June 30, 2012 Item 1. Net sales Cost of goods sold (exclusive of depreciation and amortization) Selling, general and administrative expenses Depreciation and amortization Research and development expenses Interest expense and amortization of debt issuance costs Interest income Loss on early extinguishment of debt Restructuring charges, net Equity in net loss of non-consolidated affiliates Other (income) expense, net Income (loss) before income taxes Income tax (benefit) provision Net income (loss) Net income attributable to noncontrolling interests Net income (loss) attributable to our common shareholder Current assets Cash and cash equivalents Accounts receivable, net — third parties (net of allowances of $4 and $7 as of December 31, 2011 and March 31, 2011, respectively) — related parties Inventories Prepaid expenses and other current assets Fair value of derivative instruments Deferred income tax assets Total current assets Property, plant and equipment, net Goodwill Intangible assets, net Investment in and advances to non–consolidated affiliates Fair value of derivative instruments, net of current portion Deferred income tax assets Other long–term assets — third parties — related parties Total assets Current liabilities Current portion of long–term debt Short–term borrowings Accounts payable — third parties — related parties Fair value of derivative instruments Accrued expenses and other current liabilities Deferred income tax liabilities Total current liabilities Long–term debt, net of current portion Deferred income tax liabilities Accrued postretirement benefits Other long–term liabilities Total liabilities Commitments and contingencies Shareholder’s equity Common stock, no par value; unlimited number of shares authorized; 1,000 shares issued and outstanding as of December 31, 2011 and March 31, 2011 Additional paid–in capital Accumulated deficit Accumulated other comprehensive (loss) income Total equity of our common shareholder Noncontrolling interests Total equity Total liabilities and equity millions) OPERATING ACTIVITIES Net income Adjustments to determine net cash provided by operating activities: Depreciation and amortization Gain on unrealized derivatives and other realized derivatives in investing activities, net Loss on extinguishment of debt Deferred income taxes Write–off and amortization of fair value adjustments, net Equity in net loss of non–consolidated affiliates (Gain) loss on foreign exchange remeasurement of debt (Gain) loss on sale of assets Non-cash impairment charges Amortization of debt issuance costs Other, net Changes in assets and liabilities: Accounts receivable Inventories Accounts payable Other current assets Other current liabilities Other noncurrent assets Other noncurrent liabilities Net cash provided by operating activities INVESTING ACTIVITIES Capital expenditures Proceeds from sales of assets Proceeds from investment in and advances to non–consolidated affiliates, net (Outflow) proceeds from related party loans receivable, net Proceeds from settlement of other undesignated derivative instruments, net Net cash (used in) provided by investing activities FINANCING ACTIVITIES Proceeds from issuance of debt Principal payments Short–term borrowings, net Return of capital to our common shareholder Dividends, noncontrolling interest Acquisition of noncontrolling interest in Novelis Korea Ltd. Debt issuance costs Net cash provided by (used in) financing activities Net (decrease) increase in cash and cash equivalents Effect of exchange rate changes on cash balances held in foreign currencies Cash and cash equivalents — beginning of period Cash and cash equivalents — end of period Additional Paid-in Accumulated Other Comprehensive Income (Loss) Non- controlling Balance as of March 31, 2011 Net income attributable to our common shareholder Net income attributable to noncontrolling interests Currency translation adjustment, net of tax provision of $ — included in AOCI Change in fair value of effective portion of cash flow hedges, net of tax benefit of $28 included in AOCI Change in pension and other benefits, net of tax provision of $1 included in AOCI Noncontrolling interest cash dividends Acquisition of noncontrolling interest in Novelis Korea Ltd Balance as of December 31, 2011 millions) Net income (loss) Other comprehensive income (loss): Currency translation adjustment Net change in fair value of effective portion of cash flow hedges Net change in pension and other benefits Other comprehensive income (loss) before income tax effect Income tax (benefit) provision related to items of other comprehensive income (loss) Other comprehensive income (loss), net of tax Comprehensive income (loss) Net income Other comprehensive income (loss): Currency translation adjustment Net change in fair value of effective portion of cash flow hedges Net change in pension and other benefits Other comprehensive income (loss) before income tax effect Income tax (benefit) provision related to items of other comprehensive income (loss) Other comprehensive income (loss), net of tax Comprehensive income (loss) millions, except number of shares) judgment. The accounting estimates used in the preparation of our condensed consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as our operating environment changes. We evaluate and update our assumptions and estimates on an ongoing basis and may employ outside experts to assist in our evaluations. Actual results could differ from the estimates we have used. - “Restructuring charges, net” for the Balance as of March 31, 2011 Provisions, net Cash payments Adjustments — other Balance as of December 31, 2011 payments related to these previously announced plans. As of Finished goods Work in process Raw materials Supplies Inventories - Net income attributable to our common shareholder Decrease in additional paid-in capital for purchase of shares in Novelis Korea Limited Change from net income attributable to our common shareholder and transfers from noncontrolling interest - Current assets Cash and cash equivalents Accounts receivable Inventories Total current assets Property, plant and equipment, net Goodwill Deferred income taxes Other long-term assets Total assets Current liabilities Accounts payable Accrued expenses and other current liabilities Total current liabilities Accrued postretirement benefits Other long-term liabilities Total liabilities Net sales Costs, expenses and provisions for taxes on income Net loss Purchase of tolling services from Aluminium Norf GmbH (Norf) receivable. Accounts receivable Other long-term assets Accounts payable - Debt consists of the following (in millions). Third party debt: Short term borrowings Novelis Inc. Floating rate Term Loan Facility, due March 2017 8.375% Senior Notes, due December 2017 8.75% Senior Notes, due December 2020 7.25% Senior Notes, due February 2015 Novelis Korea Limited Facility Loan, due December 2014 Term Loan, due December 2014 Novelis Switzerland S.A. Capital lease obligation, due December 2019 (Swiss francs (CHF) 41 million) Novelis Brazil BNDES loans, due December 2018 through April 2021 Other Other debt, due December 2011 through November 2015 Total debt — third parties Less: Short term borrowings Current portion of long term debt Long-term debt, net of current portion — third parties: As of December 31, 2011 Short-term borrowings and Current portion of long term debt due within one year 2 years 3 years 4 years 5 years Thereafter Total $40 million. As of As of - The board of directors has authorized •The Novelis Long-Term Incentive Plan FY 2009 — FY 2012 (2009 LTIP) was authorized in June 2008. Under the 2009 LTIP, phantom stock appreciation rights (SARs) were granted to certain of our executive officers and key employees. •The Novelis Long-Term Incentive Plan FY 2010 — FY 2013 (2010 LTIP) was authorized in June 2009. Under the 2010 LTIP, SARs were granted to certain of our executive officers and key employees. •The Novelis Long-Term Incentive Plan FY 2011— FY 2014 (2011 LTIP) was authorized in May 2010. The 2011 LTIP provides for SARs and phantom restricted stock units (RSUs). •The Novelis Long-Term Incentive Plan FY 2012— FY 2015 (2012 LTIP) was authorized in May 2011. The 2012 LTIP provides for SARs and RSUs. Novelis Long-Term Incentive Plan 2009 Novelis Long-Term Incentive Plan 2010 Novelis Long-Term Incentive Plan 2011 Novelis Long-Term Incentive Plan 2012 Total compensation (income) expense 2012 LTIP - RSUs RSUs outstanding as of March 31, 2011 Granted Forfeited/Cancelled RSUs outstanding as of December 31, 2011 2012 LTIP - SARs SARs outstanding as of March 31, 2011 Granted Forfeited/Cancelled SARs outstanding as of December 31, 2011 2011 LTIP - RSUs RSUs outstanding as of March 31, 2011 Forfeited/Cancelled RSUs outstanding as of December 31, 2011 2011 LTIP - SARs SARs outstanding as of March 31, 2011 Exercised Forfeited/Cancelled SARs outstanding as of December 31, 2011 2010 LTIP - SARs SARs outstanding as of March 31, 2011 Exercised Forfeited/Cancelled SARs outstanding as of December 31, 2011 - 2009 LTIP - SARs SARs outstanding as of March 31, 2011 Exercised Forfeited/Cancelled SARs outstanding as of December 31, 2011 The fair value of each unvested SAR is based on the difference between the fair value of a long call and a short call option. The fair value of each of these call options was determined using the Monte Carlo Simulation model. We used historical stock price volatility data of Hindalco on the National Stock Exchange of India to determine expected volatility assumptions. The fair value of each vested SAR is remeasured at fair value each reporting period based on the excess of the current stock price over the exercise price, not to exceed the maximum payout as defined by each plan. The fair value of each unvested SAR under the 2013 LTIP, 2012 LTIP, 2011 LTIP, Risk-free interest rate Dividend yield Volatility Service cost Interest cost Expected return on assets Amortization — losses Net periodic benefit cost Service cost Interest cost Expected return on assets Amortization — losses Amortization — prior service cost Net periodic benefit cost There was no impact to our condensed consolidated statement of operations for the three months ended June 30, 2012. The plan amendment will reduce other post-retirement benefit expense in future years. Funded pension plans Unfunded pension plans Savings and defined contribution pension plans Total contributions (Gain) loss on remeasurement of monetary assets and liabilities, net Loss released from accumulated other comprehensive income Gain recognized on balance sheet remeasurement currency exchange contracts, net Currency (gains) losses, net Cumulative currency translation adjustment — beginning of period Effect of changes in exchange rates Cumulative currency translation adjustment — end of period INSTRUMENTS AND COMMODITY CONTRACTS The fair values of our financial instruments and commodity contracts as of Derivatives designated as hedging instruments: Cash flow hedges Currency exchange contracts Aluminum contracts Net Investment hedges Currency exchange contracts Fair value hedges Aluminum contracts Total derivatives designated as hedging instruments Derivatives not designated as hedging instruments Aluminum contracts Currency exchange contracts Interest rate swaps Electricity swap Energy contracts Total derivatives not designated as hedging instruments Total derivative fair value Derivatives designated as hedging instruments: Cash flow hedges Currency exchange contracts Aluminum contracts Fair value hedges Aluminum contracts Total derivatives designated as hedging instruments Derivatives not designated as hedging instruments: Aluminum contracts Currency exchange contracts Interest rate swaps Electricity swap Energy contracts Total derivatives not designated as hedging instruments Total derivative fair value 2012 Hedge Type Purchase (Sale) Cash flow purchases Cash flow sales Fair value Not designated Total As of Contracts that represent the majority of notional amounts will mature during the second quarter of fiscal 2013. , there were no interest rate swaps outstanding that were not designated as hedges. Derivative Instruments Not Designated as Hedges Aluminum contracts Balance sheet remeasurement currency exchange contracts Other currency exchange contracts Energy contracts Interest Rate swaps Gain recognized Derivative Instruments Designated as Hedges Cash flow hedges Aluminum contracts (C) Currency exchange contracts (A) Balance Sheet remeasurement currency exchange contracts (B) Electricity swap (B) Fair Value hedges Aluminum contracts Fixed priced firm sales commitments (C) Gain recognized Total gain (loss) recognized Balance sheet remeasurement currency exchange contracts Realized gains, net Unrealized gains (losses) on other derivative instruments, net Total gain recognized The following table summarizes the impact on AOCI and earnings of derivative instruments designated as cash flow hedges (in millions). Within the next twelve months, we expect to reclassify Derivatives in Cash Flow Electricity swap(A) Aluminum contracts Currency exchange contracts Interest rate swaps Total Derivatives in Cash Flow Electricity swap(A) Aluminum contracts Aluminum contracts Currency exchange contracts Currency exchange contracts Currency exchange contracts Interest rate swaps Total As of derivative contracts. Level 2 Instruments Aluminum contracts Currency exchange contracts Energy contracts Interest rate swaps Total Level 2 Instruments Level 3 Instruments Aluminum contracts Electricity swap Total Level 3 Instruments Total We recognized unrealized Balance as of March 31, 2011 Realized/unrealized gain included in earnings(A) Settlements Balance as of December 31, 2011 Assets Long-term receivables from related parties Liabilities Total debt — third parties (excluding short term borrowings) Foreign currency remeasurement (gains) losses, net (A) (Gain) loss on change