the Lockheed F-16 aircraft, the Canadair aircraft, the Advanced
Amphibious Assault Vehicle and the Airbus A340-600 aircraft.
Davenport, Iowa is home to Alcoa's largest sheet and plate plant. The plant
produces products requiring special alloying, heat-treating and other
processing. Some of these products are unique and proprietary. Over the past two
years, the Davenport plant's heat-treating capacity for sheet and plate was
increased to meet aerospace and automotive demand. Alcoa also commissioned the
largest vertical heat-treat furnace in North America, thus tripling the plant's
capacity for wide-width fuselage sheet. A horizontal plate heat-treating
furnace, which was installed in 1997, has increased the plant's capacity by 30%.
Alcoa has a plant in Hutchinson, Kansas for further processing and just-in-time
stocking of aluminum sheet products for the U.S. aerospace market. Alcoa serves
European sheet and plate markets through a distribution center in Paal, Belgium.
Alcoa has a plant in Danville, Illinois for further processing and just-in-time
stocking of aluminum sheet products for the North American automotive market.
This facility began to operate in 1998 and became fully operational during the
second half of 1999.
11
<PAGE>
The Company also has plants in Lancaster, Pennsylvania and Texarkana, Texas that
produce sheet and plate, and semi-fabricated products, circles and blanks. The
Lancaster facility also produces semi-fabricated cast aluminum plate, engineered
to meet highly specialized industrial applications. The Texarkana mill is a
leased facility. The five-year operating lease for the facility expires in
November 2002, but is renewable for up to two additional years.
Alcoa's Memory Products business in Sidney, Ohio was closed in 1999 as the
memory disk market and customer base declined.
Alcoa's Brite Products business in Norcross, Georgia was closed in 1999.
Alcoa and Kobe Steel have a joint venture consisting of one company in the U.S.
and one in Japan. The focus of these ventures is to expand the use of aluminum
sheet products in passenger cars and light trucks. As a result of a
restructuring of the venture in January 2000, the U.S. company will focus on
research and development efforts, while the Japanese company will continue to
engage in commercial (manufacturing, marketing and sales) as well as research
and development efforts, to serve the transportation industry.
The Company's Hungarian subsidiary, Alcoa-Kofem Kft (Kofem), produces common
alloy flat and coiled sheet as well as soft alloy extrusions for the building,
construction, food, transportation and agricultural markets in central and
western Europe. Kofem delivers aluminum truck bodies to major beverage companies
in Europe and the Middle East.
The Company's Alcoa Italia S.p.A. subsidiary produces industrial plate and
common alloy flat and coiled sheet for the building and construction,
transportation and other industrial markets in Europe at its Fusina, Italy
rolling mill.
Alcoa has rolling mills at Amorebieta, Alicante and Sabinanigo, Spain. These
mills produce common alloy flat and coiled sheet for the building and
construction, and transportation markets, lithographic sheet and coil, bright
products for lighting, cosmetic and industrial uses and foil products for food,
pharmaceutical and industrial applications in Europe.
In April 1999, Alcoa completed the acquisition of the bright products business
of Pechiney's Rhenalu rolling plant located at Castelsarrasin near Toulouse,
France.
In August 1999, Alcoa, the Holding Company for Metallurgical Industries and the
Egypt Aluminum Company (Egyptalum) signed a memorandum of understanding relating
to the formation of a strategic alliance between Alcoa and Egyptalum. Egyptalum
is the largest aluminum company in Egypt, with substantial assets in smelting
and rolled products.
IV. Engineered Products
Engineered products include aluminum extrusions, forgings, castings and wire,
rod and bar.
Extrusions
- ----------
The North American extrusion business is comprised of Alcoa Engineered Products
and Alcoa Extruded Construction Products.
12
<PAGE>
Alcoa Engineered Products has nine operating locations:
o Baltimore, Maryland - hard alloy extrusions
o Catawba, North Carolina - specialized extrusions
o Chandler, Arizona - hard alloy extrusions, tube and forge stock
o Cressona, Pennsylvania - industrial and distribution common alloy
extrusions
o Elizabethton, Tennessee - industrial and distribution common alloy
extrusions
o Lafayette, Indiana - hard alloy extrusions and tube
o Massena, New York - cast rod, mechanical-grade redraw rod, wire and
cold-finished rod and bar extrusions
o Morris, Illinois - industrial and distribution common alloy extrusions
o Spanish Fork, Utah - industrial and distribution common alloy
extrusions
These facilities are supported by sales and administration centers in Illinois,
Indiana and Pennsylvania. Extruded aluminum products from these operations are
sold to original equipment manufacturers in aerospace/defense, automotive,
commercial transportation, machinery, electrical, recreation, consumer durables
and other industrial markets and to distributors who service these markets.
Alcoa Extruded Construction Products has nine operating locations: Arkansas,
Florida, Georgia (2), Ohio, Louisiana, Mississippi, South Dakota and an
international operation in Monterrey, Mexico. These facilities manufacture and
sell soft-alloy extruded products. Representative products include window and
door frames, bath and shower enclosures, patio and pool enclosures, stadium
seating, light poles and flag poles, and colored architectural shapes.
Alcoa Extruded Construction Products' shower and bath enclosures are distributed
through service centers in California, Florida, Georgia, Iowa, North Carolina,
Pennsylvania, Texas and Washington, as well as through independent distributors.
The Mexican operation consists of a two-press extrusion plant in Monterrey. All
plants and facilities are owned by the Company, except for the plant located in
Monterrey and the service centers, which are leased. The Company closed its
extrusion facility in West Chicago, Illinois in April 1999.
In January 2000, Alcoa purchased Excel Extrusions, Inc., a subsidiary of Noranda
Aluminum, Inc., located in Warren, Ohio. The facility produces soft-alloy
aluminum extrusions that are used primarily in the building and construction
markets.
A subsidiary in Argentina and Aluminio manufacture aluminum extruded products.
Aluminio operates five plants in Brazil, with a total of fifteen extrusion
presses.
Alcoa Extrusions Hannover GmbH & Co. KG produces and markets high-strength
aluminum extrusions and rod and bar to serve European transportation and defense
markets.
The subsidiaries of Alcoa Europe Holding B.V., formerly Alcoa Nederland Holding
B.V., produce extrusions, common alloy sheet products and a variety of finished
products for the building industry, such as aluminum windows, doors and aluminum
ceiling systems. These companies also manufacture products for agricultural
applications, such as automated greenhouse systems.
Alcoa Italia S.p.A. produces and markets industrial extrusions through plants in
Bolzano, Fossanova, Feltre and Iglesias, Italy. Also part of Alcoa Italia S.p.A.
is an extrusion die shop located in Mori, Italy.
The Company owns and operates extrusion plants in Valls, Noblejas and La Coruna,
Spain.
Alcoa also has extrusion plants in Hungary and the United Kingdom. In March
1999, Alcoa completed its acquisition of Reynolds' aluminum extrusion plant in
Irurzun, Spain as well as its distribution operation for architectural systems,
which has warehouses in several cities in Spain.
13
<PAGE>
Kawneer Company, Inc. (Kawneer) designs, manufactures and markets architectural
aluminum products and is a leading producer of these products in the U.S. and
Canada. These products include entrances, windows, framing and curtain wall
systems for the commercial building markets. Kawneer products also are
engineered for use on construction projects throughout the world.
Kawneer operates five integrated architectural plants, 17 service centers and
one additional manufacturing location in the U.S. Distribution is principally
through dealers, most of whom are glazing contractors.
Kawneer also operates two integrated architectural plants in Canada that provide
most of the product that is sold for large overseas projects, as well as two
service centers.
Alumax Europe N.V. manages Kawneer Europe's operations in the United Kingdom,
France, Germany and Poland. It also participates in a joint venture in Morocco.
Three manufacturing plants located in France, England and Germany, two of which
are owned and one of which is leased, provide architectural aluminum products
similar to those produced by Kawneer operations in the U.S. These products are
marketed under the Kawneer Europe name throughout Europe. Kawneer Europe's
subsidiaries also operate service centers in France, Poland and Morocco. Other
former operations of Alumax Europe, which included custom extrusion plants in
the United Kingdom and the Netherlands, and an aluminum recycling facility in
the Netherlands that produces soft-alloy extrusion billet, have been integrated
operationally into Alcoa Europe Extrusion and End Products Business Unit.
Forgings and Castings
- ---------------------
The Company's plant in Cleveland, Ohio produces aluminum forgings, sold
principally in the aerospace, automotive, commercial transportation and defense
markets. The Cleveland plant, along with the Company's facility in Barberton,
Ohio, also produces aluminum forged wheels for passenger automobiles, sport
utility vehicles and light trucks and wheels for the bus and Class 8 heavy-duty
truck industry.
