ALCAN INC - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2003

Commission file number 1-3677

ALCAN INC.

(Exact name of registrant as specified in its charter)

CANADA
Inapplicable

(State or Other Jurisdiction of
(I.R.S. Employer Identification No.)

Incorporation or Organization)

1188 Sherbrooke Street West, Montreal, Quebec, Canada H3A 3G2

(Address of Principal Executive Offices and Postal Code)

	(514) 848-8000
	(Registrant's Telephone Number, including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes Ö No ____

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes Ö No ____

At September 30, 2003, the registrant had 322,040,012 shares of common stock (without nominal or par value) outstanding.

CONTENTS

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Item 2. Management's discussion and analysis of financial conditions and results of operations

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Item 4. Disclosure Controls and Procedures

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Items 2., 3., 4. and 5.

Item 6. Exhibits and Reports on Form 8-K

SIGNATURE

EXHIBIT INDEX

PART I – FINANCIAL INFORMATION

In this report, all dollar amounts are stated in U.S. dollars and all quantities in metric tons, or tonnes, unless indicated otherwise. A tonne is 1,000 kilograms, or 2,204.6 pounds. The word "Company" refers to Alcan Inc. and, where applicable, one or more of its consolidated subsidiaries.

Item 1. Financial Statements

ALCAN INC.

INTERIM CONSOLIDATED STATEMENT OF INCOME

(unaudited)

Periods ended September 30

Third Quarter

Nine Months

(in millions of US$, except per share amounts)

2003

2002

2003

2002

Sales and operating revenues

3,480

3,170

10,161

9,204

Costs and expenses

Cost of sales and operating expenses

2,741

2,499

8,027

7,259

Depreciation and amortization

237

207

692

618

Selling, administrative and general expenses

186

136

525

416

Research and development expenses

34

28

95

83

Interest (note 12)

52

52

156

151

Restructuring, impairment and other special charges

5

6

(9)

26

Other expenses (income) - net

33

(12)

142

38

3,288

2,916

9,628

8,591

Income from continuing operations

before income taxes and other items

192

254

533

613

Income taxes

77

64

369

265

Income from continuing operations before other items

115

190

164

348

Equity income (loss)

2

(1)

3

2

Minority interests

1

3

(12)

1

Income from continuing operations

118

192

155

351

Loss from discontinued operations (note 3)

(18)

(1)

(131)

(3)

Net income

100

191

24

348

Dividends on preference shares

2

1

5

3

Net income attributable to common shareholders

98

190

19

345

Net income per common share - basic and diluted

Income from continuing operations

0.36

0.59

0.47

1.07

Loss from discontinued operations

(0.05)

-

(0.41)

-

Net income

0.31

0.59

0.06

1.07

Dividends per common share

0.15

0.15

0.60

0.45

The accompanying notes are an integral part of the interim financial statements.

-2-

CONTENTS

ALCAN INC.

INTERIM CONSOLIDATED STATEMENT OF RETAINED EARNINGS

(unaudited)

Nine months ended September 30 (in millions of US$)
2003 2002

Retained earnings - beginning of year - as reported

3,503

4,074

Accounting change - Impairment of goodwill

as at January 1, 2002 (note 2)

-

(748)

As restated

3,503

3,326

Net income

24

348

Dividends

- Common

(193)

(144)

- Preference

(5)

(3)

Retained earnings - end of period

3,329

3,527

The accompanying notes are an integral part of the interim financial statements.

-3-

CONTENTS

ALCAN INC.

INTERIM CONSOLIDATED BALANCE SHEET

(unaudited for 2003)

September 30,

December 31,

(in millions of US $)

2003

2002

ASSETS

Current assets

Cash and time deposits

123

109

Trade receivables (net of allowances of $64 in 2003 and $58 in 2002)

1,516

1,264

Other receivables

491

542

Inventories

- Aluminum operating segments

. Aluminum

891

905

. Raw materials

417

390

. Other supplies

316

296

1,624

1,591

- Packaging operating segment

496

368

2,120

1,959

Current assets held for sale (note 3)

79

76

4,329

3,950

Deferred charges and other assets

689

666

Property, plant and equipment

Cost (excluding Construction work in progress)

18,617

17,630

Construction work in progress

783

570

Accumulated depreciation

(8,859)

(8,107)

10,541

10,093

Intangible assets (net of accumulated amortization of $77 in 2003

and $53 in 2002)

316

318

Goodwill

2,379

2,303

Long-term assets held for sale (note 3)

55

208

Total assets

18,309

17,538

The accompanying notes are an integral part of the interim financial statements.

-4-

CONTENTS

ALCAN INC.

INTERIM CONSOLIDATED BALANCE SHEET (cont'd)

(unaudited for 2003)

September 30,

December 31,

(in millions of US$)

2003

2002

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities

Payables and accrued liabilities

2,520

2,294

Short-term borrowings

385

381

Debt maturing within one year

181

295

Current liabilities of operations held for sale (note 3)

38

47

3,124

3,017

Debt not maturing within one year (note 13)

3,369

3,186

Deferred credits and other liabilities

1,682

1,418

Deferred income taxes

1,263

1,120

Long-term liabilities of operations held for sale (note 3)

7

22

Minority interests

148

150

Shareholders' equity

Redeemable non-retractable preference shares

160

160

Common shareholders' equity

. Common shares

4,720

4,703

. Retained earnings

3,329

3,503

. Deferred translation adjustments

507

259

8,556

8,465

8,716

8,625

Commitments and contingencies (note 11)

Total liabilities and shareholders' equity

18,309

17,538

The accompanying notes are an integral part of the interim financial statements.