in fair value of other unrealized derivative instruments, net (Gain) on change in fair value of other realized derivative instruments, net (Gain) loss on sale of assets, net (Gain) on litigation settlement in Brazil (B) Loss on Brazilian tax litigation, net (C) Other, net Other (income) expense, net - Pre-tax income (loss) before equity in net income (loss) of non-consolidated affiliates and noncontrolling interests Canadian statutory tax rate Provision at the Canadian statutory rate Increase (decrease) for taxes on income (loss) resulting from: Exchange translation items Exchange remeasurement of deferred income taxes Change in valuation allowances Expense (income) items not subject to tax Dividends not subject to tax Enacted tax rate changes Tax rate differences on foreign earnings Uncertain tax positions, net Other — net Income tax (benefit) provision Effective tax rate or more jurisdictions. Inc. Contents The “Eliminations and other” column in the table below include eliminations and functions that are managed directly from our corporate office that have not been allocated to our operating segments as well as the adjustment for proportional consolidation. December 31, 2011 March 31, 2011 Selected Operating Results Three Months Ended December 31, 2011 Net sales Depreciation and amortization Capital expenditures Selected Operating Results Three Months Ended December 31, 2010 Net sales Depreciation and amortization Capital expenditures Selected Operating Results Nine months Ended December 31, 2011 Net sales Depreciation and amortization Capital expenditures Selected Operating Results Nine Months Ended December 31, 2010 Net sales Depreciation and amortization Capital expenditures - The following table shows the reconciliation from income from reportable segments to “Net income North America Europe Asia South America Depreciation and amortization Interest expense and amortization of debt issuance costs Interest income Adjustment to eliminate proportional consolidation Unrealized gains (losses) on change in fair value of derivative instruments, net Realized gains (losses) on derivative instruments not included in segment income Loss on early extinguishment of debt Restructuring charges, net Other costs, net Income (loss) before income taxes Income tax (benefit) provision Net income (loss) Net income attributable to noncontrolling interests Net income (loss) attributable to our common shareholder Rexam Affiliates of Ball Corporation Anheuser-Busch Purchases from Rio Tinto Alcan as a percentage of total Currency translation adjustment Fair value of effective portion of cash flow hedges Pension and other benefits Accumulated other comprehensive (loss) income Interest paid Income taxes paid In connection with the issuance of our - Net sales Cost of goods sold (exclusive of depreciation and amortization) Selling, general and administrative expenses Depreciation and amortization Research and development expenses Interest expense and amortization of debt issuance costs Interest income Restructuring charges, net Equity in net (income) loss of non-consolidated affiliates Other (income) expense, net Income (loss) before income taxes Income tax provision (benefit) Net income (loss) Net income attributable to noncontrolling interests Net income (loss) attributable to our common shareholder Net sales Cost of goods sold (exclusive of depreciation and amortization) Selling, general and administrative expenses Depreciation and amortization Research and development expenses Interest expense and amortization of debt issuance costs Interest income Loss on the early debt extinguishment Restructuring charges, net Equity in net (income) loss of non-consolidated affiliates Other (income) expense, net Income (loss) before taxes Income tax provision Net income (loss) Net income attributable to noncontrolling interests Net income (loss) attributable to our common shareholder - Net sales Cost of goods sold (exclusive of depreciation and amortization) Selling, general and administrative expenses Depreciation and amortization Research and development expenses Interest expense and amortization of debt issuance costs Interest income Restructuring charges, net Equity in net (income) loss of non-consolidated affiliates Other (income) expense, net Income (loss) before income taxes Income tax provision (benefit) Net income (loss) Net income attributable to noncontrolling interests Net income (loss) attributable to our common shareholder Net sales Cost of goods sold (exclusive of depreciation and amortization) Selling, general and administrative expenses Depreciation and amortization Research and development expenses Interest expense and amortization of debt issuance costs Interest income Loss on early debt extinguishment Restructuring charges, net Equity in net (income) loss of non-consolidated affiliates Other (income) expense, net Income (loss) before income taxes Income tax (benefit) provision Net income (loss) Net income attributable to noncontrolling interests Net income (loss) attributable to our common shareholder - Current assets Cash and cash equivalents Accounts receivable, net of allowances — third parties — related parties Inventories Prepaid expenses and other current assets Fair value of derivative instruments Deferred income tax assets Total current assets Property, plant and equipment, net Goodwill Intangible assets, net Investments in and advances to non-consolidated affiliates Fair value of derivative instruments, net of current portion Deferred income tax assets Other long-term assets Total assets LIABILITIES AND SHAREHOLDER’S EQUITY Current liabilities Current portion of long-term debt Short-term borrowings — third parties — related parties Accounts payable — third parties — related parties Fair value of derivative instruments Accrued expenses and other current liabilities Deferred income tax liabilities Total current liabilities Long-term debt, net of current portion — third parties — related parties Deferred income tax liabilities Accrued postretirement benefits Other long-term liabilities Total liabilities Commitments and contingencies Shareholder’s equity Common stock Additional paid-in capital Retained earnings (accumulated deficit) Accumulated other comprehensive income (loss) Total equity of our common shareholder Noncontrolling interests Total equity Total liabilities and equity - Current assets Cash and cash equivalents Accounts receivable, net of allowances — third parties — related parties Inventories Prepaid expenses and other current assets Fair value of derivative instruments Deferred income tax assets Total current assets Property, plant and equipment, net Goodwill Intangible assets, net Investments in and advances to non-consolidated affiliates Fair value of derivative instruments, net of current portion Deferred income tax assets Other long-term assets Total assets Current liabilities Current portion of long-term debt Short-term borrowings — third parties — related parties Accounts payable — third parties — related parties Fair value of derivative instruments Accrued expenses and other current liabilities Deferred income tax liabilities Total current liabilities Long-term debt, net of current portion — third parties — related parties Deferred income tax liabilities Accrued postretirement benefits Other long-term liabilities Commitments and contingencies Shareholder’s equity Common stock Additional paid-in capital Retained earnings (accumulated deficit) Accumulated other comprehensive income (loss) Total equity of our common shareholder Noncontrolling interests Total equity Total liabilities and equity - OPERATING ACTIVITIES Net cash (used in) provided by operating activities INVESTING ACTIVITIES Capital expenditures Proceeds from sales of assets Proceeds from investment in and advances to non-consolidated affiliates, net (Outflow) proceeds from related party loans receivable, net (Outflow) proceeds from settlement of undesignated derivative instruments, net Net cash (used in) provided by investing activities FINANCING ACTIVITIES Proceeds from issuance of debt — third parties — related parties Principal payments — third parties — related parties Short-term borrowings, net — third parties — related parties Dividends — noncontrolling interests Acquistion of noncontrolling interests Debt issuance costs Net cash provided by (used in) financing activities Net increase (decrease) in cash and cash equivalents Effect of exchange rate changes on cash balances held in foreign currencies Cash and cash equivalents — beginning of period Cash and cash equivalents — end of period - OPERATING ACTIVITIES Net cash provided by (used in) operating activities INVESTING ACTIVITIES Capital expenditures Proceeds from sales of assets — third parties — related parties Changes to investment in and advances to non-consolidated affiliates Proceeds from loans receivable, net — related parties Net proceeds from settlement of derivative instruments Net cash provided by (used in) investing activities FINANCING ACTIVITIES Proceeds from issuance of debt, third parties Principal payments, third parties Related parties borrowings, net Short-term borrowings, net — third parties — related parties Return of capital Dividends — noncontrolling interests Debt issuance costs Net cash provided by (used in) financing activities Net increase (decrease) in cash and cash equivalents Effect of exchange rate changes on cash balances held in foreign currencies Cash and cash equivalents — beginning of period Cash and cash equivalents — end of period our Asia region. Nine months Net sales Percentage increase (decrease) in net sales versus comparable previous year period Rolled product shipments: North America Europe Asia South America Total Beverage and food cans All other rolled products Total Nine months Percentage increase (decrease) in rolled products shipments versus comparable previous year period: North America Europe Asia South America Total Beverage and food cans All other rolled products Total Metal price lag is attributable to fluctuating metal prices associated with the period of time between the pricing of our purchases of inventory and the We discuss this metal price risk further below. London Metal Exchange Prices Aluminum (per metric tonne, and presented in U.S. dollars): Closing cash price as of beginning of period Average cash price during the period Closing cash price as of end of period Aluminum prices have declined approximately $260 per ton during the first quarter of fiscal 2013, which resulted in $8 million of unrealized gains on undesignated metal derivatives. electricity swap. U.S. dollar per Euro Brazilian real per U.S. dollar South Korean won per U.S. dollar Canadian dollar per U.S. dollar 2011: first quarter of fiscal 2012. the results of each region. JUNE 30, 2011 segments. Conversion costs were higher primarily due a raise in utility costs and a reduction in the incremental benefits we realize from using UBC and scrap due to lower aluminum prices. •$ •$ Selected Operating Results Three Months Ended December 31, 2011 Net sales Shipments Rolled products Ingot products Total shipments Selected Operating Results Three Months Ended December 31, 2010 Net sales Shipments Rolled products Ingot products Total shipments Changes in Segment income Segment income — three months ended December 31, 2010 Volume Conversion premium and product mix Conversion costs(A) Metal price lag Foreign exchange Primary metal production Other changes(B) Segment income — three months ended December 31, 2011 In March 2012, we made a decision to close our Saguenay Works plant in Quebec, Canada effective August 2012. The closure was driven by the need to right-size production capacity in North America, along with the increasing logistic costs and structural challenges facing this location. In July 2012, we announced plans to establish a new organization for the procurement of used beverage cans in North America. The announcement follows the Company's agreement to withdraw from the Evermore joint venture with Alcoa, Inc. effective August 31, 2012. Our volumes were unfavorable in the first quarter of fiscal 2013 compared to the first quarter of fiscal 2012 due to lower shipments with a key customer as well as production and supply chain issues we experienced early in the quarter related to transferring our Saguenay plant capacity to other North America plants. These impacts were partially offset by shifting some Middle East supply responsibilities from our Asia region to North America in the first quarter fiscal 2013 compared to the first quarter fiscal 2012. average aluminum prices. As of In May 2012, we made a decision to build a fully integrated recycling facility at our Nachterstedt, Germany plant, which will have an annual capacity of approximately 400 kt. In June 2012, we completed the sale of three European aluminum foil and packaging plants to Eurofoil, higher pension related expenses. As of During the fourth quarter of fiscal 2012, we announced plans to invest $100 million into an aluminum automotive heat treatment plant in China, which will have annual capacity of approximately 120 kt. Construction of the new facility is expected to begin in the fall of 2012 and we expect the plant to be operational in late calendar year 2014. year. end of calendar year 2013. year. scrap, compared to the same period in the prior year. In Brazil, the U.S. dollar is the functional currency due to predominantly U.S. dollar selling prices. The U.S. dollar strengthened compared to the Brazilian real during the quarter, which resulted in favorable foreign currency gains as the Brazilian real denominated liabilities are remeasured to the U.S. dollar. income” North America Europe Asia South America Total Segment income Depreciation and amortization Interest expense and amortization of debt issuance costs Interest income Adjustment to eliminate proportional consolidation Unrealized gains (losses) on