Alcoa's plant in Szekesfehervar, Hungary manufactures forged aluminum truck
wheels for the European market. The plant also manufactures wheels for export to
Asian, South American and other geographic markets that use European-style
wheels.
Aluminio plans to build a 72,000-unit-per-year aluminum wheel plant in the state
of Pernambuco, Brazil. The new plant initially will operate by finishing Alcoa
wheels imported in unfinished form.
V. Other
This category includes the production and sale of high performance body
structures for cars, electrical, plastic and composite materials products,
manufacturing and packaging equipment, magnesium products and steel and titanium
forgings.
Alcoa Automotive
- ----------------
In 1999, Alcoa refocused its Automotive Structures business unit. The Company
formed two new businesses, Alcoa Automotive Castings (which includes a Finished
Extruded Components unit) and Alcoa Automotive Engineering. Alcoa Automotive
Castings offers high-quality, structural castings and formed and machined
extrusions, while Alcoa Automotive Engineering provides design, engineering,
prototyping and cost analysis for aluminum structures, assemblies and
components.
14
<PAGE>
The manufacturing plant in Soest, Germany became part of the Alcoa Automotive
Castings business. Alcoa produces the components and selected sub-assemblies for
the Audi A8 spaceframe, the result of a cooperative effort between the two
companies that began in 1981. The Soest plant also produces the front end module
for the new Mercedes-Benz A Class car.
Alcoa Automotive Castings's Modena, Italy facility assembles spaceframes for the
Ferrari 360 Modena, which was introduced in 1999 to favorable automotive
industry reviews.
In August 1999, Alcoa acquired almost all of the remaining 50% interest in the
A-CMI partnership from Hayes Lemmerz International, Inc. A-CMI was a joint
venture formed in 1995 between Alcoa and CMI International, Inc. to produce cast
aluminum products for the automotive industry. Hayes Lemmerz purchased CMI
International, Inc. in February 1999. A-CMI, now part of Alcoa Automotive
Castings, has plants located in Fruitport, Michigan, Hawesville, Kentucky and
Lista, Norway. The Lista plant is located near the 50%-owned Elkem Aluminium ANS
smelter, which delivers molten aluminum to the plant. Current Automotive
Castings customers include DaimlerChrysler, Ford, Volvo, BMW and General Motors.
Alcoa also designs and builds specialized die-casting machines through a
subsidiary in Montreal, Canada.
Alcoa's plant in Northwood, Ohio manufactures DaimlerChrysler's Plymouth Prowler
frame and a variety of aluminum structural assemblies for the U.S. automotive
industry, including the Corvette windshield surround.
Alcoa is working with several other automobile manufacturers in North America
and Japan to develop new automotive applications for aluminum products.
Alcoa Automotive Engineering includes the design and engineering offices in
Esslingen (Stuttgart), Germany, Southfield (Detroit), Michigan and Alcoa
Technical Center, near Pittsburgh, Pennsylvania. The Company designs aluminum
auto body structures for a variety of car manufacturers and for Tier 1 suppliers
to the automotive industry at these locations.
Alumax Engineered Metal Processes, Inc. (AEMP) produced automotive components
with operations in Jackson, Tennessee and Bentonville, Arkansas using a
semi-solid forging process. In May 1999, Alcoa completed the sale of the
Jackson, Tennessee facility to the management of AEMP. In addition, Alcoa closed
the Bentonville, Arkansas plant.
Alcoa Fujikura Ltd. (AFL)
- -------------------------
AFL produces and markets electronic and electrical distribution systems (EDS)
for the automotive industry, as well as fiber optic products and systems for
selected electric utilities, telecommunications, cable television and datacom
markets. AFL supplies EDS to:
o Ford
o Subaru
o PACCAR
o Audi and
o Volkswagen.
AFL owns Michels GmbH & Co. K.G. (Michels), a European manufacturer of EDS for
automobiles. AFL also owns the Stribel group of companies, European
manufacturers of electromechanical and electronic components for the European
automotive market. The European facilities are located in Germany, Hungary,
Ireland and the United Kingdom.
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<PAGE>
AFL and Aluminio have a joint venture, AFL do Brasil Ltda., that manufactures
and sells EDS in Brazil. AFL also has an EDS manufacturing facility in
Venezuela.
Significant competitive factors in the EDS markets include price, quality and
full service supplier capability, as automakers increasingly require support
from selected suppliers on a global basis.
Six "R" Communications, L.L.C., part of AFL's telecommunications division, is a
Monroe, North Carolina-based provider of EF&I services (engineer, furnish and
install) to the telecom, CATV and electric utility industries. EF&I subsidiaries
of Six "R" Communications include T.I.C.S. Corporation in Charlotte, North
Carolina; MinTel Communications, L.L.C. in Norcross, Georgia; and Quality
Control Services, L.L.C. in Richmond, Virginia.
In October 1999, AFL's telecommunications division acquired 55% of the stock of
Tele-Tech Company, Inc., in Lexington, Kentucky and 55% of the stock of Digisys
Corp. in Alpharetta, Georgia. Both companies are providers of EF&I services
nationally to the telecom industry and cabling contracting services for LAN and
computer network installations.
In February 2000, AFL's telecommunications division acquired privately held
Noyes Fiber Systems, Inc., headquartered in Belmont, New Hampshire. Noyes Fiber
Systems is a manufacturer of fiber optic test equipment for measuring,
maintaining and documenting the performance of fiber optic networks.
Packaging and Closures
- ----------------------
Alcoa Closure Systems International, Inc. (ACSI), the world's largest producer
of plastic closures, manages all of Alcoa's worldwide closures businesses other
than in South America. ACSI coordinates its business from Indianapolis, Indiana.
The Company's South American closures business and PET (polyethylene
terephthalate) plastic bottles manufacturing facilities are managed separately
by Aluminio from Sao Paulo, Brazil.
The use of plastic closures has surpassed that of aluminum closures for beverage
containers in the U.S. and in many other countries. Alcoa has plastic closure,
PET plastic bottle, closure molding equipment and packaging equipment design and
assembly facilities at the following locations:
Packaging and Closures Facilities:
o Barcelona, Spain
o Barueri, Itapissuma, Lages and Queimados, Brazil
o Bogota, Colombia
o Buenos Aires, Argentina
o Crawfordsville, Indiana
o Englewood, Colorado
o Ensenada and Saltillo, Mexico
o Lima, Peru
o Lyubuchany, Russia
o Manama, Bahrain
o Manila, the Philippines
o Nogi, Japan
o Olive Branch, Mississippi
o Randolph, New York
o San Jose, Costa Rica
o Santiago, Chile
o Sidney, Ohio
o Szekesfehervar, Hungary
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<PAGE>
o Tianjin, China and
o Worms and Viernheim, Germany.
The Alcoa Packaging Equipment business unit designs, manufactures and services:
o can forming equipment
o can decoration equipment
o registered embossers
o end conversion presses
o a variety of testing equipment for the can-making industry
o plastic and aluminum closure handling, orientation, inspection and
capping equipment for the food and beverage industry and
o specialty aluminum components for the semiconductor equipment
industry.
Other Aluminum Products
- -----------------------
Aluminio and Phelps Dodge Corporation have a joint venture that produces
aluminum electric cable and copper wiring and cables in Brazil. The venture,
Phelps Dodge & Alcoa Fios e Cabos Eletricos S.A., is owned 60% by Phelps Dodge
and 40% by Aluminio. Production takes place at the venture's plant in Pocos de
Caldas.
Alcoa Building Products, Inc. (ABP) manufactures and markets residential
aluminum siding and other aluminum building products. ABP sells these products
principally to specialty distributors.
ASCI produces aluminum closures for bottles at Worms, Germany, Nogi, Japan and
Barcelona, Spain. In early 1999, the Company sold the assets subject to certain
liabilities of Capsulas Metalicas, S.A., its metal beverage closures business in
Barcelona, Spain, to Alucapvit, S.p.A.
Alcoa also owns a 36% interest in American Trim, L.L.C., a joint venture that
manufactures primarily auto parts and appliance control panels.
Other Nonaluminum Products
- --------------------------
ABP produces vinyl siding and accessories and other nonaluminum building
products for the residential building and construction markets.
Northwest Alloys, Inc., in Addy, Washington, produces magnesium from minerals in
the area owned by the Company. Alcoa uses the magnesium for certain aluminum
alloys and also sells it to third parties.