-5-

CONTENTS

ALCAN INC.

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

Periods ended September 30

Third Quarter

Nine Months

(in millions of US$)

2003

	CANADA	Inapplicable
	(State or Other Jurisdiction of	(I.R.S. Employer Identification No.)
	Incorporation or Organization)

	1188 Sherbrooke Street West, Montreal, Quebec, Canada H3A 3G2
	(Address of Principal Executive Offices and Postal Code)

ALCAN INC.

INTERIM CONSOLIDATED STATEMENT OF INCOME
(unaudited)

Periods ended September 30	Third Quarter		Nine Months
(in millions of US$, except per share amounts)	2003	2002	2003	2002

Sales and operating revenues	3,480	3,170	10,161	9,204

Costs and expenses

Cost of sales and operating expenses	2,741	2,499	8,027	7,259
Depreciation and amortization	237	207	692	618
Selling, administrative and general expenses	186	136	525	416
Research and development expenses	34	28	95	83
Interest (note 12)	52	52	156	151
Restructuring, impairment and other special charges	5	6	(9)	26
Other expenses (income) - net	33	(12)	142	38
	3,288	2,916	9,628	8,591
Income from continuing operations
before income taxes and other items	192	254	533	613
Income taxes	77	64	369	265
Income from continuing operations before other items	115	190	164	348
Equity income (loss)	2	(1)	3	2
Minority interests	1	3	(12)	1

Income from continuing operations	118	192	155	351

Loss from discontinued operations (note 3)	(18)	(1)	(131)	(3)

Net income	100	191	24	348

Dividends on preference shares	2	1	5	3

Net income attributable to common shareholders	98	190	19	345

Net income per common share - basic and diluted
Income from continuing operations	0.36	0.59	0.47	1.07
Loss from discontinued operations	(0.05)	-	(0.41)	-
Net income	0.31	0.59	0.06	1.07

Dividends per common share	0.15	0.15	0.60	0.45
The accompanying notes are an integral part of the interim financial statements.

ALCAN INC.


INTERIM CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(unaudited)

Nine months ended September 30 (in millions of US$)		2003	2002

Retained earnings - beginning of year - as reported		3,503	4,074

Accounting change - Impairment of goodwill
as at January 1, 2002 (note 2)		-	(748)

As restated		3,503	3,326

Net income		24	348

Dividends	- Common	(193)	(144)
	- Preference	(5)	(3)

Retained earnings - end of period		3,329	3,527

The accompanying notes are an integral part of the interim financial statements.

ALCAN INC.

INTERIM CONSOLIDATED BALANCE SHEET
(unaudited for 2003)

		September 30,	December 31,
(in millions of US $)		2003	2002
ASSETS
Current assets
Cash and time deposits		123	109
Trade receivables (net of allowances of $64 in 2003 and $58 in 2002)		1,516	1,264
Other receivables		491	542
Inventories	- Aluminum operating segments
	. Aluminum	891	905
	. Raw materials	417	390
	. Other supplies	316	296
		1,624	1,591
	- Packaging operating segment	496	368
		2,120	1,959
Current assets held for sale (note 3)		79	76
		4,329	3,950
Deferred charges and other assets		689	666
Property, plant and equipment
Cost (excluding Construction work in progress)		18,617	17,630
Construction work in progress		783	570
Accumulated depreciation		(8,859)	(8,107)
		10,541	10,093
Intangible assets (net of accumulated amortization of $77 in 2003
and $53 in 2002)		316	318
Goodwill		2,379	2,303
Long-term assets held for sale (note 3)		55	208

Total assets		18,309	17,538

The accompanying notes are an integral part of the interim financial statements.

ALCAN INC.

INTERIM CONSOLIDATED BALANCE SHEET (cont'd)
(unaudited for 2003)


	September 30,	December 31,
(in millions of US$)	2003	2002
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Payables and accrued liabilities	2,520	2,294
Short-term borrowings	385	381
Debt maturing within one year	181	295
Current liabilities of operations held for sale (note 3)	38	47
	3,124	3,017

Debt not maturing within one year (note 13)	3,369	3,186
Deferred credits and other liabilities	1,682	1,418
Deferred income taxes	1,263	1,120

Long-term liabilities of operations held for sale (note 3)	7	22
Minority interests	148	150

Shareholders' equity

Redeemable non-retractable preference shares	160	160
Common shareholders' equity
. Common shares	4,720	4,703
. Retained earnings	3,329	3,503
. Deferred translation adjustments	507	259
	8,556	8,465
	8,716	8,625
Commitments and contingencies (note 11)

Total liabilities and shareholders' equity	18,309	17,538
The accompanying notes are an integral part of the interim financial statements.