change in fair value of derivative instruments, net Realized gains (losses) on derivative instruments not included in segment income Loss on early extinguishment of debt Restructuring charges, net Other costs, net Income (loss) before income taxes Income tax (benefit) provision Net income (loss) Net income (loss) attributable to noncontrolling interests Net income (loss) attributable to our common shareholder Selected Operating Results Nine Months Ended December 31, 2011 Net sales Shipments Rolled products Ingot products Total shipments Selected Operating Results Nine Months Ended December 31, 2010 Net sales Shipments Rolled products Ingot products Total shipments Changes in Segment income Segment income — nine months ended December 31, 2010 Volume Conversion premium and product mix Conversion costs(A) Metal price lag Foreign exchange Primary metal production Other changes(B) Segment income — nine months ended December 31, 2011 North America Europe Asia South America Total segment income Depreciation and amortization Interest expense and amortization of debt issuance costs Interest income Unrealized gains (losses) on change in fair value of derivative instruments, net Realized gains (losses) on derivative instruments not included in segment income Adjustment to eliminate proportional consolidation Loss on early extinguishment of debt Restructuring charges, net Other costs, net Income before income taxes Income tax provision Net income Net income attributable to noncontrolling interests Net income attributable to our common shareholder LIQUIDITY AND CAPITAL RESOURCES projects. Cash and cash equivalents Overdrafts Availability under the ABL facility Total liquidity Cash held outside Canada, in which we are incorporated, is free from significant restrictions that would prevent the cash from being accessed to meet the Company's liquidity needs including, if necessary, to fund operations and service debt obligations in Canada. Upon the repatriation of any earnings to Canada, in the form of dividends or otherwise, we could be subject to Canadian income taxes (subject to adjustment for foreign taxes paid) and withholding taxes payable to the various foreign countries. As of June 30, 2012, we do not believe adverse tax consequences exist that restrict our use of “Cash or cash equivalents” in a material manner. Net cash provided by operating activities Net cash (used in) investing activities Less: Proceeds from sales of assets Free cash flow Ending cash and cash equivalents 90 days. Capital expenditures Proceeds from settlement of other undesignated derivative instruments, net Proceeds from sales of assets Proceeds from investment in and advances to non-consolidated affiliates, net (Outflow) proceeds from related party loans receivable, net Net cash (used in) provided by investing activities June 30, 2012. (Alunorf). Proceeds from issuance of debt, third parties Principal payments, third parties Short-term borrowings (payments), net Return of capital to our common shareholder Dividends, noncontrolling interest Debt issuance costs Acquisition of noncontrolling interest in Novelis Korea Ltd Net cash provided by (used in) financing activities We have guaranteed the indebtedness for a credit facility and loan on behalf of Alunorf. The guarantee is limited to 50% of the outstanding debt, not to exceed 6 million euros. As of June 30, 2012, our guarantee was $1 million. 2012. disclosures. does not reflect the company’s cash expenditures or requirements for capital expenditures or capital commitments; does not reflect changes in, or cash requirements for, the company’s working capital needs; does not reflect any costs related to the current or future replacement of assets being depreciated and amortized. as a measure of operating performance to assist us in comparing our operating performance on a consistent basis because it removes the impact of items not directly resulting from our core operations; for planning purposes, including the preparation of our internal annual operating budgets and financial projections; to evaluate the performance and effectiveness of our operational strategies; and as a basis to calculate incentive compensation payments for our key employees. results may differ from those predicted. While we do not know what impact any of these differences may have on our business, our results of operations, financial condition, cash flow and the market price of our securities may be materially adversely affected. Factors that could cause actual results or outcomes to differ from the results expressed or implied by forward-looking statements include, among other things: relationships with, and financial and operating conditions of, our customers, suppliers and other stakeholders; changes in the prices and availability of aluminum (or premiums associated with such prices) or other materials and raw materials we use; fluctuations in the supply of, and prices for, energy in the areas in which we maintain production facilities; the level of our indebtedness and our ability to generate cash; deterioration of our ratings by a credit agency; changes in the relative values of various currencies and the effectiveness of our currency hedging activities; union disputes and other employee relations issues; factors affecting our operations, such as litigation, environmental remediation and clean-up costs, labor relations and negotiations, breakdown of equipment and other events; changes in general economic conditions including deterioration in the global economy, particularly sectors in which our customers operate; changes in the fair value of derivative instruments or the failure of counterparties to our derivative instruments to honor their agreements; the capacity and effectiveness of our metal hedging activities; availability of production capacity; impairment of our goodwill and other intangible assets; continuing obligations and other relationships resulting from our spin-off from Alcan Inc.; the impact of restructuring efforts in the future; economic, regulatory and political factors within the countries in which we operate or sell our products, including changes in duties or tariffs; competition from other aluminum rolled products producers as well as from substitute materials such as steel, glass, plastic and composite materials; cyclical demand and pricing within the principal markets for our products as well as seasonality in certain of our customers’ industries; and changes in interest rates that have the effect of increasing the amounts we pay under our principal credit agreement and other financing agreements. 2012. We estimate that a 10% increase in LME aluminum prices would result in a June 30, 2012. The following table presents the estimated potential effect on the fair values of these derivative instruments as of Electricity Natural Gas The following table presents the estimated potential effect on the fair values of these derivative instruments as of Currency measured against the U.S. dollar Brazilian real Euro Korean won Canadian dollar British pound Swiss franc designated as cash flow hedges. Upon completion of the refinancing transaction, our exposure to changes in the benchmark LIBOR interest rate was limited, which resulted in de-designation. The 2011 Term Loan Facility contains a floor feature of the higher of LIBOR or 100 basis points plus a spread The following table presents the estimated potential effect on the fair values of these derivative instruments as of Interest Rate Contracts North America June 30, 2012. 2012. Description /s/ Steven Fisher /s/ Robert P. Nelson Descriptionxý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 December 31, 2011¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Canada 98-0442987 30326 (Address of principal executive offices) (Zip Code) xý No ¨xý No ¨Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x x (Do(Do not check if a smaller reporting company)Smaller reporting company ¨ xýJanuaryJuly 31, 2012, the registrant had 1,000 shares of common stock, no par value, outstanding. All of the registrant’s outstanding shares were held indirectly by Hindalco Industries Ltd., the registrant’s parent company.PART I. FINANCIAL INFORMATIONItem 1. 3 3Condensed Consolidated Balance Sheets as of December 31, 2011 and March 31, 2011 (unaudited)456 7 PART II. OTHER INFORMATION 56Item 4.59PART II. OTHER INFORMATION606061 Three Months
Ended
December 31, Nine Months
Ended
December 31, 2011 2010 2011 2010 $ 2,462 $ 2,560 $ 8,455 $ 7,617 2,224 2,232 7,481 6,628 95 94 281 272 79 100 249 307 10 9 34 27 74 46 228 125 (3 ) (4 ) (11 ) (10 ) — 74 — 74 1 20 31 35 4 5 9 11 (1 ) (14 ) (85 ) (53 ) 2,483 2,562 8,217 7,416 (21 ) (2 ) 238 201 (10 ) 33 42 104 (11 ) (35 ) 196 97 1 11 26 31 $ (12 ) $ (46 ) $ 170 $ 66 Three Months Ended June 30, 2012 2011 Net sales $ 2,550 $ 3,113 Cost of goods sold (exclusive of depreciation and amortization) 2,202 2,708 Selling, general and administrative expenses 102 95 Depreciation and amortization 73 89 Research and development expenses 12 12 Interest expense and amortization of debt issuance costs 74 77 Gain on assets held for sale (5 ) — Restructuring charges, net 5 19 Equity in net loss of non-consolidated affiliates 2 2 Other income, net (27 ) (25 ) 2,438 2,977 Income before income taxes 112 136 Income tax provision 21 59 Net income 91 77 Net income attributable to noncontrolling interests — 15 Net income attributable to our common shareholder $ 91 $ 62 BALANCE SHEETSSTATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)millions, except number of shares) December 31,
2011 March 31,
2011 ASSETS $ 436 $ 311 1,267 1,480 35 28 1,091 1,338 74 50 89 165 54 39 3,046 3,411 2,646 2,543 611 611 648 707 671 743 6 17 40 52 167 193 16 19 $ 7,851 $ 8,296 LIABILITIES AND SHAREHOLDER’S EQUITY $ 22 $ 21 227 17 992 1,378 52 50 97 82 466 568 30 43 1,886 2,159 4,322 4,065 509 552 507 526 326 359 7,550 7,661 — — 1,660 1,830 (1,272 ) (1,442 ) (121 ) 57 267 445 34 190 301 635 $ 7,851 $ 8,296 Three Months Ended June 30, 2012 Three Months Ended June 30, 2011 Total Total Net income $ 91 $ — $ 91 $ 62 — $ 15 $ 77 Other comprehensive income (loss): Currency translation adjustment (81 ) (1 ) (82 ) 54 5 59 Net change in fair value of effective portion of cash flow hedges (28 ) — (28 ) (13 ) — (13 ) Net change in pension and other benefits 24 — 24 1 — 1 Other comprehensive income (loss) before income tax effect (85 ) (1 ) (86 ) 42 5 47 Income tax (benefit) provision related to items of other comprehensive income (loss) (1 ) — (1 ) (4 ) — (4 ) Other comprehensive income (loss), net of tax (84 ) (1 ) (85 ) 46 5 51 Comprehensive income (loss) $ 7 $ (1 ) $ 6 $ 108 $ 20 $ 128 STATEMENTS OF CASH FLOWSBALANCE SHEETS (unaudited)millions)millions, except number of shares) Nine Months Ended
December 31, 2011 2010 $ 196 $ 97 249 307 (67 ) (58 ) — 74 11 12 20 8 9 11 16 — 1 (11 ) 14 5 12 6 (9 ) (8 ) 152 (37 ) 193 (220 ) (426 ) 22 (16 ) (7 ) (123 ) 21 14 (8 ) (41 ) 4 205 218 (297 ) (132 ) 11 28 1 1 (5 ) 8 95 81 (195 ) (14 ) 274 3,985 (16 ) (2,486 ) 211 49 — (1,700 ) (1 ) (18 ) (343 ) — (2 ) (174 ) 123 (344 ) 133 (140 ) (8 ) — 311 437 $ 436 $ 297 June 30,
2012 March 31,
2012ASSETS Current assets Cash and cash equivalents $ 263 $ 317 Accounts receivable, net — third parties (net of allowances of $5 and $5 as of June 30, 2012 and March 31, 2012, respectively) 1,305 1,331 — related parties 29 36 Inventories 1,076 1,024 Prepaid expenses and other current assets 94 61 Fair value of derivative instruments 99 99 Deferred income tax assets 138 151 Assets held for sale 4 81 Total current assets 3,008 3,100 Property, plant and equipment, net 2,740 2,689 Goodwill 611 611 Intangible assets, net 669 678 Investment in and advances to non–consolidated affiliates 648 683 Fair value of derivative instruments, net of current portion 2 2 Deferred income tax assets 87 74 Other long–term assets — third parties 164 168 — related parties 15 16 Total assets $ 7,944 $ 8,021 LIABILITIES AND SHAREHOLDER’S EQUITY Current liabilities Current portion of long–term debt $ 23 $ 23 Short–term borrowings 119 18 Accounts payable — third parties 1,219 1,245 — related parties 48 51 Fair value of derivative instruments 107 95 Accrued expenses and other current liabilities 423 476 Deferred income tax liabilities 28 34 Liabilities held for sale — 57 Total current liabilities 1,967 1,999 Long–term debt, net of current portion 4,315 4,321 Deferred income tax liabilities 563 581 Accrued postretirement benefits 661 687 Other long–term liabilities 309 310 Total liabilities 7,815 7,898 Commitments and contingencies Shareholder’s equity Common stock, no par value; unlimited number of shares authorized; 1,000 shares issued and outstanding as of June 30, 2012 and March 31, 2012 — — Additional paid–in capital 1,659 1,659 Accumulated deficit (1,288 ) (1,379 ) Accumulated other comprehensive loss (275 ) (191 ) Total equity of our common shareholder 96 89 Noncontrolling interests 33 34 Total equity 129 123 Total liabilities and equity $ 7,944 $ 8,021 STATEMENTSTATEMENTS OF SHAREHOLDER’S EQUITYCASH FLOWS (unaudited)millions, except number of shares) Equity of our Common Shareholder Common Stock Accumulated Total Shares Amount Capital Deficit (AOCI) Interests Equity 1,000 $ — $ 1,830 $ (1,442 ) $ 57 $ 190 $ 635 — — — 170 — — 170 — — — — — 26 26 — — — — (128 ) (9 ) (137 ) — — — — (52 ) (2 ) (54 ) — — — — 5 — 5 — — — — — (1 ) (1 ) — — (170 ) — (3 ) (170 ) (343 ) 1,000 $ — $ 1,660 $ (1,272 ) $ (121 ) $ 34 $ 301 Three Months Ended June 30, 2012 2011 OPERATING ACTIVITIES Net income $ 91 $ 77 Adjustments to determine net cash used in operating activities: Depreciation and amortization 73 89 Gain on unrealized derivatives and other realized derivatives in investing activities, net (16 ) (24 ) Gain on assets held for sale (5 ) — Deferred income taxes (16 ) 37 Write–off and amortization of fair value adjustments, net 8 3 Equity in net loss of non–consolidated affiliates 2 2 (Gain) loss on foreign exchange remeasurement of debt (7 ) — (Gain) loss on sale of assets (2 ) 1 Amortization of debt issuance costs 4 4 Other, net 1 14 Changes in assets and liabilities including assets and liabilities held for sale (net of effects from acquisitions and divestitures): Accounts receivable 16 (92 ) Inventories (75 ) (81 ) Accounts payable 19 (70 ) Other current assets (31 ) (13 ) Other current liabilities (54 ) (83 ) Other noncurrent assets (2 ) 9 Other noncurrent liabilities (11 ) 12 Net cash used in operating activities (5 ) (115 ) INVESTING ACTIVITIES Capital expenditures (167 ) (67 ) Proceeds from sales of assets, third party 10 — Proceeds from sale of assets, related party 2 — Proceeds from investment in and advances to non–consolidated affiliates, net — 1 Proceeds (outflow) from related party loans receivable, net 2 (6 ) Proceeds (outflow) from settlement of other undesignated derivative instruments, net 1 (7 ) Net cash used in investing activities (152 ) (79 ) FINANCING ACTIVITIES Proceeds from issuance of debt 12 3 Principal payments (5 ) (5 ) Short–term borrowings, net 92 190 Dividends, noncontrolling interest (1 ) — Net cash provided by financing activities 98 188 Net decrease in cash and cash equivalents (59 ) (6 ) Effect of exchange rate changes on cash 5 2 Cash and cash equivalents — beginning of period 317 311 Cash and cash equivalents — end of period $ 263 $ 307 STATEMENTSSTATEMENT OF COMPREHENSIVE INCOME (LOSS)SHAREHOLDER’S EQUITY (unaudited)millions)0000000 0000000 0000000 0000000 0000000 0000000 Three Months Ended