Aluminio owns 40% and affiliates of Alcatel of France own 60% of a joint
venture, called Alcatel Cabos Brazil. The venture manufactures, in Brazil, and
sells telecommunication cables and related accessories in South America.
The Alcoa facility at Cleveland, Ohio produces large press steel, titanium and
special super-alloy forgings. Aerospace and commercial customers are the
principal purchasers of these products.
Competition
- -----------
The markets for most aluminum products are highly competitive. Price, quality
and service are the principal competitive factors in most of these markets.
Where aluminum products compete with other materials, the diverse
characteristics of aluminum are also a significant factor, particularly its
light weight and recyclability.
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<PAGE>
The aluminum industry is highly cyclical, and the LME-based prices of primary
aluminum influence the Company's results of operations. This price sensitivity
impacts a portion of the Company's alumina sales and many of the Company's
aluminum products. There is, however, less impact on the more specialized and
value-added products.
The Company continues to examine all aspects of its operations and activities
and redesign them where necessary to enhance effectiveness and achieve cost
reductions. Alcoa believes that it enhances its competitive position through its
improved processes, extensive facilities and willingness and ability to commit
capital where necessary to meet growth in important markets, and by the
capability of its employees. This is being done through aggressive
implementation of the Alcoa Business System (ABS) that encompasses the entire
value chain, including manufacturing and supporting business processes. Research
and development has led to improved product quality and production techniques,
new product development and cost control.
ABS is based upon the complete integration of the Company's mission, vision and
values with manufacturing and its business processes and measures in order to
produce desired outcomes. The basic tenets of ABS are (1) making products for
use (not inventory), and working only on the needs of customers (external and
internal) (2) doing away with waste everywhere and (3) recognizing that success
can only be achieved through people.
Alcoa has realized significant achievements to date through the implementation
of ABS in its businesses, including:
o reduction of waste
o reduction in lead times
o improvement in delivery performance
o improvement in "throughput" and recovery
o increases in productivity
o reduction of inventory and backlogged orders
o reduction in handling equipment and
o emptying of factory floor space.
Alcoa believes that ABS will in time substantially improve its profitability
relative to its peers. In July 1998, Alcoa announced a $1.1 billion cost
reduction initiative to be achieved by January 1, 2001. The Company intends to
realize a significant portion of this reduction through ABS. At the end of 1999,
the Company had achieved $728 million in annualized cost savings towards the
$1.1 billion goal.
Risk Factors
- ------------
In addition to the risks inherent in its operations, Alcoa is exposed to
financial, market, political and economic risks. The following discussion, which
provides additional detail regarding Alcoa's exposure to the risks of changing
commodity prices, foreign exchange rates and interest rates, includes
forward-looking statements that involve risk and uncertainties. Actual results
could differ materially from those projected in these forward-looking
statements.
Commodity Price Risks
- ---------------------
Alcoa is a leading global producer of aluminum ingot and aluminum fabricated
products. As a condition of sale, customers often require Alcoa to commit to
fixed-price contracts that sometimes extend a number of years into the future.
Customers will likely require Alcoa to enter into similar arrangements in the
future. These contracts expose Alcoa to the risk of fluctuating aluminum prices
between the time the order is accepted and the time that the order ships.
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<PAGE>
In the U.S., Alcoa is net metal short and is subject to the risk of higher
aluminum prices for the anticipated metal purchases required to fulfill the
long-term customer contracts noted above. To hedge this risk, Alcoa enters into
long positions, principally using futures and options. Alcoa follows a stable
pattern of purchasing metal; therefore, it is highly likely that anticipated
metal requirements will be met. At December 31, 1999 and 1998, these contracts
totaled approximately 465,000 mt and 933,000 mt, respectively. These contracts
act to fix the purchase price for these metal purchase requirements, thereby
reducing Alcoa's risk to rising metal prices.
A hypothetical 10% change from the 1999 year-end, three-month LME aluminum ingot
price of $1,650 per mt would result in a pretax gain or loss to future earnings
of $77 million related to all of the futures and options contracts noted above.
However, it should be noted that any change in the value of these contracts,
real or hypothetical, would be significantly offset by an inverse change in the
value of the underlying metal purchase transactions.
Earnings were selected as the measure of sensitivity due to the historical
relationship between aluminum ingot prices and Alcoa's earnings. The
hypothetical change of 10% was calculated using a parallel shift in the existing
December 31, 1999 forward price curve for aluminum ingot. The price curve takes
into account the time value of money, as well as future expectations regarding
the price of aluminum ingot.
The futures and options contracts noted above are with creditworthy
counterparties and are further supported by cash, treasury bills or irrevocable
letters of credit issued by carefully chosen banks.
The expiration dates of the options and the delivery dates of the futures
contracts noted above do not always coincide exactly with the dates on which
Alcoa is required to purchase metal to meet its contractual commitments with
customers. Accordingly, some of the futures and options positions will be rolled
forward. This may result in significant cash inflows if the hedging contracts
are "in-the-money" at the time they are rolled forward. Conversely, there could
be significant cash outflows if metal prices fall below the price of contracts
being rolled forward.
Alcoa also had 21,000 mt and 29,000 mt of futures and options contracts
outstanding at year-end 1999 and 1998, respectively, that cover long-term,
fixed-price commitments to supply customers with metal from internal sources.
Accounting convention requires that these contracts be marked to market, which
resulted in after-tax gains of $12 million in 1999 and charges of $45 million in
1998 and $13 million in 1997. A hypothetical 10% change in aluminum ingot prices
from the year-end 1999 level of $1,650 per mt would result in a pretax gain or
loss of $3 million related to these positions. The hypothetical gain or loss was
calculated using the same model and assumptions noted earlier.
Alcoa sells products to various third parties at prices that are influenced by
changes in LME aluminum prices. From time to time, the Company may elect to
hedge a portion of these exposures to reduce the risk of fluctuating market
prices on these sales. Towards this end, Alcoa may enter into short positions
using futures and options contracts. At December 31, 1999, these contracts
totaled 244,000 mt. These contracts act to fix a portion of the sales price
related to these sales contracts. A hypothetical 10% change in aluminum ingot
prices from the year-end 1999 level of $1,650 per mt would result in a pretax
gain or loss of $29 million related to these positions. The hypothetical gain or
loss was calculated using the same model and assumptions noted earlier.
Alcoa also purchases certain other commodities, such as fuel oil, natural gas
and copper, for its operations and enters into futures and options contracts to
eliminate volatility in the prices of such products. None of these contracts are
material. For additional information on financial instruments, see Notes A and T
to the financial statements.
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<PAGE>
Foreign Exchange Risks
- ----------------------
Alcoa is subject to significant exposure from fluctuations in foreign
currencies. As a matter of company policy, foreign currency exchange contracts,
including forwards and options, are sometimes used to limit the risk of
fluctuating exchange rates. A hypothetical 10% change in applicable 1999
year-end forward rates would result in a pretax gain or loss of approximately
$169 million related to these positions. However, it should be noted that any
change in the value of these contracts, real or hypothetical, would be
significantly offset by an inverse change in the value of the underlying hedged
item. The model assumes a parallel shift in the forward curve for the applicable
currencies and includes the foreign currency impacts of Alcoa's cross-currency
interest rate swaps. See Notes A and T for information related to the accounting
policies and fair market values of Alcoa's foreign exchange contracts at
December 31, 1999 and 1998.
Interest Rate Risks
- -------------------
Alcoa attempts to maintain a reasonable balance between fixed- and floating-rate
debt and uses interest rate swaps and caps to keep financing costs as low as
possible. At December 31, 1999 and 1998, Alcoa had $3,067 million and $3,489
million of debt outstanding at effective interest rates of 5.8% and 6.1%,
respectively, after the impact of interest rate swaps and caps is taken into
account. A hypothetical change of 10% in Alcoa's effective interest rate from
year-end 1999 levels would increase or decrease interest expense by $20 million.
The interest rate effect of Alcoa's cross-currency interest rate swaps has been
included in this analysis. For more information related to Alcoa's use of
interest rate instruments, see Notes A and T.
Risk Management
- ---------------
All of the aluminum and other commodity contracts, as well as the various types
of financial instruments, are straightforward and are held for purposes other
than trading. They are used primarily to mitigate uncertainty and volatility,
and principally cover underlying exposures.
Alcoa's commodity and derivative activities are subject to the management,
direction and control of the Strategic Risk Management Committee (SRMC). SRMC is
composed of the chief executive officer, the chief financial officer and other
officers and employees that the chief executive officer may select from time to
time. SRMC reports to the board of directors at each of its scheduled meetings
on the scope of its derivative activities.