December 31, 2011 Three Months Ended
December 31, 2010 Attributable to
Our Common
Shareholder Attributable to
Noncontrolling
Interests Total Attributable to
Our Common
Shareholder Attributable to
Noncontrolling
Interests Total $ (12 ) $ 1 $ (11 ) $ (46 ) $ 11 $ (35 ) (48 ) 5 (43 ) (33 ) — (33 ) 54 (2 ) 52 22 — 22 3 — 3 (17 ) — (17 ) 9 3 12 (28 ) — (28 ) 18 — 18 (2 ) — (2 ) (9 ) 3 (6 ) (26 ) — (26 ) $ (21 ) $ 4 $ (17 ) $ (72 ) $ 11 $ (61 ) 0000000 0000000 0000000 0000000 0000000 0000000 Nine Months Ended
December 31, 2011 Nine Months Ended
December 31, 2010 Attributable to
Our Common
Shareholder Attributable to
Noncontrolling
Interests Total Attributable to
Our Common
Shareholder Attributable to
Noncontrolling
Interests Total $ 170 $ 26 $ 196 $ 66 $ 31 $ 97 (128 ) (9 ) (137 ) 5 1 6 (80 ) (2 ) (82 ) 32 — 32 6 — 6 (17 ) — (17 ) (202 ) (11 ) (213 ) 20 1 21 (27 ) — (27 ) 5 — 5 (175 ) (11 ) (186 ) 15 1 16 $ (5 ) $ 15 $ 10 $ 81 $ 32 $ 113 Equity of our Common Shareholder Common Stock Accumulated Deficit Total Equity Shares Amount Balance as of March 31, 2012 1,000 $ — $ 1,659 $ (1,379 ) $ (191 ) $ 34 $ 123 Net income attributable to our common shareholder — — — 91 — — 91 Currency translation adjustment, net of tax provision of $ — included in AOCI — — — — (81 ) (1 ) (82 ) Change in fair value of effective portion of cash flow hedges, net of tax benefit of $9 included in AOCI — — — — (19 ) — (19 ) Change in pension and other benefits, net of tax provision of $8 included in AOCI — — — — 16 — 16 Balance as of June 30, 2012 1,000 $ — $ 1,659 $ (1,288 ) $ (275 ) $ 33 $ 129 1.BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESand became Rio Tinto Alcan Inc. References herein to “Rio Tinto Alcan”“Alcan” refer to Rio Tinto Alcan Inc., was formed in Canada on September 21, 2004, and its subsidiaries, is the world’s leading aluminum rolled products producer based on shipment volume.2004. We produce aluminum sheet and light gauge products wherefor use in the end-use destination of the productspackaging market, which includes the beverage and food can transportation, construction and industrial, and foil products, as well as for use in the transportation, electronics, architectural and industrial markets. We also have recycling operations in many of our plants to recycle post-consumer aluminum, such as used-beverage cans (UBCs). As of December 31, 2011,June 30, 2012, we had manufacturing operations in elevennine countries on four continents: North America, South America, Asia and Europe, 29through 26 operating plants and seven research and development facilities.facilities, including recycling operations in ten of these plants. In addition to aluminum rolled products plants, our South American businesses include bauxite mining, primary aluminum smelting and power generation facilities.20112012 filed with the United States Securities and Exchange Commission (SEC) on May 26, 2011.24, 2012. Management believes that all adjustments necessary for the fair statement of results, consisting of normally recurring items, have been included in the unaudited condensed consolidated financial statements for the interim periods presented.(US GAAP)(GAAP) requires managementus to make estimates and assumptions. These estimates and assumptions that affect the reported amounts of assets and liabilities and disclosurethe disclosures of contingent assets and liabilities atas of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.periods. The principal areas of judgment relate to (1) the fair value of derivative financial instruments; (2) impairment of goodwill; (3) impairmentsimpairment of long-livedlong lived assets and other intangible assets and(4) equity investments; (4)(5) actuarial assumptions related to pension and other postretirement benefit plans; (5) income(6) tax reservesuncertainties and valuation allowances and (6)(7) assessment of loss contingencies, including environmental and litigation liabilities. Future events and other tax reserves.Acquisitiontheir effects cannot be predicted with certainty, and accordingly, our accounting estimates require the exercise of Novelis Common Stock$44.93$44.93 per share. The aggregate purchase price for all of the Company’s common shares was $3.4$3.4 billion and Hindalco also assumed $2.8$2.8 billion of Novelis’ debt for a total transaction value of $6.2 billion.$6.2 billion. Subsequent to completion of the Arrangement on May 15, 2007, all of our common shares were indirectly held by Hindalco.ReclassificationCertain reclassificationsprior period amountsnet earnings (losses) of these entities. The difference between consolidation and presentation have been made to conform tothe equity method impacts certain of our financial ratios because of the presentation adoptedof the detailed line items reported in the consolidated financial statements for consolidated entities, compared to a two-line presentation of equity method investments and net losses.current period.Forcost method to account for our investments in entities that we do not control and for which we do not have the threeability to exercise significant influence over operating and nine months ended December 31, 2010, we reclassified $(30) million and $(58) million, respectively, from “(Gain) loss on change infinancial policies. These investments are recorded at the lower of their cost or fair valuevalue.—(Continued)GAAP and IFRSs. ASU No. 2011-04 develops common requirementsEffective for measuring fair value and for disclosing information about fair value measurements in accordance with US GAAP and International Financial Reporting Standards (IFRSs) and improves the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with US GAAP and IFRSs. ASU No. 2011-04 will be effective for fiscal years and interim periods beginning after December 15, 2011. The adoption of this standard will have no impact on our consolidated financial position, but will require additional disclosure.In June 2011,and year ended March 31, 2013, we adopted the FASB issued ASUFinancial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2011-05,Comprehensive Income (Topic 220): Presentation of Comprehensive Income. ASU No. 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’stockholders' equity and requires all non-owner changes in stockholders’stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. We elected to present two separate but consecutive statements. Additionally, in December 2011,effective for the year ended March 31, 2012, we adopted the FASB issued ASU No. 2011-12,Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05,which indefinitely defers the requirement in ASU No. 2011-05 to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented. During the deferral period, the existing requirements in USU.S. GAAP for the presentation of reclassification adjustments must continue to be followed. These standards are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 and are to be applied retrospectively, with early adoption permitted. We are currently evaluating the potential impact, if any, of theThe adoption of ASU No. 2011-05this standard had no impact on our consolidated financial statementsposition other than the change in presentation and disclosures.additional disclosure.In September 2011, the FASB issued ASU No. 2011-08,Intangibles — Goodwill and Other (Topic 350): Testing Goodwill for Impairment, which contains changes to the testing of goodwill for impairment. These changes provide an entity the option to first assess qualitative factors to determine whether the existence of events or circumstances lead to a determination that it is more likely than not (more than 50%) that the fair value of a reporting unit is less than its carrying amount. If an entity elects to perform a qualitative assessment and determines that an impairment is more likely than not, the entity is then required to perform the existing two-step quantitative impairment test, otherwise no further analysis is required. An entity may also elect not to perform the qualitative assessment and, instead, go directly to the two-step quantitative impairment test. ASU No. 2011-08 will be effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, although early adoption is permitted. We plan to early adopt ASU No. 2011-08 for the year ended March 31, 2012 and will elect to perform the qualitative assessment to determine if further analysis is required for any of our reporting units.2.RESTRUCTURING PROGRAMSninethree months ended December 31,June 30, 2012 and June 30, 2011 is $31$5 million which includes $14 and $19 million of non-cash asset impairments that were not recorded through the restructuring liability., respectively. The following table summarizes our restructuring liability activity by segment (in millions). Europe North
America Asia South
America Corporate Total Restructuring
Liabilities $ 37 $ 6 $ — $ 4 $ 3 $ 50 13 4 — — — 17 (19 ) (5 ) — (2 ) (1 ) (27 ) (3 ) — — — — (3 ) $ 28 $ 5 $ — $ 2 $ 2 $ 37 Europe Asia Corporate Balance as of March 31, 2012 $ 19 $ 5 $ — $ 2 $ 2 $ 28 Provisions 1 4 — — — 5 Cash payments (10 ) (2 ) — — — (12 ) Adjustments — other (1 ) — — — — (1 ) Balance as of June 30, 2012 $ 9 $ 7 $ — $ 2 $ 2 $ 20 ninethree months ended December 31, 2011June 30, 2012 consisted of $16$1 million of severance across our European plants fixed asset impairmentsand other exit costs related to restructuring actions initiated in prior years and other exit costs.years. For the ninethree months ended December 31, 2011,June 30, 2012, we made $10$9 million in severance payments $2and $1 million in payments for environmental remediation, and $7 million in other exit related payments.—-(Continued)The Company ceased operations associated with the Bridgnorth, UK foil rolling and laminating operations at the end of April 2011. In the nine months ended December 31, 2011, based on negotiations for the sale of the land and buildings on the Bridgnorth site, we recorded an additional $7 million of fixed asset impairment and restructuring chargesseverance costs related to the sale and site closure and made payments of $11 million in severance and other exit payments related to this plan.In the nine months ended December 31, 2011 we recorded $4 million of severance charges for restructuring programs related to our European general and administrative functions.As of December 31, 2011, the restructuring liability balance of $28 million was comprised of $20 million of environmental remediation liabilities, $5 million of severance costs and $3 million of other costs.North AmericaIn the nine months ended December 31, 2011, we recorded an additional $2 million of termination benefits related to the previously announced relocation of our North American headquarters from Cleveland to AtlantaSaguenay Works facility, and we made $5$1 million in payments related to previously announced separation programs. We also recorded $2 million of one-time termination benefits associated with our decision to relocate our primary research and development operations to Kennesaw, Georgia. For the three months ended June 30, 2012, we made $2 million in payments related to previously announced separation programs.December 31, 2011,June 30, 2012, the restructuring liability balance of $5$7 million was comprised of $4$6 million of severance costs and $1$1 million of other costs.Total “Restructuring charges, net” for the nine months ended December 31, 2011, consisted of $11 million of severance costs, fixed asset impairments related to current period restructuring actions and impairments related to actions initiated in prior years. For the nine months ended December 31, 2011, we made $2 million in severance and other exit related payments.In the nine months ended December 31, 2011, we announced that we ceased production of converter foil (9 microns thickness or less) for flexible packaging and stopped production of one rolling mill at our Santo André plant in Brazil. The decision was made due to overcapacity in the foil market and increased competition from low-cost countries. Approximately 74 positions were eliminated in the Santo Andre plant related to ceasing these operations. For the nine months ended December 31, 2011, the Company recorded $3 million in asset impairment costs related to the write down of land and building to fair value and $1 million in severance related costs.December 31 2011,June 30, 2012, the restructuring liability balance of $2$2 million was comprised of environmental remediation liabilities.CorporateDecember 31, 2011,June 30, 2012, the restructuring liability balance of $2$2 million was comprised of lease termination costs incurred in the relocation of our corporate headquarters to a new facility in Atlanta, Georgia and other contract termination fees.3.INVENTORIES December 31,
2011 March 31,
2011 $ 264 $ 293 373 529 352 414 102 102 $ 1,091 $ 1,338 June 30,
2012 March 31,
2012Finished goods $ 204 $ 207 Work in process 383 380 Raw materials 391 340 Supplies 98 97 Inventories $ 1,076 $ 1,024 —4.CONSOLIDATIONPurchase of Noncontrolling Interest in Novelis Korea LimitedDuring the three months ended December 31, 2011, we acquired 31.2% of the shares of Novelis Korea Ltd. for $343 million (KRW 393.9 billion). The transaction resulted in our ownership of 99% of the outstanding shares of Novelis Korea Limited. The acquisition was recorded as a reduction to equity of $343 million.The following table summarizes the change in ownership interest (in millions). Nine months ended
December 31, 2011 $ 170 (170 ) $ — June 30,
2012 March 31,
2012Assets held for sale Accounts receivable — 53 Inventories — 17 Prepaid expenses and other current assets — 3 Property, plant and equipment, net 4 8 Total assets held for sale $ 4 $ 81 Liabilities held for sale Accounts payable — 23 Accrued expenses and other current liabilities — 20 Accrued postretirement benefits — 10 Other liabilities — 4 Total liabilities held for sale $ — $ 57 , formerly known as ARCO Aluminum, Inc. (ARCO). Effective August 1, 2011, a consortium of Japanese companies purchased ARCO. The transaction did not impact Novelis’ interest in Logan. Logan processes metal received from Novelis and Tri-Arrows and charges the respective partner a fee to cover expenses. Logan is thinly capitalized and relies on the regular reimbursement of costs and expenses by Novelis and Tri-Arrows to fund its operations. This reimbursement is considered a variable interest as it constitutes a form of financing of the activities of Logan. Other than these contractually required reimbursements, we do not provide other material support to Logan. Logan’s creditors do not have recourse to our general credit.— December 31,
2011 March 31,
2011 Assets $ 2 $ 1 23 27 44 36 69 64 16 13 12 12 54 52 4 3 $ 155 $ 144 Liabilities $ 26 $ 26 15 11 41 37 124 120 2 2 $ 167 $ 159 June 30,
2012 March 31,
2012Assets Current assets Cash and cash equivalents $ 7 $ 2 Accounts receivable 21 20 Inventories 43 42 Prepaid expenses and other current assets 1 — Total current assets 72 64 Property, plant and equipment, net 13 15 Goodwill 12 12 Deferred income taxes 63 63 Other long-term assets 3 3 Total assets $ 163 $ 157 Liabilities Current liabilities Accounts payable $ 27 $ 24 Accrued expenses and other current liabilities 12 11 Total current liabilities 39 35 Accrued postretirement benefits 146 145 Other long-term liabilities 2 2 Total liabilities $ 187 $ 182 5.6. INVESTMENT IN AND ADVANCES TO NON-CONSOLIDATED AFFILIATES AND RELATED PARTY TRANSACTIONS The following table summarizes our share of the condensed results of operations of our equity method affiliates (in millions). These results include the incremental depreciation and amortization expense that we record in our equity method accounting as a result of fair value adjustments made to our investments in non-consolidated affiliates due to the Arrangement. Three Months
Ended
December 31, Nine Months
Ended
December 31, 2011 2010 2011 2010 $ 61 $ 52 $ 188 $ 167 65 57 197 178 $ (4 ) $ (5 ) $ (9 ) $ (11 ) $ 61 $ 51 $ 188 $ 166 businessbusinesses we conduct with theseour non-consolidated affiliates, which we classify as related party transactions and balances. ForThe following table summarizes our share of the condensed results of operations of these non-consolidated affiliates, which we account for using the equity method, and also describes the nature and amounts of significant transactions that we had with these non-consolidated affiliates (in millions). These results include the incremental depreciation and amortization expense, net of tax, of $4 million for the three and nine months ended December 31,June 30, 2012 and 2011, that we recorded in our equity method accounting as a result of fair value adjustments we made to our investments in non-consolidated affiliates due to the Arrangement. Three Months Ended June 30, 2012 2011 Net sales $ 61 $ 66 Costs, expenses and provisions for taxes on income 63 68 Net loss $ (2 ) $ (2 ) Purchase of tolling services from Aluminium Norf GmbH (Alunorf) $ 61 $ 66 2010,$29 million in "Accounts receivable, net - related parties" from Alunorf. In the three months ended June 30, 2012 and 2011, we earned less than $1 million of interest income on athe outstanding loan due from Norf.Norf.Alunorf. The guarantee is limited to 50% of the outstanding debt, not to exceed 6 million Euros. euros. As of December 31, 2011,June 30, 2012, our guarantee was $1 million.$1 million. December 31,
2011 March 31,
2011 $ 35 $ 28 $ 16 $ 19 $ 52 $ 50 June 30,
2012 March 31,
2012Accounts receivable $ 29 $ 33 Other long-term assets $ 15 $ 16 Accounts payable $ 48 $ 51 —(Continued)6.DEBT December 31, 2011 March 31, 2011 Interest
Rates(A) Principal Unamortized
Carrying Value
Adjustments Carrying
Value Principal Unamortized
Carrying Value
Adjustments Carrying
Value 4.30 % $ 227 $ — $ 227 $ 17 $ — $ 17 3.75 % 1,709 (39 )(B) 1,670 1,496 (38 )(B) 1,458 8.375 % 1,100 — 1,100 1,100 — 1,100 8.75 % 1,400 — 1,400 1,400 (1 ) 1,399 7.25 % 74 2 76 74 3 77 4.63 % 26 — 26 — — — 4.96 % 17 — 17 — — — 7.50 % 44 (2 ) 42 48 (3 ) 45 5.50 % 15 (4 ) 11 5 (2 ) 3 4.27 % 2 — 2 4 — 4 4,614 (43 ) 4,571 4,144 (41 ) 4,103 (227 ) — (227 ) (17 ) — (17 ) (22 ) — (22 ) (21 ) — (21 ) $ 4,365 $ (43 ) $ 4,322 $ 4,106 $ (41 ) $ 4,065 June 30, 2012 March 31, 2012 Principal Principal Third party debt: Short term borrowings 3.57 % $ 119 $ — $ 119 $ 18 $ — $ 18 Novelis Inc. Floating rate Term Loan Facility, due March 2017 4.00 % 1,701 (35 ) (B) 1,666 1,705 (37 ) (B) 1,668 8.375% Senior Notes, due December 2017 8.375 % 1,100 — 1,100 1,100 — 1,100 8.75% Senior Notes, due December 2020 8.75 % 1,400 — 1,400 1,400 — 1,400 7.25% Senior Notes, due February 2015 7.25 % 74 2 76 74 2 76 Novelis Korea Limited Facility Loan, due December 2014 4.62 % 26 — 26 26 — 26 Term Loan, due December 2014 4.95 % 17 — 17 18 — 18 Novelis Switzerland S.A. Capital lease obligation, due December 2019 (Swiss francs (CHF) 39 million) 7.50 % 41 (2 ) 39 45 (2 ) 43 Novelis Brazil BNDES loans, due December 2018 through April 2021 5.77 % 15 (3 ) 12 15 (4 ) 11 Other Other debt, due July 2012 through November 2015 5.21 % 2 — 2 2 — 2 Total debt — third parties 4,495 (38 ) 4,457 4,403 (41 ) 4,362 Less: Short term borrowings (119 ) — (119 ) (18 ) — (18 ) Current portion of long term debt (23 ) — (23 ) (23 ) — (23 ) Long-term debt, net of current portion — third parties: $ 4,353 $ (38 ) $ 4,315 $ 4,362 $ (41 ) $ 4,321 (A) December 31, 2011June 30, 2012 and exclude the effects of related interest rate swaps and accretion/amortization of fair value adjustments as a result of the Arrangement, the debt exchange completed in fiscal 2009, the series of refinancing transactions we completed in fiscal 2011, and the additional borrowing in fiscal 2012.(B) Debt existing at the time of the Arrangement was recorded at fair value. In connection with a series of refinancing transactions a portion of the historical fair value adjustments were allocated to the Term Loan Facility. The balance also includes the unamortized discount on the Term Loan Facility. December 31, 2011June 30, 2012 for our debt denominated in foreign currencies) are as follows (in millions). Amount $ 249 24 68 99 25 4,149 $ 4,614 Novelis Inc.NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) —(Continued)As of June 30, 2012 Amount Short-term borrowings and Current portion of long term debt due within one year $ 142 2 years 25 3 years 142 4 years 24 5 years 1,640 Thereafter 2,522 Total $ 4,495 $1.1$1.1 billion in aggregate principal amount of 8.375% Senior Notes Due 2017 (the 2017 Notes) and $1.4$1.4 billion in aggregate principal amount of 8.75% Senior Notes Due 2020 (the 2020 Notes, and together with the 2017 Notes, the Notes).$185$185 million aggregate outstanding principal amount of the 11.5% Notes was tendered and redeemed. Of the $1.1$1.1 billion aggregate principal amount of the 7.25% Notes, $74$74 million was not redeemed and is expected to remain outstanding through maturity in February 2015. The 7.25% Notes that remain outstanding are no longer subject to substantially all of the restrictive covenants and certain events of default originally included in the indenture for the 7.25% Notes.On December 7, 2011, we borrowed an incremental $225 million through our existing term loan credit facility (Term Loan Facility). $1.5$1.5 billion six-year secured and an incremental $225$225 million five-year secured term loan credit facility, due March 2017 (collectively referred to as Term Loan Facility) and (2) an $800$800 million five-year asset based loan facility (ABL Facility) that may be increased by an additional $200 million.$200 million. The interest rate on the Term Loan Facility areis the higher of LIBOR or a floor of 100 basis points, plus a spread ranging from 2.75% to 3.0% depending on the Company’s net leverage ratio, as defined in the Term Loan Facility agreement. The senior secured credit facilities contain various affirmative covenants, including covenants with respect to our financial statements, litigation and other reporting requirements, insurance, payment of taxes, employee benefits and (subject to certain limitations) causing new subsidiaries to pledge collateral and guaranty our obligations. The senior secured credit facilities also contain certain negative covenants as specified in the agreements. Substantially all of our assets are pledged as collateral under the senior secured credit facilities.April 1, 2012 through March 31, 2013 4.50 to 1.0 April 1, 2013 through March 31, 2014 4.375 to 1.0 April 1, 2014 through March 31, 2015 4.25 to 1.0 April 1, 2015 and thereafter 4.0 to 1.0 $26$26 million (KRW 30 billion)billion) loan due December 2014, (2) a $17$17 million (KRW 20 billion)billion) loan due December 2014, and (3) a short term borrowing of $17$17 million (KRW 20 billion)billion). All three bank loans have variable interest rates with the base rate tied to Korea’sKorea's 91-day CD rate plus an applicable spread ranging from 1.08% to 1.41%.On January 18, 2012 Novelis Korea entered into interest rate swaps for the two 3 year loans maturing December 2014. The rates were fixed at 4.485% for the $26 million (KRW 30 billion) loan and 4.815% for the $17 million (KRW 20 billion) loan.December 31, 2011,June 30, 2012, our short-term borrowings were $227$119 million consisting of $208$90 million of short-term loans under our ABL Facility, $1$2 million in bank overdrafts, a $17$17 million (KRW 20 billion)billion) Novelis Korea bank loan, and $1$10 million in other short term borrowings. loans under the Novelis Brazil loan. The weighted average interest rate on our total short-term borrowings was 3.57% and 4.83% as of June 30, 2012 and March 31, 2012, respectively.December 31, 2011, $23June 30, 2012, $17 million of the ABL Facility was utilized for letters of credit, and we had $422$607 million in remaining availability under the ABL Facility. The weighted average interest rate on our total short-term borrowings was 4.30% and 2.43% as of December 31, 2011 and March 31, 2011, respectively.December 31, 2011,$48$48 million of outstanding letters of credit in Korea which are not related to the ABL Facility.InDecember 2011,May 2012, Novelis Brazil entered into eleven22 new loan agreements (the BNDES loans) with Brazil’s National Bank for Economic and Social Development (BNDES) related to the plant expansion in Pindamonhangaba, Brazil (Pinda). The agreements provided for a commitment of Brazilian Real (R$) borrowings at a fixedcurrent weighted average rate of 5.5%5.8% up to an aggregate of $18$17 million (R$ (R$34 million)million). As of December 31, 2011,June 30, 2012, we had $15$15 million (R$28 million) (R$31 million) outstanding under the BNDES loan agreements with maturity dates of December 20182015 through April 2021.the benchmark LIBOR interest raterates which impactsimpact our variable-rate debt. Priorcompletionbenchmark KRW 3M-CD interest rate. We swapped our (1) $26 million (KRW 30 billion) floating rate loan to a fixed rate of 4.485% and our (2) $17 million (KRW 20 billion) floating rate loan to a fixed rate of 4.815%. Both swaps expire December 2014, concurrent with the maturity of the December 17, 2010 refinancing transactions,loans. As of June 30, 2012 and March 31, 2012, these swaps were designated as cash flow hedges. Upon completionthe refinancing transactions on December 17, 2010,March 31, 2012, we ceased hedge accounting for these swaps. Nohad $220 million of outstanding USD LIBOR based interest rate swaps that matured in April 2012 that were not designated as hedges. As of December 31, 2011.June 30, 2012, there were no interest rate swaps outstanding that were not designated as hedges.—(Continued)7.SHARE-BASED COMPENSATIONfourfive long term incentive plans as follows:fourfive plans, SARs vest at the rate of 25% per year, subject to performance criteria and expire seven7 years from their grant date. Each SAR is to be settled in cash based on the difference between the market value of one Hindalco share on the date of grant and the market value on the date of exercise, subject to a maximum payout as defined by the plan. If the SAR is exercised within one year of vesting, the maximum payout is equal to two and a half times the target. If the SAR is exercised after one year of vesting, the maximum payout is equal to three times the target. The RSUs under the 2011 LTIP, 2012 LTIP and 20122013 LTIP vest in full three years from the grant date and are not subject to performance criteria. The payout on the RSUs is limited to three times the grant price.2013, 2014, 2015 and 20152016 have not yet been established, measurement periods for SARs relating to those periods have not yet commenced. As a result, only compensation expense for vested and current year SARs has been recorded for the three and nine months ended December 31, 2011June 30, 2012 and 2010. Three Months Ended