Material Limitations
- --------------------
The disclosures, with respect to aluminum prices and foreign exchange risk, do
not take into account the underlying anticipated purchase obligations and the
underlying transactional foreign exchange exposures. If the underlying items
were included in the analysis, the gains or losses on the futures and options
contracts may be offset. Actual results will be determined by a number of
factors that are not under Alcoa's control and could vary significantly from
those disclosed.
Year 2000 Issue
- ---------------
Alcoa, like other businesses, made substantial preparations for the Year 2000
issue. The Year 2000 issue arose from the past practice of utilizing two digits
(as opposed to four) to represent the year in some computer programs and
software. If uncorrected, this could have resulted in computational errors as
dates are compared across the century boundary. The vast majority of the
products produced and sold by Alcoa are unaffected by Year 2000 issues in use or
operation since they contain no microprocessors.
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Based on information available to date, Alcoa has not experienced any
significant events attributable to Year 2000 issues. The Company will continue
to monitor for potential issues at Alcoa, its customers and suppliers, in order
to permit a rapid response should any issues arise. Alcoa believes that if any
Year 2000 issues were to arise, they would not have a significant impact on its
operations and would most likely be isolated, short-term events.
Alcoa's Year 2000 program provided a focused effort across all of the Company's
locations that:
o identified, assessed, remediated and tested 26,232 Alcoa systems and
components;
o formally assessed 3,399 critical and important suppliers;
o conducted 202 formal on-site program verification reviews;
o provided Year 2000 readiness information to 2,802 separate customers
and
o updated and completed 1,890 contingency plans.
In 1999 and 1998, Alcoa incurred $38 million each year of direct costs in
connection with its Year 2000 program. These costs include external consulting
costs and the cost of hardware and software replaced as a result of Year 2000
issues. Alcoa does not expect to incur significant direct costs related to the
Year 2000 issue during the current year.
Employees
- ---------
Alcoa had approximately 107,700 employees worldwide at year-end 1999.
Alcoa and its unions ratified six-year labor agreements covering the majority of
Alcoa's U.S. production workers in mid-1996. As part of the agreements, Alcoa
and the unions agreed to an unprecedented partnership mandating that they work
cooperatively on customer requirements, business objectives and shareholder and
union interests. The agreements set broad goals for employee safety, job
security, and influence, control and accountability for the work environment.
Other major provisions include wage increases over the first five years,
enhanced pension benefits, increases in sickness and accident insurance, life
insurance and dental benefits and the amount of income a spouse may earn before
sharing medical benefit costs.
The agreements have five years of defined provisions. At the end of the fifth
year, Alcoa and the unions will reopen the entire contract. If the parties
cannot reach agreement, they will submit the economic provisions to arbitration.
Agreements negotiated under guidelines established by a national industrial
relations authority cover wages for AWA - Australia employees.
Aluminio negotiates wages for both hourly and salaried employees annually in
compliance with government guidelines. Each Aluminio location, however, has a
separate compensation package for its employees.
Research and Development
- ------------------------
Alcoa, a technology leader in the aluminum industry, engages in research and
development programs that include process and product development, and basic and
applied research. Alcoa conducts these activities within its business units and
at Alcoa Technical Center. Expenditures for R&D activities were $128 million in
1999, $128 million in 1998 and $143 million in 1997. The Company funds
substantially all R&D expenses.
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Each of the major process/product areas within the Company has a Technology
Management Review Board (TMRB), consisting of members from various worldwide
locations. The TMRB is responsible for formulating and communicating a
technology strategy for its particular process/product area, developing and
managing the technology portfolio and ensuring the global transfer of
technology.
Environmental
- -------------
Alcoa's Environment, Health and Safety Policy confirms its commitment to operate
worldwide in a manner that protects the environment and the health and safety of
employees and of the citizens of the communities where the Company operates.
Alcoa continues its efforts to develop and implement modern technology, and
standards and procedures, to meet its Environment, Health and Safety goals. The
Company spent approximately $90 million during 1999 for new or expanded
facilities for environmental control. Capital expenditures for such facilities
will approximate $99 million in 2000. These figures do not include the costs of
operating these facilities. Remediation expenses are continuing at many of the
Company's facilities. See Note U on Environmental Matters in the Annual Report
to Shareholders and "Item 3 -- Legal Proceedings" below.
Alcoa's operations worldwide, like those of others in manufacturing industries,
have in recent years become subject to increasingly stringent legislation and
regulations intended to protect human health and safety, and the environment.
The Company expects this trend to continue. Compliance with new laws,
regulations or policies could require substantial expenditures by the Company in
addition to those mentioned above.
Alcoa supports the use of sound scientific research and realistic risk criteria
to analyze environmental and human health and safety effects and to develop
effective laws and regulations in all countries where it operates. The Company
also relies on internal standards that it applies worldwide to ensure that its
facilities operate with minimal adverse environmental, health and safety
impacts, even where no regulatory requirements exist. Alcoa recognizes that
recycling and pollution prevention offer real solutions to many environmental
problems, and it continues vigorously to pursue efforts in these areas.
Item 2. Properties.
See "Item 1. Business." Alcoa believes that its facilities are suitable and
adequate for its operations.
Item 3. Legal Proceedings.
In the ordinary course of its business, Alcoa is involved in a number of
lawsuits and claims, both actual and potential, including some which it has
asserted against others. While the amounts claimed may be substantial, the
ultimate liability cannot now be determined because of the considerable
uncertainties that exist. It is possible that results of operations or liquidity
in a particular period could be materially affected by certain contingencies.
Management believes, however, that the disposition of matters that are pending
or asserted will not have a material adverse effect on the financial position of
the Company.
Environmental Matters
- ---------------------
Alcoa is involved in proceedings under the Superfund or analogous state
provisions regarding the usage, disposal, storage or treatment of hazardous
substances at a number of sites in the U.S. The Company has committed to
participate, or is engaged in negotiations with Federal or state authorities
relative to its alleged liability for participation, in clean-up efforts at
several such sites.
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In response to a unilateral order issued under Section 106 of the Comprehensive
Environmental Compensation and Liability Act of 1980 (CERCLA) by the U.S.
Environmental Protection Agency (EPA) Region II regarding releases of hazardous
substances, including polychlorinated biphenyls (PCBs), into the Grasse River
near its Massena, New York facility, Alcoa has been conducting investigations
and studies of the river under order from the EPA issued under CERCLA. In
December 1999, the Company submitted an Analysis of Alternatives report to EPA.
The report evaluates several alternative remedial approaches for the Grasse
River.
Representatives of various Federal and state agencies and a Native American
tribe, acting in their capacities as trustees for natural resources, have
asserted that Alcoa may be liable for loss or damage to such resources under
Federal and state law based on Alcoa's operations at its Massena facility. While
formal proceedings have not been instituted, the Company continues to actively
investigate these claims.
In March 1994, Alcoa and Region VI of the EPA entered into an administrative
order on consent, EPA Docket No. 6-11-94, concerning the Alcoa (Pt.
Comfort)/Lavaca Bay National Priorities List site that includes portions of
Alcoa's Pt. Comfort, Texas bauxite refining operations and portions of Lavaca
Bay, Texas, adjacent to the Company's plant. The administrative order requires
the Company to conduct a remedial investigation and feasibility study under EPA
oversight. Work under the administrative order is proceeding, including actions
to fortify an offshore dredge disposal island that may include the removal of
certain mercury-contaminated sediments adjacent to Alcoa's plant in and near
routinely dredged navigation channels. As required by the order, the Company
submitted a baseline risk assessment for the site. A Feasibility Study is
anticipated to be filed in March 2000. The Company and certain Federal and state
natural resource trustees, who previously served Alcoa with notice of their
intent to file suit to recover damages for alleged loss or injury of natural
resources in Lavaca Bay, have entered into several agreements to cooperatively
identify restoration alternatives and approaches for Lavaca Bay. Efforts under
those agreements are ongoing.
In March 1997, Alcoa Italia S.p.A. received an order from Italian governmental
authorities relating to several environmental deficiencies at its Fusina Plant.
Alcoa Italia and the governmental authorities commenced discussions that
resulted in a plan for sampling certain emission points. During 1998, Alcoa
Italia sampled air emissions at the Fusina Plant. The results of the samples,
which indicated that the emissions are within the authorized limits, were
submitted to the Italian governmental authorities, who have formally notified
Alcoa Italia that the emissions are satisfactory and that the order has been
closed.