December 31, Nine Months Ended
December 31, 2011 2010 2011 2010 $ — $ 1 $ 2 $ 4 (1 ) 1 (2 ) 7 — 2 (3 ) 3 — — 1 — $ (1 ) $ 4 $ (2 ) $ 14 Novelis Inc.2011NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) —.(Continued) Three Months Ended June 30, 2012 2011 2009 LTIP $ — $ 3 2010 LTIP (1 ) 2 2011 LTIP (1 ) (1 ) 2012 LTIP (1 ) — 2013 LTIP 1 — Total compensation (income) expense $ (2 ) $ 4 Number of
RSUs Grant Date Fair
Value
(in Indian Rupees) Aggregate
Intrinsic
Value (USD
in millions) — — $ — 923,620 188.20 2 (26,380 ) 192.38 897,240 188.07 $ 2 Number of
SARs Weighted
Average
Exercise Price
(in Indian Rupees) Weighted Average
Remaining
Contractual Term
(In years) Aggregate
Intrinsic
Value (USD
in millions) — — — $ — 7,030,830 186.78 — (170,345 ) 192.38 6,860,485 188.09 6.4 $ — Number of
RSUs Grant Date Fair
Value
(in Indian Rupees) Aggregate
Intrinsic
Value (USD
in millions) 906,057 148.79 $ 4 (40,388 ) 147.10 865,669 148.86 $ 2 Number of
SARs Weighted
Average
Exercise Price
(in Indian Rupees) Weighted Average
Remaining
Contractual Term
(In years) Aggregate
Intrinsic
Value (USD
in millions) 7,117,652 148.79 6.2 $ 10 (69,222 ) 147.10 (277,433 ) 147.10 6,770,997 148.87 5.4 $ — Number of
SARs Weighted
Average
Exercise Price
(in Indian Rupees) Weighted Average
Remaining
Contractual Term
(In years) Aggregate
Intrinsic
Value (USD
in millions) 11,052,491 88.46 5.2 $ 25 (1,527,246 ) 87.33 (253,202 ) 88.10 9,272,043 88.07 4.5 $ 5 2013 LTIP - RSUs RSUs outstanding as of March 31, 2012 — — $ — Granted 1,936,970 109.57 — Forfeited/Cancelled — — RSUs outstanding as of June 30, 2012 1,936,970 109.57 $ — —2013 LTIP - SARs SARs outstanding as of March 31, 2012 — — — $ — Granted 16,394,306 109.57 — — Forfeited/Cancelled — — — SARs outstanding as of June 30, 2012 16,394,306 109.57 6.9 $ — 2012 LTIP - RSUs RSUs outstanding as of March 31, 2012 878,675 186.02 $ 2 Granted — — — Forfeited/Cancelled (12,066 ) 188.26 RSUs outstanding as of June 30, 2012 866,609 186.24 $ 2 2012 LTIP - SARs SARs outstanding as of March 31, 2012 6,688,717 186.05 6.1 $ — Granted — — — — Forfeited/Cancelled (267,337 ) 188.68 — SARs outstanding as of June 30, 2012 6,421,380 186.22 5.9 $ — 2011 LTIP - RSUs RSUs outstanding as of March 31, 2012 802,149 149.01 $ 2 Forfeited/Cancelled (37,166 ) 147.10 RSUs outstanding as of June 30, 2012 764,983 149.04 $ 2 2011 LTIP - SARs SARs outstanding as of March 31, 2012 6,303,848 149.01 5.1 $ — Exercised — — Forfeited/Cancelled (263,383 ) 147.40 SARs outstanding as of June 30, 2012 6,040,465 149.03 4.9 $ — 2010 LTIP - SARs SARs outstanding as of March 31, 2012 8,171,586 88.37 4.2 $ 7 Exercised (122,546 ) 172.95 Forfeited/Cancelled (323,609 ) 86.95 SARs outstanding as of June 30, 2012 7,725,431 87.72 4.0 $ 4 2009 LTIP - SARs SARs outstanding as of March 31, 2012 4,845,652 60.50 3.2 $ 7 Exercised (314,542 ) 133.72 Forfeited/Cancelled (341,265 ) 60.50 SARs outstanding as of June 30, 2012 4,189,845 60.50 3.0 $ 4 (Continued) Number of
SARs Weighted
Average
Exercise Price
(in Indian Rupees) Weighted Average
Remaining
Contractual Term
(In years) Aggregate
Intrinsic
Value (USD
in millions) 8,944,822 60.50 4.2 $ 14 (3,166,188 ) 60.50 (186,685 ) 60.50 5,591,949 60.50 3.5 $ 6 2010 LTIP and 20092010 LTIP was estimated as of December 31, 2011June 30, 2012 using the following assumptions: 2012 LTIP 2011 LTIP 2010 LTIP 2009 LTIP 8.52 % 8.47 % 8.32 % 8.19 % 1.17 % 1.17 % 1.17 % 1.17 % 52 % 54 % 57 % 58 % 2013 LTIP 2012 LTIP 2011 LTIP 2010 LTIP Risk-free interest rate 8.24 % 8.24 % 8.17 % 8.08 % Dividend yield 1.29 % 1.29 % 1.29 % 1.29 % Volatility 51 % 52 % 55 % 55 % 2013, 2014, 2015 and 20152016 have not yet been established and therefore, measurement periods for SARs relating to those periods have not yet commenced, no compensation expense for those tranches has been recorded for the ninethree months ended December 31, 2011.June 30, 2012. As of December 31, 2011, 7,083,354June 30, 2012, 13,507,031 SARs were exercisable.$13$19 million which is expected to be realized over a weighted average period of 2.19 years.2.23 years. Unrecognized compensation expense is $1$1 million related to 2011 RSU’s and $1.6RSUs, $1 million related to 2012 RSU’s,RSUs, and $4 million related to 2013 RSUs which will be recognized over the remaining vesting period of 1.51, 2 and 3 years and 2.5 years,, respectively.8.POSTRETIREMENT BENEFIT PLANSNovelis Inc.NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) —(Continued) Pension Benefit Plans Other Benefits Three Months Ended
December 31, Three Months Ended
December 31, 2011 2010 2011 2010 $ 10 $ 9 $ 2 $ 2 17 16 3 2 (16 ) (14 ) — — 2 2 — — $ 13 $ 13 $ 5 $ 4 Pension Benefit Plans Other Benefits Nine Months Ended
December 31, Nine Months Ended
December 31, 2011 2010 2011 2010 $ 30 $ 27 $ 6 $ 6 51 48 8 6 (47 ) (42 ) — — 8 8 1 — (1 ) — — — $ 41 $ 41 $ 15 $ 12 Pension Benefit Plans Other Benefits Three Months Ended June 30, Three Months Ended June 30, 2012 2011 2012 2011 Service cost $ 11 $ 10 $ 3 $ 2 Interest cost 16 17 2 3 Expected return on assets (16 ) (16 ) — — Amortization — losses 6 3 1 — Net periodic benefit cost $ 17 $ 14 $ 6 $ 5 6.72%6.40% in fiscal 2013.Switzerland,Korea, Malaysia and Brazil. We contributed the following amounts to all plans including the Rio Tinto Alcan plans that cover our employees (in millions). Three Months Ended
December 31, Nine Months Ended
December 31, 2011 2010 2011 2010 $ 10 $ 15 $ 31 $ 32 �� 3 3 10 9 5 4 15 13 $ 18 $ 22 $ 56 $ 54 Three Months Ended June 30, 2012 2011 Funded pension plans $ 9 $ 11 Unfunded pension plans 3 3 Savings and defined contribution pension plans 5 5 Total contributions $ 17 $ 19 2012,2013, we expect to contribute an additional $23$38 million to our funded pension plans, $3$11 million to our unfunded pension plans and $4$17 million to our savings and defined contribution plans.We implemented a new retirement pension plan in South Korea at the end of December 2011, in accordance with the Employee Retirement Benefits Security Act of South Korea, which requires companies to convert from retirement insurance plans to retirement pension plans. Included in our expected contributions for the remainder of our fiscal 2012 is $5 million of contributions we plan to make related to interim settlement elections by employees.We exited our former defined contribution pension plan in Switzerland and have entered into a new defined contribution pension plan. As a result, we expect to contribute approximately $7 million to the plan over the next ten years to the new defined contribution plan.Novelis Inc.NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) —(Continued)9.CURRENCY (GAINS) LOSSES Three Months Ended
December 31, Nine Months Ended
December 31, 2011 2010 2011 2010 $ (1 ) $ 11 $ 15 $ 10 1 — 1 — (4 ) — (11 ) — $ (4 ) $ 11 $ 5 $ 10 Three Months Ended June 30, 2012 2011 Gain on remeasurement of monetary assets and liabilities, net $ (3 ) $ (1 ) Loss released from accumulated other comprehensive income 1 — (Gain) loss recognized on balance sheet remeasurement currency exchange contracts, net (3 ) 11 Currency (gains) losses, net $ (5 ) $ 10 Nine Months Ended
December 31, 2011 $ 114 (137 ) $ (23 ) Novelis Inc.NOTES TO THE CONDENSED CONSOLIDATED Three Months Ended June 30, 2012 Year Ended March 31, 2012 Cumulative currency translation adjustment — beginning of period $ 23 $ 114 Effect of changes in exchange rates (71 ) (79 ) Sale of investment in foreign entities $ (11 ) $ (12 ) Cumulative currency translation adjustment — end of period $ (59 ) $ 23 STATEMENTS (unaudited) —(Continued)10.FINANCIAL INSTRUMENTS AND COMMODITY CONTRACTSDecember 31, 2011June 30, 2012 and March 31, 20112012 are as follows (in millions).000000000 000000000 000000000 000000000 000000000 December 31, 2011 Assets Liabilities Net Fair Value
Assets/(Liabilities) Current Noncurrent Current Noncurrent(A) $ 9 $ 1 $ (12 ) $ (12 ) $ (14 ) 12 — — — 12 2 — — — 2 — — (11 ) — (11 ) 23 1 (23 ) (12 ) (11 ) 37 — (47 ) (1 ) (11 ) 29 5 (9 ) (1 ) 24 — — (1 ) — (1 ) — — (9 ) (27 ) (36 ) — — (8 ) (1 ) (9 ) 66 5 (74 ) (30 ) (33 ) $ 89 $ 6 $ (97 ) $ (42 ) $ (44 ) 000000000 000000000 000000000 000000000 000000000 March 31, 2011 Assets Liabilities Net Fair Value
Assets/(Liabilities) Current Noncurrent Current Noncurrent(A) $ 43 $ 10 $ (1 ) $ — $ 52 44 — — — 44 9 — — — 9 96 10 (1 ) — 105 54 5 (49 ) — 10 15 2 (19 ) (1 ) (3 ) — — (4 ) — (4 ) — — (6 ) (23 ) (29 ) — — (3 ) — (3 ) 69 7 (81 ) (24 ) (29 ) $ 165 $ 17 $ (82 ) $ (24 ) $ 76 June 30, 2012 Assets Liabilities Current Noncurrent Current Noncurrent(A) Derivatives designated as hedging instruments: Cash flow hedges Aluminum contracts $ 23 $ — $ (6 ) $ — $ 17 Currency exchange contracts 1 1 (24 ) (10 ) (32 ) Net Investment hedges Currency exchange contracts 11 — — — 11 Fair value hedges Aluminum contracts — — (10 ) (1 ) (11 ) Total derivatives designated as hedging instruments 35 1 (40 ) (11 ) (15 ) Derivatives not designated as hedging instruments Aluminum contracts 47 — (40 ) (1 ) 6 Currency exchange contracts 17 1 (11 ) (1 ) 6 Energy contracts — — (16 ) (27 ) (43 ) Total derivatives not designated as hedging instruments 64 1 (67 ) (29 ) (31 ) Total derivative fair value $ 99 $ 2 $ (107 ) $ (40 ) $ (46 ) March 31, 2012 Assets Liabilities Current Noncurrent Current Noncurrent(A) Derivatives designated as hedging instruments: Cash flow hedges Aluminum contracts $ 17 $ — $ (5 ) $ — $ 12 Currency exchange contracts 12 1 (6 ) (6 ) 1 Net Investment hedges Currency exchange contracts 2 — — — 2 Fair value hedges Aluminum contracts 1 — (6 ) — (5 ) Total derivatives designated as hedging instruments 32 1 (17 ) (6 ) 10 Derivatives not designated as hedging instruments: Aluminum contracts 51 — (47 ) — 4 Currency exchange contracts 16 1 (10 ) (1 ) 6 Energy contracts — — (21 ) (30 ) (51 ) Total derivatives not designated as hedging instruments 67 1 (78 ) (31 ) (41 ) Total derivative fair value $ 99 $ 2 $ (95 ) $ (37 ) $ (31 ) (A) The noncurrent portions of derivative liabilities are included in “Other long-term liabilities” in the accompanying condensed consolidated balance sheets. Novelis Inc.NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) —(Continued)$15$8 million and gains on changes in the fair value of designated hedged items of $15$7 million in sales revenue for the ninethree months ended December 31, 2011, of which less than $1 million relates to firm commitment sales that occurred during the period.June 30, 2012. We recognized losses on changesineffectiveness of $1 million in fair value of derivative contracts of $4 million and gains on changes in the fair value of designated hedged items of $4 million in sales revenue for the three months ended December 31, 2011, of which $2 million relates to firm commitment sales that occurred during the period."Other (income) expense, net." We had 3459 kt and 2532 kt of outstanding aluminum forward purchase contracts designated as fair value hedges as of December 31, 2011June 30, 2012 and March 31, 2011,2012, respectively.price.prices. Such exposures do not extend beyond one yeartwo years in length. We had 016 kt and 18316 kt of outstanding aluminum forward purchase contracts designated as cash flow hedges as of December 31, 2011June 30, 2012 and March 31, 2011,2012, respectively.52152 kt and 144 kt of outstanding aluminum forward sales contracts designated as cash flow hedges as of December 31, 2011. No aluminum forward sales contracts were designated as cash flow hedges as of June 30, 2012 and March 31, 2011.December 31, 2011 June 30, 20122011,2012, we had short positions of 10099 kt and 14642 kt, respectively, of outstanding aluminum sales contracts not designated as hedges. The average duration of undesignated contracts is less than four months.months. The following table summarizes our notional amount (in kt). December 31,
2011 March 31,
2011 — 183 (52 ) — 34 25 (100 ) (146 ) (118 ) 62 June 30,
2012 March 31,
2012Hedge Type Purchase (Sale) Cash flow purchases 16 16 Cash flow sales (152 ) (144 ) Fair value 59 32 Not designated (99 ) (42 ) Total (176 ) (138 ) $1 billion$860 million and $644$976 million of outstanding foreign currency forwards designated as cash flow hedges as of December 31, 2011June 30, 2012 and March 31, 2011,2012, respectively.$42$113 million and $123 million of outstanding foreign currency forwards designated as net investment hedges as of DecemberJune 30, 2012 and March 31, 2011.2012, respectively. We had no contracts designated asrecorded gains of $6 million and losses of less than $1 million related to net investment hedges as of March 31, 2011. We recorded gains of $5 million in OCI for the nine3 months ended June 30, 2012 and June 30, 2011, respectively. There was no ineffectiveness on net investment hedges recorded for the three months ended December 31,June 30, 2012 and June 30, 2011 related to these hedges.Novelis Inc..NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) —(Continued)December 31, 2011June 30, 2012 and March 31, 2011,2012, we had outstanding currency exchange contracts with a total notional amount of $1.2$1.4 billion and $1.6 billion, respectively,, which were not designated as hedges.December 31, 2011.June 30, 2012.December 31, 2011June 30, 2012 and March 31, 2011,2012, we had 8.35.7 million MMBTUs and 6.76.6 million MMBTUs, respectively, of natural gas swaps that were not designated as hedges. Such exposures do not extend beyond 2 years in length. One MMBTU is the equivalent of one decatherm, or one million British Thermal Units.the benchmark LIBOR interest raterates which impactsimpact our variable-rate debt.Priorcompletionbenchmark KRW 3M-CD interest rate. We swapped our (1) $26 million (KRW 30 billion) floating rate loan to a fixed rate of 4.485% and our (2) $17 million (KRW 20 billion) floating rate loan to a fixed rate of 4.815%. Both swaps expire December 2014, concurrent with the maturity of the December 17, 2010 refinancing transactions,loans. As of June 30, 2012 and March 31, 2012, these swaps were designated as cash flow hedges. Upon completionthe refinancing transaction, our exposure to changes in the benchmark LIBOR interest rate was limited. We ceased hedge accounting for these swaps and released all AOCI into earnings during the year ended March 31, 2011. No interest rate swaps were designated as cash flow hedges as2012, we had $220 million of December 31, 2011 and March 31, 2011.We had $220 million of outstanding USD LIBOR based interest rate swaps that were not designated as hedges asmatured in April—-(Continued)June 30, 2012 Three Months Ended
December 31, Nine Months Ended
December 31, 2011 2010 2011 2010 $ 4 $ (12 ) $ 85 $ 5 4 — 11 — 11 38 23 49 (15 ) (1 ) (18 ) (5 ) — (5 ) — (5 ) 4 20 101 44 — 4 (3 ) 4 3 4 11 4 (1 ) — (1 ) 6 — 2 — 6 (4 ) — (15 ) — 4 — 15 — 2 10 7 14 $ 6 $ 30 $ 108 $ 58 $ 3 $ — $ 10 $ — 66 21 136 95 (63 ) 9 (38 ) (37 ) $ 6 $ 30 $ 108 $ 58 Three Months Ended June 30, 2012 2011 Derivative Instruments Not Designated as Hedges Aluminum contracts $ 6 $ 28 Currency exchange contracts 7 (2 ) Energy contracts (A) 4 (3 ) Gain recognized in "Other (income) expense, net" 17 23 Derivative Instruments Designated as Hedges Gain recognized in "Other (income) expense, net" (B) 10 1 Total gain recognized in "Other (income) expense, net" $ 27 $ 24 Balance sheet remeasurement currency exchange contracts $ 2 $ (11 ) Realized gains, net 12 10 Unrealized gains on other derivative instruments, net 13 25 Total gain recognized in "Other (income) expense, net" $ 27 $ 24 (A) Includes amounts related to de-designated electricity swap. (B) Amount representsincludes: excluded forward market premium/discount excluded and hedging relationship ineffectiveness.(B)Amount represents ineffectiveness and amounts releasedon designated aluminum contracts; releases to income from AOCI.(C)An immaterial amount ofAOCI on balance sheet remeasurement contracts; and ineffectiveness exists in both cash flow andon fair value hedging relationshipshedges involving aluminum derivatives.Novelis Inc.NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) —(Continued)$23$8 million of losses from “AOCI” to earnings. Amount of Gain (Loss)
Recognized in OCI
(Effective Portion) Amount of Gain (Loss)
Recognized in OCI
(Effective Portion) Amount of Gain (Loss)
Recognized in “Other (Income)
Expense, net” (Ineffective and
Excluded Portion) Amount of Gain (Loss)
Recognized in “Other (Income)
Expense, net” (Ineffective and
Excluded Portion) Three Months Ended
December 31, Nine Months Ended
December 31, Three Months Ended
December 31, Nine Months Ended
December 31, 2011 2010 2011 2010 2011 2010 2011 2010 $ — $ 2 $ — $ 10 $ — $ — $ — $ — 7 15 (41 ) 15 — 4 (3 ) 4 4 — (50 ) 6 3 4 11 4 — 2 — 1 — (5 ) — (5 ) $ 11 $ 19 $ (91 ) $ 32 $ 3 $ 3 $ 8 $ 3 Amount of Gain (Loss)
Reclassified from AOCI into
Income/(Expense)
(Effective Portion)
Three Months Ended
December 31, Amount of Gain (Loss)
Reclassified from AOCI into
Income/(Expense)
(Effective Portion)
Nine Months Ended
December 31, Location of Gain (Loss)
Reclassified from AOCI into
Earnings 2011 2010 2011 2010 $ (1 ) $ 2 $ (4 ) $ 5 Other (income) expense, net (43 ) — (17 ) — Cost of goods sold 4 — 4 — Sales (1 ) — 9 — Cost of goods sold and SG&A (2 ) — (2 ) — Sales — — (1 ) — Other (income) expense, net and
Interest Expense — (5 ) — (5 ) Other (income) expense, net and
Interest Expense $ (43 ) $ (3 ) $ (11 ) $ — Three Months Ended June 30, Three Months Ended June 30, 2012 2011 2012 2011 Aluminum contracts $ 21 $ (25 ) $ 11 $ (3 ) Currency exchange contracts (36 ) 33 1 4 Total $ (15 ) $ 8 $ 12 $ 1 Amount of Gain (Loss) Reclassified from AOCI into Income/(Expense)(Effective Portion) Three Months Ended June 30, 2012 2011 $ (1 ) $ (1 ) Other (income) expense, net Aluminum contracts 18 19 Cost of goods sold Aluminum contracts 2 — Sales Currency exchange contracts (3 ) 3 Cost of goods sold and SG&A Currency exchange contracts (2 ) — Sales Currency exchange contracts (1 ) — Other (income) expense, net and
Interest ExpenseTotal $ 13 $ 21 (A) AOCI related to de-designated electricity swap is amortized to income over the remaining term of the hedged item. 11.FAIR VALUE MEASUREMENTSNovelis Inc.NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) —(Continued)electricity) and commodity location premium contracts.electricity swap). Models for these fair value measurements include inputs based on estimated future prices for periods beyond the term of the quoted prices.December 31, 20112011,2012, we did not have any Level 1 financial instruments.December 31, 2011June 30, 2012 and March 31, 20112012 (in millions). December 31, 2011 March 31, 2011 Assets Liabilities Assets Liabilities $ 49 $ (59 ) $ 111 $ (48 ) 46 (34 ) 70 (21 ) — (9 ) — (3 ) — (1 ) — (4 ) 95 (103 ) 181 (76 ) — — 1 (1 ) — (36 ) — (29 ) — (36 ) 1 (30 ) $ 95 $ (139 ) $ 182 $ (106 ) June 30, 2012 March 31, 2012 Assets Liabilities Assets Liabilities Level 2 Instruments Aluminum contracts $ 70 $ (58 ) $ 69 $ (58 ) Currency exchange contracts 31 (46 ) 32 (23 ) Energy contracts — (6 ) — (10 ) Total Level 2 Instruments 101 (110 ) 101 (91 ) Level 3 Instruments Energy contracts — (37 ) — (41 ) Total Level 3 Instruments — (37 ) — (41 ) Total $ 101 $ (147 ) $ 101 $ (132 ) Novelis Inc.NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) —(Continued)lossesgains of $10$2 million for the ninethree months ended December 31, 2011June 30, 2012 related to Level 3 financial instruments that were still held as of December 31, 2011.June 30, 2012. These unrealized lossesgains are included in “Other (income) expense, net.” Level 3 –
Electricity
Swap $ (29 ) (3 ) (4 ) $ (36 ) Balance as of March 31, 2012 $ (41 ) Realized/unrealized gain included in earnings(B) 5 Settlements (1 ) Balance as of June 30, 2012 $ (37 ) (A) Represents net derivative liabilities. (B) Included in “Other (income) expense, net.” available. When not available we useor on a standard credit adjusted discounted cash flow model. December 31, 2011 March 31, 2011 Carrying
Value Fair
Value Carrying
Value Fair
Value $ 16 $ 16 $ 19 $ 19 $ 4,344 $ 4,515 $ 4,086 $ 4,370 12.OTHER (INCOME) EXPENSE, NET June 30, 2012 March 31, 2012 Assets Long-term receivables from related parties $ 15 $ 15 $ 16 $ 16 Liabilities Total debt — third parties (excluding short term borrowings) $ 4,338 $ 4,448 $ 4,344 $ 4,605 Three Months Ended
December 31, Nine Months Ended
December 31, 2011 2010 2011 2010 $ (4 ) $ 11 $ 5 $ 10 63 (9 ) 38 37 (66 ) (21 ) (136 ) (95 ) (1 ) 2 1 (11 ) — — (8 ) — 3 2 10 6 4 1 5 — $ (1 ) $ (14 ) $ (85 ) $ (53 ) Three Months Ended June 30, 2012 2011 Foreign currency remeasurement (gains) losses, net (A) $ (5 ) $ 10 (Gain) on change in fair value of other unrealized derivative instruments, net (13 ) (25 ) (Gain) on change in fair value of other realized derivative instruments, net (12 ) (10 ) (Gain) loss on sale of assets, net (2 ) 1 Loss on Brazilian tax litigation, net (B) 2 3 Interest income (1 ) (4 ) Other, net 4 — Other (income) expense, net $ (27 ) $ (25 ) (A) Includes “Gain“(Gain) loss recognized on balance sheet remeasurement currency exchange contracts, net.”(B)We received and recognized a gain of $8 million during the nine months ended December 31, 2011 as settlement related to a lawsuit we filed against a Brazilian vendor.(C)(B)See footnote 1415 – Commitments and Contingencies, Brazil Tax Matters for further details.—13.INCOME TAXES Three Months Ended
December 31, Nine Months Ended
December 31, 2011 2010 2011 2010 $ (17 ) $ 3 $ 247 $ 212 27 % 29 % 27 % 29 % (5 ) 1 67 62 — — (13 ) — (1 ) 4 (30 ) 15 22 15 61 30 (1 ) 2 2 4 (10 ) — (41 ) — — — 3 — 4 9 12 (5 ) (20 ) 1 (19 ) (2 ) 1 1 — — $ (10 ) $ 33 $ 42 $ 104 59 % 1,100 % 17 % 49 % Three Months Ended June 30, 2012 2011 Pre-tax income before equity in net income of non-consolidated affiliates and noncontrolling interests $ 114 $ 138 Canadian statutory tax rate 26 % 27 % Provision at the Canadian statutory rate 30 37 Increase (decrease) for taxes on income (loss) resulting from: Exchange translation items (5 ) (1 ) Exchange remeasurement of deferred income taxes (19 ) 10 Change in valuation allowances 20 21 Expense items not subject to tax 1 2 Dividends not subject to tax (13 ) (15 ) Tax rate differences on foreign earnings 6 4 Uncertain tax positions, net 1 1 Income tax provision $ 21 $ 59 Effective tax rate 18 % 43 % December 31, 2011,June 30, 2012, we had a net deferred tax liability of $445 million.$366 million. This amount includes gross deferred tax assets of approximately $707$707 million and a valuation allowance of $291 million.Duringquarter ended December 31, 2011, we agreed to certain findings presented by taxing authorities related to tax auditsnext 12 months, resulting in certain jurisdictions for the years 2004 through 2008. As a result of these findings, we reduced our unrecognized tax benefits, including interest, by approximately $23 million. Of this amount, approximately $6 million will be settled in cash paymentschange to the tax authorities with the remaining amount recorded as a reduction to the income tax provision. Certain examination findings relate to issues which impact multiple tax jurisdictions. Depending on the proposed resolution of these issuesvaluation allowance in one jurisdiction, we will pursue competent authority relief from the offsetting tax jurisdiction(s), and therefore have recorded an offsetting deferred tax asset of approximately $4 million in one such jurisdiction in the three months ended December 31, 2011.2009.2009. As a result of further settlement of audits, judicial decisions, the filing of amended tax returns or the expiration of statutes of limitations, our reserves for unrecognized tax benefits, as well as reserves for interest and penalties, may decrease in the next 12 months by an amount up to approximately $15 million.
$14 million.14.COMMITMENTS AND CONTINGENCIES$0$0 to $50 million.$50 million. This estimated aggregate range of reasonably possible losses is based upon currently available information. The Company’s estimates involve significant judgment, and therefore, the estimate will change from time to time and actual losses may differ from the current estimate.Novelis Inc.NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) —(Continued)Legal ProceedingsCoca-Cola Lawsuit. On December 30, 2011, Corporation entered into a settlement agreement with Coca-Cola Bottlers’ Sales and Services Company LLC (CCBSS), under which Novelis and CCBSS resolved all claims between them and agreed to dismiss the litigation filed in Georgia State Court on February 15, 2007, relating to certain pricing matters under an aluminum can stock supply agreement between the parties. The settlement ended the litigation without the payment of financial consideration by either party.all of our known environmental mattersliabilities as of December 31, 2011June 30, 2012 will be approximately $40 million.$9 million. Of this amount, $20$5 million is included in “Other long-term liabilities,” with the remaining $20$4 million included in “Accrued expenses and other current liabilities” in our condensed consolidated balance sheet as of December 31, 2011.June 30, 2012. Management has reviewed the environmental matters, including those for which we assumed liability as a result of our spin-off from Alcan Inc. As a result of this review, management has determined that the currently anticipated costs associated with these environmental matters will not, individually or in the aggregate, materially impact our operations or materially adversely affect our financial condition, results of operations or liquidity.Novelis Inc.NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) —(Continued)December 31, 2011June 30, 2012 and March 31, 2011,2012, we had cash deposits aggregating approximately $32$33 million and $50$33 million, respectively, with the Brazilian government. These deposits, which are included in “Other long-term assets — third parties” in our accompanying condensed consolidated balance sheets, will be expended toward these legal proceedings.We have establishedThe liabilities for these settlements approximate $147 million and $163 millionas of December 31, 2011. In total, the liabilities approximate $160 millionJune 30, 2012 and $179 million as of December 31, 2011 and March 31, 2011,2012, respectively. As of December 31, 2011, $12June 30, 2012, $12 million and $148$135 million of liabilities are included in “Accrued expenses and other current liabilities” and “Other long-term liabilities,” respectively, in our accompanying condensed consolidated balance sheets. As of March 31, 2011, $52012, $13 million and $174$150 million of liabilities are included in “Accrued expenses and other current liabilities” and “Other long-term liabilities,” respectively. We have recognized net interest expense of $10$2 million and $6$3 million as “Loss on Brazilian tax litigation, net” which is reported in “Other (income) expense, net” for the ninethree months ended December 31, 2011June 30, 2012 and 2010,2011, respectively.On January 4, 2012, we received a favorable response concluding a formal consultation we had initiated with the Brazilian tax authorities in 2005 related to charging Value Added Tax (VAT) on certain specific commercial arrangements. The resolutionthis matter resulted in no cash payments or liability and had no impact on our financial statements.15.SEGMENT, MAJOR CUSTOMER AND MAJOR SUPPLIER INFORMATIONAmerica, Europe,America; Europe; Asia and South America.“impairmentimpairment of goodwill”;goodwill; (f) impairment charges on long-lived assets (other than goodwill); (g) gain or loss on extinguishment of debt; (h) noncontrolling interests’interests' share; (i) adjustments to reconcile our proportional share of “Segment income” from non-consolidated affiliates to income as determined on the equity method of accounting; (j) “restructuring charges, net”; (k) gains or losses on disposals of property, plant and equipment and businesses, net; (l) other costs, net; (m) litigation settlement, net of insurance recoveries; (n) sale transaction fees; (o) provision or benefit for taxes on income (loss) and (p) cumulative effect of accounting change, net of tax.USU.S. GAAP-based measures, we must adjust proportional consolidation of each line item. See Note 4 —5- Consolidation and Note 5 —6 - Investment in and Advances to Non-Consolidated Affiliates and Related Party Transactions for further information about these non-consolidated affiliates.Novelis Inc.NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) —(Continued)000000 000000 000000 000000 000000 000000 Total Assets North