On May 13, 1998, an action was filed in the Superior Court of Riverside County,
California allegedly on behalf of more than 500 plaintiffs who currently live,
or formerly lived, in the Glen Avon, California area, who claim to have suffered
personal injuries, both physical and emotional, as well as property damage, as a
result of air and water contamination due to the escape of toxic wastes from the
Stringfellow disposal site. The complaint, which names Alcoa, Alumax Inc. and
more than 130 other companies as defendants, was served on Alcoa and Alumax in
October 1998. Alcoa filed a motion in February 1999 stating that claims are
barred by the statute of limitations. Amended pleadings were filed by the
plaintiffs in August 1999, and demurrer motions are now pending before the
court.
In March 1998, Region V of the EPA referred various alleged environmental
violations at Alcoa's Warrick Operations to the civil division of the U.S.
Department of Justice (DOJ). The alleged violations stem from an April 1997
multi-media environmental inspection of Warrick Operations by the EPA relating
to water permit exceedances as reported on monthly discharge monitoring reports,
wastewater toxicity issues and alleged opacity violations. Alcoa and the DOJ
entered into a series of tolling agreements to suspend the statute of
limitations related to the alleged violations in this matter. The parties have
reached final agreement on the language of a consent decree that will formalize
settlement of this matter. The consent decree will be executed by the parties
and lodged with the court during the first quarter of 2000.
23
<PAGE>
In October 1998, Region V of the EPA referred various alleged environmental
violations at Alcoa's Lafayette Operations to the civil division of the DOJ. The
alleged violations relate to water permit exceedances as reported on monthly
discharge monitoring reports. Alcoa and the DOJ entered into a tolling agreement
to suspend the statute of limitations related to the alleged violations in order
to facilitate settlement discussions with the DOJ and EPA. The parties have been
unable to reach settlement on this matter. In June 1999, the DOJ and EPA filed a
complaint against Alcoa in the United States District Court for the Northern
District of Indiana. Alcoa filed a motion to dismiss and a motion to strike
certain parts of the government's complaint requesting sediment remediation in
August 1999. A discovery schedule had been entered into by the parties and this
matter is scheduled for trial in January 2002.
In March 1999, two search warrants were executed by various federal and state
agencies on the Alcoa Port Allen works of Discovery Aluminas, Inc., a
subsidiary, in Port Allen, Louisiana. Also in March, Discovery Aluminas, Inc.
was served with a grand jury subpoena that required the production to a federal
grand jury of certain company records relating to alleged environmental issues
involving wastewater discharges and management of solid or hazardous wastes at
the plant. In April 1999, the Port Allen plant manager was indicted for a single
count of violating the Clean Water Act. The case has not been set for trial. In
October 1999, a second grand jury subpoena for documents was issued to Alcoa
requesting information regarding wastewater discharges from a Port Allen plant.
Alcoa has provided a complete and timely response to the subpoena. Alcoa also is
engaged in discussions with the U.S. Attorney's office and the EPA seeking to
resolve the situation.
Other Matters
- -------------
Alcoa initiated a lawsuit in King County, Washington in December 1992 against
nearly 100 insurance companies that provided insurance coverage for
environmental property damage at Alcoa plant sites between the years 1956 and
1985. The trial for the first three sites concluded in October 1996 with a jury
verdict partially in Alcoa's favor and an award of damages to Alcoa. In its
post-trial decisions, the trial court substantially reduced the amount that
Alcoa will be able to recover from its insurers on the three test sites. Alcoa
appealed these rulings to the Washington Court of Appeals, which, upon
completion of briefing, certified the appeal to the Washington Supreme Court.
Oral argument was heard in January 2000. A decision by the court is expected by
the third quarter 2000.
In April 1997, German customs authorities conducted a search of the offices of
Alcoa VAW Hannover Presswerk GmbH & Co. KG (Alcoa VAW) in Hannover, Germany,
seeking materials relating to export transactions dating from 1992. In November
1997, German customs authorities reported 53 documentary customs violations, and
in January 1998, the local district attorney opened legal proceedings on the
matter. Discussions between Alcoa VAW and German customs authorities continue.
Alcoa, along with various asbestos manufacturers, distributors and other
businesses, is a defendant in numerous individual lawsuits filed in the State of
Texas on behalf of persons claiming injury as a result of occupational exposure
to asbestos at various Alcoa facilities. In two of these cases, jury verdicts
were returned against the Company, and settlements have been reached.
Following the March 9, 1998 announcement of the proposed acquisition of Alumax
by Alcoa and AMX Acquisition Corporation, five putative class actions on behalf
of stockholders of Alumax were filed in the Delaware Court of Chancery against
Alumax and certain of Alumax's directors. Four of these actions also named Alcoa
as a defendant. The plaintiffs in those actions alleged, among other things,
that the director defendants agreed to a buyout of Alumax at an inadequate
price, that they failed to provide Alumax's stockholders with all necessary
information about the value of Alumax, that they failed to make an informed
decision as no market check of Alumax's value was obtained and the acquisition
24
<PAGE>
was structured to ensure that stockholders would tender their shares and was
coercive. In addition, the plaintiffs alleged that the Schedules 14D-1 and 14D-9
filed by Alcoa, AMX Acquisition Corporation and Alumax, respectively, failed to
disclose certain information necessary for Alumax's stockholders to make an
informed decision regarding the offer and the other transactions contemplated by
the merger agreement. Plaintiffs sought to enjoin the acquisition or to rescind
it in the event that it was consummated and to cause Alumax to implement a "full
and fair" auction for Alumax. Plaintiffs also sought compensatory damages in an
unspecified amount, costs and disbursements, including attorneys' fees, and such
other relief as the Delaware Court of Chancery may deem appropriate. The matter
has been dismissed.
The Internal Revenue Service (IRS) asserted that Alumax and certain of its
subsidiaries were improperly included in the 1984, 1985, and 1986 consolidated
income tax returns of AMAX Inc. and on that basis assessed a Federal income tax
deficiency against Alumax of $129 million. Alumax filed a petition in the United
States Tax Court seeking a redetermination of the purported deficiency. On
September 30, 1997, the Tax Court decided in favor of the IRS, stating that AMAX
Inc. did not have the 80% control necessary to consolidate. On October 27, 1997,
Alumax paid an aggregate of $411 million to the IRS, representing the deficiency
and accrued interest. On December 24, 1997, Alumax filed a notice of appeal of
the Tax Court's decision to the United States Court of Appeals for the Eleventh
Circuit. A decision affirming the Tax Court's decision was handed down by the
Court of Appeals on January 21, 1999. The Company requested a rehearing of the
issue. Under the terms of a Tax Disaffiliation Agreement executed by Alumax and
AMAX in connection with the merger of AMAX into Cyprus Minerals Company and the
public distribution of all of Alumax's shares in November 1993, Alumax assumed
responsibility for all proceedings relating to the above-described deficiency
and payment of any additional taxes, along with interest that may ultimately be
due; and Cyprus Amax Minerals Company will share certain tax benefits that will
become available to it in the event of a final adverse determination. An appeal
was decided against the Company, and the case has been closed.
In July 1999, Alcoa Aluminio received notice that an administrative proceeding
was commenced by Brazil's Secretary of Economic Law of the Ministry of Justice
against Brazilian producers of primary aluminum, including Alcoa Aluminio. The
suit alleges collusive action in the pricing of primary aluminum in violation of
Brazilian antitrust law. Alcoa Aluminio has presented its defense and is
awaiting the decision of the Secretary of Economic Law. If the Secretary of
Economic Law determines that the antitrust law was violated, then the action may
be further prosecuted by the Administrative Council of Economic Defense.
Brazilian law provides for civil and criminal sanctions for violations of
antirust law, including fines ranging from 1% to 30% of a company's revenue
during the last fiscal year.
On October 15, 1999, Victoria Shaev, who represents that she is an Alcoa
shareholder, filed a purported derivative action on behalf of the Company in the
United States District Court for the Southern District of New York, naming as
defendants the Company, each member of Alcoa's Board of Directors, certain
officers of the Company and PricewaterhouseCoopers LLP, Alcoa's independent
accountants. The shareholder did not make a demand on the Company prior to
filing this lawsuit. Under relevant law, this demand is required. The lawsuit
alleges, among other things, that Alcoa's proxy statement dated March 8, 1999
contained materially false and misleading representations and omissions
concerning the Company's proposed Alcoa Stock Incentive Plan and that the
shareholder approval of the plan, based upon these alleged representations and
omissions, was defective. The Plaintiff seeks to invalidate the shareholder
approval of the plan and enjoin its implementation. She also requests that Alcoa
pay the costs and disbursements of the action, including the fees of her
accountants, counsel and experts. The matter is being defended.
25
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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 1999.
Item 4A. Executive Officers of the Registrant.
The names, ages, positions and areas of responsibility of the executive officers
of the Registrant as of February 15, 2000 are listed below.
Paul H. O'Neill, 64, Director and Chairman of the Board. Mr. O'Neill was elected
a director of Alcoa in 1986 and became Chairman of the Board in 1987. He was
Chief Executive Officer from June 1987 to May 1999. Before joining Alcoa, Mr.
O'Neill had been an officer since 1977 and President and a director since 1985
of International Paper Company.
Alain J. P. Belda, 56, Director, President and Chief Executive Officer. Mr.
Belda was elected to Alcoa's Board of Directors in September 1998. He has been
Chief Executive Officer since May 1999 and President since January 1997. He was
elected Chief Operating Officer in January 1997, Executive Vice President in
1994 and Vice Chairman in 1995. Mr. Belda was President of Alcoa Aluminio S.A.
in Brazil from 1979 to March 1994. He was elected Vice President of Alcoa in
1982 and, in 1989, was given responsibility for all of Alcoa's interests in
Latin America (other than Suriname). In August 1991 Mr. Belda was named
President - Latin America for the Company.
Michael Coleman, 49, Vice President and President - Alcoa Rigid Packaging
Division. Mr. Coleman joined Alcoa in January 1998. He had been Vice President -
Operations of North Star Steel from 1993 to 1994, Executive Vice President -
Operations from 1994 to 1996 and President from 1996 through 1997. Mr. Coleman
joined North Star Steel in 1982.
L. Patrick Hassey, 54, Vice President and President - Alcoa Europe. Mr. Hassey
joined Alcoa in 1967 and was named Davenport Works Manager in 1985. In 1991, he
was elected a Vice President of Alcoa and appointed President -
Aerospace/Commercial Rolled Products Division. He was appointed President -
Alcoa Europe in November 1997.
Barbara S. Jeremiah, 48, Vice President-Corporate Development. Ms. Jeremiah
joined Alcoa in 1977 as an attorney and was elected Assistant General Counsel in
1992 and Corporate Secretary in 1993. She was elected to her current position in
1998, where she heads Alcoa corporate development activities.
Richard B. Kelson, 53, Executive Vice President and Chief Financial Officer. Mr.
Kelson was elected Assistant General Counsel in 1989, Senior Vice President -
Environment, Health and Safety in 1991 and Executive Vice President and General
Counsel in May 1994. He was named to his current position in May 1997.
Frank L. Lederman, 50, Vice President and Chief Technical Officer. Mr. Lederman
was Senior Vice President and Chief Technical Officer of Noranda, Inc., a
Canadian-based, diversified natural resource company, from 1988-1995. He joined
Alcoa as a Vice President in May 1995 and became Chief Technical Officer in
December 1995. In his current position Mr. Lederman directs operations of the
Alcoa Technical Center.
26
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Joseph C. Muscari, 53, Vice President-Environment, Health and Safety, Audit and
Compliance. Mr. Muscari joined Alcoa in 1969 and was named President-Alcoa Asia
in 1993. In 1997, he was elected Vice President-Audit. He was named to his
current position in May 1999 and is responsible for EHS policy, standards and
strategy and the Alcoa integrated audit process. In addition, Mr. Muscari is the
chief compliance officer for the company.
G. John Pizzey, 54, Vice President and President - Alcoa World Alumina and
Chemicals. Mr. Pizzey joined Alcoa of Australia Limited in 1970 and was
appointed to the board of Alcoa of Australia as Executive Director - Victoria
Operations and Managing Director of Portland Smelter Services in 1986. He was
named President - Bauxite and Alumina Division of Alcoa in 1994 and President -
Primary Metals Division of Alcoa in 1995. Mr. Pizzey was elected a Vice
President of Alcoa in 1996 and was appointed President - Alcoa World Alumina in
November 1997.
Lawrence R. Purtell, 52, Executive Vice President and General Counsel. Mr.
Purtell joined Alcoa in November 1997. He had been Corporate Secretary and
Associate General Counsel of United Technologies Corporation from 1989 to 1992.
Mr. Purtell was Vice President and General Counsel of Carrier Corporation, a
unit of United Technologies Corporation and international designer, manufacturer
and marketer of heating, ventilating and air conditioning equipment and
services, from 1992 to 1993. He was Senior Vice President and General Counsel
and Corporate Secretary of McDermott International, Inc. from 1993 to 1996. In
1996, Mr. Purtell joined Koch Industries, Inc. as Senior Vice President, General
Counsel and Corporate Secretary.
Robert F. Slagle, 59, Executive Vice President, Human Resources and
Communications. Mr. Slagle was elected Treasurer in 1982 and Vice President in
1984. In 1986, he was named Vice President - Industrial Chemicals and, in 1987,
Vice President - Industrial Chemicals and U.S. Alumina Operations. Mr. Slagle
served as Vice President - Raw Materials, Alumina and Industrial Chemicals in
1989, and Vice President of Alcoa and Managing Director - Alcoa of Australia
Limited in 1991. He was named President - Alcoa World Alumina in 1996 and was
elected to his current position in November 1997.
G. Keith Turnbull, 64, Executive Vice President - Alcoa Business System. Dr.
Turnbull was appointed Assistant Director of Alcoa Laboratories in 1980. He was
named Director - Technology Planning in 1982, Vice President - Technology
Planning in 1986 and Executive Vice President - Strategic Analysis/Planning and
Information in 1991. In January 1997 he was named to his current position, with
responsibility for company-wide implementation of the Alcoa Business System.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
Dividend per share data, high and low prices per share and the principal
exchanges on which the Company's common stock is traded are set forth on page 65
of the 1999 Annual Report to Shareholders (Annual Report) and are incorporated
herein by reference.
On January 10, 2000, the Board of Directors declared a two-for-one common stock
split. The stock split is subject to the approval of Alcoa shareholders, who
must approve an amendment to Alcoa's Articles of Incorporation to increase the
authorized shares of Alcoa common stock at the Company's annual meeting on May
12, 2000. If approved, shareholders of record on May 26, 2000 will receive an
27
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additional common share for each share held. The additional shares will be
distributed on or about June 9, 2000. Per-share amounts and number of shares
outstanding have not been adjusted for the stock split since it is subject to
shareholder approval.
At February 14, 2000 (the record date for the Company's 2000 annual shareholders
meeting), there were approximately 185,000 Alcoa shareholders, including both
record holders and an estimate of the number of individual participants in
security position listings.
Item 6. Selected Financial Data.
The comparative table showing selected financial data for the Company is on page
28 of the Annual Report and is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation.
Management's review and comments on the consolidated financial statements are on
pages 29 through 38 of the Annual Report and are incorporated herein by
reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The information regarding quantitative and qualitative disclosures about market
risk is on pages 35 through 37 of the Annual Report and is incorporated herein
by reference.
Item 8. Financial Statements and Supplementary Data.
The Company's consolidated financial statements, the notes thereto and the
report of the independent public accountants are on pages 39 through 55 of the
Annual Report and are incorporated herein by reference.
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 Directors is contained under the caption "Board of
Directors" on pages 5 through 11 of the Registrant's definitive Proxy Statement
dated February 25, 2000 (Proxy Statement) and is incorporated herein by
reference.
The information regarding executive officers is set forth in Part I, Item 4A
under "Executive Officers of the Registrant."
The information required by Item 405 of Regulation S-K contained under the
caption "Compliance With Section 16(a) Reporting" on page 13 of the Proxy
Statement is incorporated herein by reference.
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Item 11. Executive Compensation.
This information is contained under the caption "Executive Compensation" on
pages 15 through 25 of the Proxy Statement and is incorporated herein by
reference. The performance graph and Report of the Compensation Committee shall
not be deemed to be "filed."
Item 12. Security Ownership of Certain Beneficial Owners and Management.
This information is contained under the caption "Alcoa Stock Ownership and
Performance" on pages 12 through 13 of the Proxy Statement and is incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions.
This information is contained under the caption "Transactions with Directors'
Companies" on page 5 of the Proxy Statement and is incorporated herein by
reference.
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
(a) The consolidated financial statements, financial statement schedule and
exhibits listed below are filed as part of this report.
(1) The Company's consolidated financial statements, the notes thereto
and the report of the independent public accountants are on pages 39
through 55 of the Annual Report and are incorporated herein by reference.
(2) The following report and schedule should be read with the
Company's consolidated financial statements in the Annual Report:
Independent Accountant's Report of PricewaterhouseCoopers LLP dated
January 10, 2000, except for Note V, for which the date is February
11, 2000, on the Company's financial statement schedule filed as a
part hereof for the fiscal years ended December 31, 1999, 1998 and
1997.
Schedule II - Valuation and Qualifying Accounts - for the fiscal years
ended December 31, 1999, 1998 and 1997.
(3) Exhibits
Exhibit
Number Description *
- ------ -------------
2. Agreement and Plan of Merger among the Company, RLM Acquisition Corp.
and Reynolds Metals Company dated as of August 18, 1999, incorporated
by reference to exhibit 99.1 to the Company's Report on Form 8-K filed
August 27, 1999.
3(a). Articles of the Registrant as amended, incorporated by reference to
exhibit 3(a) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1998.
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3(b). By-Laws of the Registrant as amended, incorporated by reference to
exhibit 3(b) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1998.
10(a). Alcoa Stock Acquisition Plan, effective January 1, 1999.
10(b). Employees' Excess Benefit Plan, Plan A, incorporated by reference to
exhibit 10(b) to the Company's Annual Report on Form 10-K (Commission
file number 1-3610) for the year ended December 31, 1980.
10(c). Incentive Compensation Plan, as amended effective January 1, 1993,
incorporated by reference to exhibit 10(c) to the Company's Annual
Report on Form 10-K (Commission file number 1-3610) for the year ended
December 31, 1992.
10(d). Employees' Excess Benefit Plan, Plan C, as amended and restated in
1994, effective January 1, 1989, incorporated by reference to exhibit
10(d) to the Company's Annual Report on Form 10-K (Commission file
number 1-3610)for the year ended December 31, 1994.
10(e). Employees' Excess Benefit Plan, Plan D, as amended effective October
30, 1992, incorporated by reference to exhibit 10(e) to the Company's
Annual Report on Form 10-K (Commission file number 1-3610) for the
year ended December 31, 1992 and exhibit 10(e)(1) the Company's Annual
Report on Form 10-K (Commission file number 1-3610) for the year ended
December 31, 1994.
10(f). Employment Agreement of Paul H. O'Neill, as amended through February
25, 1993, incorporated by reference to exhibit 10(h) to the Company's
Annual Report on Form 10-K (Commission file number 1-3610) for the
year ended December 31, 1987, exhibit 10(g) to the Company's Annual
Report on Form 10-K (Commission file number 1-3610) for the year ended
December 31, 1990 and exhibit 10(f)(2) to the Company's Annual
Report on Form 10-K (Commission file number 1-3610) for the year ended
December 31, 1992.
10(g). Deferred Fee Plan for Directors, as amended effective November 10,
1995, incorporated by reference to exhibit 10(g) to the Company's
Annual Report on Form 10-K (Commission file number 1-3610) for the
year ended December 31, 1995.
10(h). Restricted Stock Plan for Non-Employee Directors, as amended effective
March 10, 1995, incorporated by reference to exhibit 10(h) to the
Company's Annual Report on Form 10-K (Commission file number 1-3610)
for the year ended December 31, 1994.
10(h)(1). Amendment to Restricted Stock Plan for Non-Employee Directors,
effective November 10, 1995, incorporated by reference to exhibit
10(h)(1) to the Company's Annual Report on Form 10-K (Commission file
number 1-3610) for the year ended December 31, 1995.
10(i). Fee Continuation Plan for Non-Employee Directors, incorporated by
reference to exhibit 10(k) to the Company's Annual Report on Form 10-K
(Commission file number 1-3610) for the year ended December 31, 1989.
10(i)(1). Amendment to Fee Continuation Plan for Non-Employee Directors,
effective November 10, 1995, incorporated by reference to exhibit
10(i)(1) to the Company's Annual Report on Form 10-K (Commission file
number 1-3610) for the year ended December 31, 1995.
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10(j). Deferred Compensation Plan, as amended effective October 30, 1992,
incorporated by reference to exhibit 10(k) to the Company's Annual
Report on Form 10-K (Commission file number 1-3610) for the year ended
December 31, 1992.
10(j)(1). Amendments to Deferred Compensation Plan, effective January 1, 1993,
February 1, 1994 and January 1, 1995, incorporated by reference to
exhibit 10(j)(1) to the Company's Annual Report on Form 10-K
(Commission file number 1-3610) for the year ended December 31, 1994.
10(j)(2). Amendment to Deferred Compensation Plan, effective June 1, 1995,
incorporated by reference to exhibit 10(j)(2) to the Company's Annual
Report on Form 10-K (Commission file number 1-3610) for the year ended
December 31, 1995.
10(j)(3). Amendment to Deferred Compensation Plan, effective November 1, 1998.
10(j)(4). Amendments to Deferred Compensation Plan, effective January 1, 1999.
10(k). Summary of the Executive Split Dollar Life Insurance Plan, dated
November 1990, incorporated by reference to exhibit 10(m) to the
Company's Annual Report on Form 10-K (Commission file number 1-3610)
for the year ended December 31, 1990.
10(l). Dividend Equivalent Compensation Plan, effective February 3, 1997,
incorporated by reference to exhibit 10(l) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
10(m). Form of Indemnity Agreement between the Company and individual
directors or officers, incorporated by reference to exhibit 10(j) to
the Company's Annual Report on Form 10-K (Commission file number
1-3610) for the year ended December 31, 1987.
10(n). Amended and Restated Revolving Credit Agreement (364-Day), dated as of
August 13, 1999, incorporated by reference to exhibit 10(n) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999.
10(o). Revolving Credit Agreement (Five-Year), dated as of August 14, 1998,
incorporated by reference to exhibit 10(o) to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998.
10(p). Alcoa Stock Incentive Plan, effective June 1, 1999, incorporated by
reference to exhibit 10(p) to the Company's Annual Report on Form
10-K for the year ended December 31, 1998.
10(q). Alcoa Supplemental Pension Plan for Senior Executives, effective
January 1, 1999, incorporated by reference to exhibit 10(q) to the
Company's Annual Report on Form 10-K for the year ended December 31,
1998.
10(r). Deferred Fee Estate Enhancement Plan for Directors, effective July 10,
1998, incorporated by reference to exhibit 10(r) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1998.
10(s). Alcoa Deferred Compensation Estate Enhancement Plan, effective July
10, 1998, incorporated by reference to exhibit 10(s) to the
Company's Annual Report on Form 10-K for the year ended December 31,
1998.
31
<PAGE>
10(s)(1). Amendments to Alcoa Deferred Compensation Estate Enhancement Plan,
effective January 1, 2000.
12. Computation of Ratio of Earnings to Fixed Charges.
13. Portions of Alcoa's 1999 Annual Report to Shareholders.
21. Subsidiaries and Equity Entities of the Registrant.
23. Consent of Independent Certified Public Accountants.
24. Power of Attorney for certain directors.
27. Financial data schedule.
*Exhibit Nos. 10(a) through 10(l) and 10(p) through 10(s)(1) are management
contracts or compensatory plans required to be 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.
(b) Reports on Form 8-K. Alcoa filed a Form 8-K, dated November 12, 1999,
with the Securities and Exchange Commission to report that a shareholder filed a
purported derivative action on behalf of the Company alleging that the Company's
proxy statement, dated March 8, 1999, contained materially false and misleading
representations and omissions concerning the Company's proposed Alcoa Stock
Incentive Plan.
32
<PAGE>
Independent Accountant's Report on
Financial Statement Schedule
To the Shareholders and Board of Directors
of Alcoa Inc. (Alcoa)
Our audits of the consolidated financial statements referred to in our report
dated January 10, 2000, except for Note V for which the date is February 11,
2000, appearing in the 1999 Annual Report to Shareholders of Alcoa (which report
and consolidated financial statements are incorporated by reference in this
Annual Report on Form 10-K) also included an audit of the financial statement
schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this
financial statement schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
600 Grant Street
Pittsburgh, Pennsylvania
January 10, 2000, except for
Note V, for which the date is
February 11, 2000
33
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II - 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
----------- ------ -------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
1999 $ 61 $10 $ (5)(A) $ 8(B) $ 58
1998 $ 37 $11 $ 23(A) $10(B) $ 61
1997 $ 48 $ 6 $ (4)(A) $14(B) $ 37
Income tax valuation allowance:
1999 $135 $12 $ 6(A) $19(D) $134
1998 $104 $16 $ 21(A) $ 6(C) $135
1997 $110 $12 $(13)(A) $ 5(C) $104
<FN>
Notes: (A) Collections on accounts previously written off, acquisition/divestiture of subsidiaries and foreign
currency translation adjustments.
(B) Uncollectible accounts written off.
(C) Related primarily to reductions in the valuation reserve based on a change in circumstances.
(D) Related primarily to utilization of tax loss carryforwards.
</TABLE>
34
<PAGE>
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 INC.
February 28, 2000 By /s/Timothy S. Mock
Timothy S. Mock
Vice President and Controller
(Also signing as Principal Accounting Officer)
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/Alain J. P. Belda President February 28, 2000
Alain J. P. Belda and Chief Executive Officer
(Principal Executive Officer
and Director)
/s/Richard B. Kelson Executive Vice President and February 28, 2000
Richard B. Kelson Chief Financial Officer
(Principal Financial Officer)
Kenneth W. Dam, Joseph T. Gorman, Judith M. Gueron, Sir Ronald Hampel, Hugh M.
Morgan, John P. Mulroney, Paul H. O'Neill, Henry B. Schacht, Franklin A. Thomas
and Marina v.N. Whitman, each as a Director, on February 28, 2000, by Denis A.
Demblowski, their Attorney-in-Fact.*
*By /s/Denis A. Demblowski
Denis A. Demblowski
Attorney-in-Fact
35
<PAGE>
Alcoa Logo
Form A07-15899
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<TEXT>
Exhibit 10(a)
ALCOA STOCK ACQUISITION PLAN
(EFFECTIVE JANUARY 1, 1999)
The Compensation Committee of the Board of Directors of Alcoa Inc. is
adopting this Alcoa Stock Acquisition Plan for the exclusive benefit of select
management and highly compensated employees. The purpose of this Plan is to
provide eligible employees with a match on incentive compensation which is
deferred and invested in an Alcoa stock fund.
ARTICLE I - DEFINITIONS
1.1 The following terms have the specified meanings.
"Affiliate" means any business entity which the Company and/or one or more
Subsidiaries control in fact.
"Alcoa Stock" means shares of Company common stock, par value $1.00 per share,
as well as share-equivalent credits standing in a Participant's account in the
Equivalent Company Stock Fund.
"Alcoa Stock Ownership Guidelines" means the guidelines established by Alcoa
Inc. from time to time regarding the ownership levels of Alcoa Stock by
employees in Job Grades 27 and above.
"Award" means the annual award, which an Eligible Employee is eligible to
receive under the provisions of the Alcoa Incentive Compensation Plan.
"Award Date" means February of the calendar year following the Award Year except
as may be otherwise designated in accordance with the provisions of the Alcoa
Incentive Compensation Plan.
"Award Year" means the calendar year for which Awards are made under the
provisions of the Alcoa Incentive Compensation Plan.
"Beneficiary" means the Beneficiary under the Alcoa Deferred Compensation Plan,
or for Participants ineligible for that plan, the Beneficiary is the
Participant's spouse unless otherwise designated in writing by the Participant
and such other designated Beneficiary has been agreed to in writing by the
Participant's spouse on a form approved by the Committee.
"Board" means the Board of Directors of the Company or any duly authorized
committee thereof.
"Change in Control" means a Change in Control as defined in the Alcoa Rabbi
Trust Agreement by and between the Company and Mellon Bank N.A. dated as of
August, 1998.
"Committee" means the administrative committee created under the Savings Plan
which has complete authority to control and manage the operation and
administration of that plan.
"Company" means Alcoa Inc.
"Continuous Service" means Continuous Service as defined in the Savings Plan.
"Eligible Employee" means any employee who meets the eligibility requirements as
provided in Article II.
"Equivalent Fixed Income Fund" means the phantom investment vehicle which is
deemed to be equivalent in all respects, including value, to the Fixed Income
Fund established under the Savings Plan.
"Equivalent Company Investment Funds" means the phantom investment vehicles
under this Plan which are deemed to be equivalent in all respects, including
value, to the Investment Funds established under the Savings Plan.
"Equivalent Company Stock Fund" means the phantom investment vehicle under this
Plan, which is deemed to be equivalent in all respects, including value, to the
Company Stock Fund established under the Savings Plan.
"Incentive Compensation Deferral Credits" means
(a) any amounts credited to a Participant's account under
the Alcoa Deferred Compensation Plan on the applicable Award
Date equivalent to the dollar amount which the Participant
has elected to defer from an Award for the 1999 or any later
Award Year, or
(b) for Participant's ineligible to participate in the
Alcoa Deferred Compensation Plan, any amounts credited under
this Plan on the applicable Award Date, equivalent to the
dollar amount which the Participant has elected to defer
from an Award for the 1999 or any later Award Year. Awards,
Incentive Compensation Deferral Credits, and Matching
Company Credit Awards will, if applicable, be based on the
amount of such awards or credits in local currency converted
into US Dollars, based on the exchange rate as determined by
Alcoa's Corporate Finance Department.
"Matching Company Credit Award" means an amount equivalent to 25% of the dollar
value of the Incentive Compensation Deferral Credits deferred on an Award Date.
"Nonforfeitable Circumstance" means a Nonforfeitable Circumstance as defined in
the Savings Plan.
"Participant" means any Eligible Employee who commences participation in this
Plan as provided in Article II.
"Plan" means the Alcoa Stock Acquisition Plan, as it is now in existence or as
hereafter amended.
"Savings Plan" means the Alcoa Savings Plan for Non-Bargaining Employees, or as
hereafter amended.
"Subsidiary" means a corporation at least 50% of whose outstanding voting stock
is owned or controlled by the Company and/or one or more other Subsidiaries, and
any non-corporate business entity in which the Company and/or one or more other
Subsidiaries have at least a 50% interest in capital or profits.
ARTICLE II - PARTICIPATION AND MATCHING COMPANY CREDIT AWARDS
2.1 An Eligible Employee means any employee who is a member of the group of
select management and highly compensated employees who on the date the deferral
election for Incentive Compensation Deferral Credits is made and recorded, and
who on the Award Date for that deferral:
(a) is actively at work for the Company, a Subsidiary or
Affiliate,
(b) has a job grade of 27 or higher,
(c) is not in a collective bargaining unit,
(d) has less than five years of Continuous Service,
(e) is subject to the Alcoa Stock Ownership Guidelines, and
(f) does not hold, nor at any time has held the requisite
number of shares for their current job grade as
provided under the Alcoa Stock Ownership Guidelines.
2.2 An Eligible Employee commences participation in this Plan:
(a) If eligible for the Alcoa Deferred Compensation Plan,
on the Award Date applicable to the portion of any Award
which he or she has deferred for the 1999 Award Year or any
later Award Year under the Alcoa Deferred Compensation Plan,
and has elected to invest such deferral into the Equivalent
Company Stock Fund under the Alcoa Deferred Compensation
Plan. On or before December 31, 1999, an Eligible Employee
may make a one time deferral election to the Alcoa Deferred
Compensation Plan for any portion of the Award for the 1999
Award Year. Thereafter, elections must be made pursuant to
the Alcoa Deferred Compensation Plan, or
(b) If ineligible for the Alcoa Deferred Compensation Plan,
on the Award Date applicable to the portion of any Award
which he or she has deferred for the 1999 Award Year or any
later Award Year under this Plan. On or before December 31,
1999, an Eligible Employee may make a one time deferral
election to this Plan for any portion of the Award for the
1999 Award Year. Participation in this Plan by any non-
resident Eligible Employee under this subsection, is
conditioned on any approval that is required by a non-US
governmental entity.
2.3 Commencing with the 1999 Award Year and later Award Years a Participant who
by proper election has deferred all or a portion of an Award, and elected to
invest such deferral into the "equivalent company stock fund" under the Alcoa
Deferred Compensation Plan or the Equivalent Company Stock Fund under this Plan,
will be credited with a Matching Company Credit Award.
ARTICLE III - INVESTMENTS
3.1 Matching Company Credit Awards are invested in the Equivalent Company Stock
Fund.
3.2 Incentive Compensation Deferral Credits made under this Plan, and Matching
Company Credit Awards on those amounts, which have vested, may be invested in
10% increments, at the election of the Participant, in the Equivalent Fixed
Income Fund or the Equivalent Company Stock Fund. A Participant may change his
or her investment election, effective for the first full payroll period
following the date the appropriate direction has been properly received by the
Company or its designee, in accordance with uniform rules established by the
Committee.
3.3 The Company reserves the right to refuse to honor any Participant direction
related to investments or withdrawals, including transfers among investment
options, where necessary or desirable to assure compliance with applicable law
including U.S. and other Securities laws. However, the Company does not assume
any responsibility for compliance by officers or others with any such laws, and
any failure by the Company to delay or dishonor any such direction will not be
deemed to increase the Company's legal exposure to the Participant or third
parties.
ARTICLE IV - VESTING
4.1 Each Matching Company Credit Award will vest on the third Award Date
following the Award Date on which the Matching Company Credit Award was made. If
at any time prior to a Matching Company Cred