America Europe Asia South
America Other and
Eliminations Total $ 2,539 $ 2,693 $ 1,037 $ 1,496 $ 86 $ 7,851 $ 2,612 $ 3,170 $ 1,015 $ 1,481 $ 18 $ 8,296 000000 000000 000000 000000 000000 000000 North
America Europe Asia South
America Other and
Eliminations Total $ 912 $ 804 $ 398 $ 321 $ 27 $ 2,462 34 30 13 15 (13 ) 79 29 20 24 50 — 123 000000 000000 000000 000000 000000 000000 North
America Europe Asia South
America Other and
Eliminations Total $ 901 $ 835 $ 470 $ 321 $ 33 $ 2,560 41 36 14 20 (11 ) 100 15 25 9 25 (13 ) 61 000000 000000 000000 000000 000000 000000 North
America Europe Asia South
America Other and
Eliminations Total $ 3,052 $ 2,916 $ 1,432 $ 942 $ 113 $ 8,455 102 97 41 42 (33 ) 249 75 55 62 107 (2 ) 297 000000 000000 000000 000000 000000 000000 North
America Europe Asia South
America Other and
Eliminations Total $ 2,743 $ 2,551 $ 1,340 $ 876 $ 107 $ 7,617 124 105 43 66 (31 ) 307 32 43 22 46 (11 ) 132 Total Assets Europe Asia Total June 30, 2012 $ 2,652 $ 2,575 $ 1,078 $ 1,475 $ 164 $ 7,944 March 31, 2012 $ 2,644 $ 2,753 $ 1,037 $ 1,493 $ 94 $ 8,021 —Selected Operating Results Three Months Ended June 30, 2012 Europe Asia Total Net sales $ 920 $ 863 $ 428 $ 308 $ 31 $ 2,550 Depreciation and amortization 31 26 13 13 (10 ) 73 Capital expenditures 34 11 28 64 30 167 Selected Operating Results Three Months Ended June 30, 2011 Europe Asia Total Net sales $ 1,107 $ 1,080 $ 560 $ 318 $ 48 $ 3,113 Depreciation and amortization 35 36 14 14 (10 ) 89 Capital expenditures 19 14 9 28 (3 ) 67 (Continued)(loss) attributable to our common shareholder” (in millions). Three Months Ended
December 31, Nine Months Ended
December 31, 2011 2010 2011 2010 $ 94 $ 97 $ 324 $ 298 24 47 213 217 43 59 149 162 52 35 134 115 (79 ) (100 ) (249 ) (307 ) (74 ) (46 ) (228 ) (125 ) 3 4 11 10 (9 ) (11 ) (34 ) (33 ) (63 ) 9 (38 ) (37 ) (3 ) 4 (1 ) 4 — (74 ) — (74 ) (1 ) (20 ) (31 ) (35 ) (8 ) (6 ) (12 ) 6 (21 ) (2 ) 238 201 (10 ) 33 42 104 (11 ) (35 ) 196 97 1 11 26 31 $ (12 ) $ (46 ) $ 170 $ 66 Three Months Ended June 30, 2012 2011 North America $ 89 $ 114 Europe 74 97 Asia 46 57 South America 50 38 Depreciation and amortization (73 ) (89 ) Interest expense and amortization of debt issuance costs (74 ) (77 ) Interest income 1 4 Adjustment to eliminate proportional consolidation (11 ) (13 ) Unrealized gains on change in fair value of derivative instruments, net 13 25 Realized gains on derivative instruments not included in segment income 2 2 Restructuring charges, net (5 ) (19 ) Gain on assets held for sale 5 — Other costs, net (5 ) (3 ) Income before income taxes 112 136 Income tax provision 21 59 Net income 91 77 Net income attributable to noncontrolling interests — 15 Net income attributable to our common shareholder $ 91 $ 62 Three Months Ended
December 31, Nine Months Ended
December 31, 2011 2010 2011 2010 15 % 16 % 13 % 16 % 13 % 8 % 10 % 8 % 11 % 13 % 10 % 13 % Three Months Ended June 30, 2012 2011 Rexam 13 % 13 % Affiliates of Ball Corporation 10 % 12 % Anheuser-Busch 10 % 11 % Three Months Ended
December 31, Nine Months Ended
December 31, 2011 2010 2011 2010 29 % 33 % 29 % 33 % Three Months Ended June 30, 2012 2011 Purchases from Rio Tinto Alcan as a percentage of total 26 % 32 % Novelis Inc.17. SUPPLEMENTAL INFORMATIONNOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) —(Continued)16.SUPPLEMENTAL INFORMATION December 31,
2011 March 31,
2011 $ (27 ) $ 102 (32 ) 22 (62 ) (67 ) $ (121 ) $ 57 June 30,
2012 March 31,
2012Currency translation adjustment $ (61 ) $ 20 Fair value of effective portion of cash flow hedges (26 ) (7 ) Pension and other benefits (188 ) (204 ) Accumulated other comprehensive (loss) income $ (275 ) $ (191 ) Nine Months Ended
December 31, 2011 2010 $ 266 $ 112 $ 74 $ 83 Three Months Ended June 30, 2012 2011 Interest paid $ 120 $ 126 Income taxes paid $ 40 $ 21 December 31, 2011,June 30, 2012, we recorded $88$108 million of outstanding accounts payable and accrued liabilities related to capital expenditures in which the cash outflows will occur subsequent to December 31, 2011.June 30, 2012. 17.SUPPLEMENTAL GUARANTOR INFORMATIONLuxembourg and Switzerland, as well as certain businesses in Germany and France. Certain Guarantors may be subject to restrictions on their ability to distribute earnings to Novelis Inc. (the Parent). The remaining subsidiaries (the Non-Guarantors) of the Parent are not guarantors of the Notes.—NOVELIS INC. Three Months Ended December 31, 2011 Parent Guarantors Non-
Guarantors Eliminations Consolidated $ 240 $ 1,991 $ 691 $ (460 ) $ 2,462 241 1,808 635 (460 ) 2,224 5 66 24 — 95 14 59 21 (15 ) 79 5 4 1 — 10 77 12 1 (16 ) 74 (15 ) (4 ) — 16 (3 ) 1 — — — 1 (50 ) 3 1 50 4 (22 ) — 6 15 (1 ) 256 1,948 689 (410 ) 2,483 (16 ) 43 2 (50 ) (21 ) (4 ) (14 ) 8 — (10 ) (12 ) 57 (6 ) (50 ) (11 ) — — 1 — 1 $ (12 ) $ 57 $ (7 ) $ (50 ) $ (12 ) Three Months Ended December 31, 2010 Parent Guarantors Non-
Guarantors Eliminations Consolidated $ 254 $ 2,043 $ 751 $ (488 ) $ 2,560 246 1,794 680 (488 ) 2,232 2 75 17 — 94 1 76 23 — 100 6 2 1 — 9 38 22 1 (15 ) 46 (15 ) (4 ) — 15 (4 ) 33 41 — — 74 — 19 1 — 20 (22 ) 5 — 22 5 (11 ) 5 (8 ) — (14 ) 278 2,035 715 (466 ) 2,562 (24 ) 8 36 (22 ) (2 ) 22 4 7 — 33 (46 ) 4 29 (22 ) (35 ) — — 11 — 11 $ (46 ) $ 4 $ 18 $ (22 ) $ (46 ) Three Months Ended June 30, 2012 Parent Guarantors Eliminations Consolidated Net sales $ 259 $ 2,069 $ 723 $ (501 ) $ 2,550 Cost of goods sold (exclusive of depreciation and amortization) 253 1,796 654 (501 ) 2,202 Selling, general and administrative expenses (6 ) 85 23 — 102 Depreciation and amortization 3 56 19 (5 ) 73 Research and development expenses — 12 — — 12 Interest expense and amortization of debt issuance costs 79 4 — (9 ) 74 Gain on assets held for sale (7 ) 1 1 — (5 ) Restructuring charges, net 3 2 — — 5 Equity in net (income) loss of non-consolidated affiliates (147 ) 2 — 147 2 Other (income) expense, net (11 ) (32 ) 2 14 (27 ) 167 1,926 699 (354 ) 2,438 Income (loss) before income taxes 92 143 24 (147 ) 112 Income tax provision 2 12 7 — 21 Net income (loss) 90 131 17 (147 ) 91 Net income attributable to noncontrolling interests — — — — — Net income (loss) attributable to our common shareholder $ 90 $ 131 $ 17 $ (147 ) $ 91 Comprehensive income (loss) $ 7 $ 59 $ 3 $ (63 ) $ 6 Comprehensive income (loss) attributable to noncontrolling interest $ — $ — $ (1 ) $ — $ (1 ) Comprehensive income (loss) attributable to our common shareholder $ 7 $ 59 $ 4 $ (63 ) $ 7 —NOVELIS INC.CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS(In millions) Nine Months Ended December 31, 2011 Parent Guarantors Non-
Guarantors Eliminations Consolidated $ 855 $ 6,832 $ 2,572 $ (1,804 ) $ 8,455 833 6,081 2,371 (1,804 ) 7,481 8 215 58 — 281 14 185 65 (15 ) 249 22 10 2 — 34 231 41 3 (47 ) 228 (45 ) (12 ) (1 ) 47 (11 ) 3 25 3 — 31 (350 ) 8 1 350 9 (29 ) (57 ) (14 ) 15 (85 ) 687 6,496 2,488 (1,454 ) 8,217 168 336 84 (350 ) 238 (2 ) 14 30 — 42 170 322 54 (350 ) 196 — — 26 — 26 $ 170 $ 322 $ 28 $ (350 ) $ 170 Nine Months Ended December 31, 2010 Parent Guarantors Non-
Guarantors Eliminations Consolidated $ 775 $ 6,142 $ 2,198 $ (1,498 ) $ 7,617 738 5,407 1,981 (1,498 ) 6,628 22 204 46 — 272 4 233 70 — 307 19 7 1 — 27 96 70 3 (44 ) 125 (44 ) (9 ) (1 ) 44 (10 ) 33 41 — — 74 5 28 2 — 35 (166 ) 11 — 166 11 (18 ) (28 ) (7 ) — (53 ) 689 5,964 2,095 (1,332 ) 7,416 86 178 103 (166 ) 201 20 65 19 — 104 66 113 84 (166 ) 97 — — 31 — 31 $ 66 $ 113 $ 53 $ (166 ) $ 66 Three Months Ended June 30, 2011 Parent Guarantors Eliminations Consolidated Net sales $ 305 $ 2,481 $ 1,023 $ (696 ) $ 3,113 Cost of goods sold (exclusive of depreciation and amortization) 294 2,170 940 (696 ) 2,708 Selling, general and administrative expenses 13 67 15 — 95 Depreciation and amortization — 66 23 — 89 Research and development expenses 8 3 1 — 12 Interest expense and amortization of debt issuance costs 77 14 1 (15 ) 77 Restructuring charges, net — 18 1 — 19 Equity in net (income) loss of non-consolidated affiliates (126 ) 2 — 126 2 Other (income) expense, net (23 ) (10 ) (7 ) 15 (25 ) 243 2,330 974 (570 ) 2,977 Income (loss) before taxes 62 151 49 (126 ) 136 Income tax provision — 46 13 — 59 Net income (loss) 62 105 36 (126 ) 77 Net income attributable to noncontrolling interests — — 15 — 15 Net income (loss) attributable to our common shareholder $ 62 $ 105 $ 21 $ (126 ) $ 62 Comprehensive income (loss) attributable to our common shareholder $ 108 $ 129 $ 52 $ (161 ) $ 128 Comprehensive income (loss) attributable to noncontrolling interest $ — $ — $ 20 $ — $ 20 Comprehensive income (loss) attributable to our common shareholder $ 108 $ 129 $ 32 $ (161 ) $ 108 —NOVELIS INC. As of December 31, 2011 Parent Guarantors Non-
Guarantors Eliminations Consolidated ASSETS $ 1 $ 244 $ 191 $ — $ 436 49 803 416 (1 ) 1,267 641 347 40 (993 ) 35 61 749 281 — 1,091 5 49 20 — 74 13 70 18 (12 ) 89 — 50 4 — 54 770 2,312 970 (1,006 ) 3,046 165 1,944 537 — 2,646 (2 ) 601 12 — 611 3 643 2 — 648 1,155 671 — (1,155 ) 671 3 2 1 — 6 — 26 14 — 40 2,975 162 45 (2,999 ) 183 $ 5,069 $ 6,361 $ 1,581 $ (5,160 ) $ 7,851 $ 17 $ 5 $ — $ — $ 22 208 — 19 — 227 15 317 27 (359 ) — 46 610 336 — 992 73 410 201 (632 ) 52 2 77 30 (12 ) 97 66 299 104 (3 ) 466 — 30 — — 30 427 1,748 717 (1,006 ) 1,886 4,229 49 44 — 4,322 85 2,849 65 (2,999 ) — — 499 10 — 509 41 330 136 — 507 20 293 13 — 326 4,802 5,768 985 (4,005 ) 7,550 — — — — — 1,660 — — — 1,660 (1,272 ) 716 628 (1,344 ) (1,272 ) (121 ) (123 ) (66 ) 189 (121 ) 267 593 562 (1,155 ) 267 — — 34 — 34 267 593 596 (1,155 ) 301 $ 5,069 $ 6,361 $ 1,581 $ (5,160 ) $ 7,851 As of June 30, 2012 Parent Guarantors Eliminations Consolidated ASSETS Current assets Cash and cash equivalents $ 6 $ 103 $ 154 $ — $ 263 Accounts receivable, net of allowances — third parties 40 892 372 1 1,305 — related parties 587 228 35 (821 ) 29 Inventories 53 769 254 — 1,076 Prepaid expenses and other current assets 4 76 14 — 94 Fair value of derivative instruments 12 77 13 (3 ) 99 Deferred income tax assets — 134 4 — 138 Assets held for sale — 4 — — 4 Total current assets 702 2,283 846 (823 ) 3,008 Property, plant and equipment, net 117 2,061 562 — 2,740 Goodwill (2 ) 601 12 — 611 Intangible assets, net 11 654 4 — 669 Investments in and advances to non-consolidated affiliates 1,613 648 — (1,613 ) 648 Fair value of derivative instruments, net of current portion 1 1 — — 2 Deferred income tax assets 3 61 23 — 87 Other long-term assets 2,370 201 34 (2,426 ) 179 Total assets $ 4,815 $ 6,510 $ 1,481 $ (4,862 ) $ 7,944 LIABILITIES AND SHAREHOLDER’S EQUITY Current liabilities Current portion of long-term debt $ 17 $ 6 $ — $ — $ 23 Short-term borrowings — third parties 40 62 17 — 119 — related parties 22 181 26 (229 ) — Accounts payable — third parties 57 728 434 — 1,219 — related parties 77 473 79 (581 ) 48 Fair value of derivative instruments 2 83 25 (3 ) 107 Accrued expenses and other current liabilities 70 296 67 (10 ) 423 Deferred income tax liabilities — 28 — — 28 Total current liabilities 285 1,857 648 (823 ) 1,967 Long-term debt, net of current portion — third parties 4,224 48 43 — 4,315 — related parties 119 2,277 30 (2,426 ) — Deferred income tax liabilities 2 552 9 — 563 Accrued postretirement benefits 56 449 156 — 661 Other long-term liabilities 33 267 9 — 309 Total liabilities 4,719 5,450 895 (3,249 ) 7,815 Commitments and contingencies Shareholder’s equity Common stock — — — — — Additional paid-in capital 1,659 — — — 1,659 Retained earnings (accumulated deficit) (1,288 ) 1,324 637 (1,961 ) (1,288 ) Accumulated other comprehensive income (loss) (275 ) (264 ) (84 ) 348 (275 ) Total equity of our common shareholder 96 1,060 553 (1,613 ) 96 Noncontrolling interests — — 33 — 33 Total equity 96 1,060 586 (1,613 ) 129 Total liabilities and equity $ 4,815 $ 6,510 $ 1,481 $ (4,862 ) $ 7,944 —NOVELIS INC. As of March 31, 2011 Parent Guarantors Non-
Guarantors Eliminations Consolidated ASSETS $ 1 $ 225 $ 85 $ — $ 311 31 920 529 — 1,480 640 319 89 (1,020 ) 28 60 961 317 — 1,338 2 40 8 — 50 5 140 30 (10 ) 165 — 37 2 — 39 739 2,642 1,060 (1,030 ) 3,411 136 1,898 509 — 2,543 — 600 11 — 611 5 699 3 — 707 1,273 743 — (1,273 ) 743 — 16 3 (2 ) 17 — 39 13 — 52 2,778 195 58 (2,819 ) 212 $ 4,931 $ 6,832 $ 1,657 $ (5,124 ) $ 8,296 LIABILITIES AND SHAREHOLDER’S EQUITY $ 15 $ 5 $ 1 $ — $ 21 — — 17 — 17 22 334 20 (376 ) — 73 812 493 — 1,378 78 438 175 (641 ) 50 4 73 17 (12 ) 82 119 332 119 (2 ) 568 — 43 — — 43 311 2,037 842 (1,031 ) 2,159 4,019 46 — — 4,065 97 2,644 77 (2,818 ) — — 542 10 — 552 40 344 142 — 526 19 336 6 (2 ) 359 4,486 5,949 1,077 (3,851 ) 7,661 — — — — — 1,830 — — — 1,830 (1,442 ) 892 434 (1,326 ) (1,442 ) 57 (9 ) (44 ) 53 57 445 883 390 (1,273 ) 445 — — 190 — 190 445 883 580 (1,273 ) 635 $ 4,931 $ 6,832 $ 1,657 $ (5,124 ) $ 8,296 As of March 31, 2012 Parent Guarantors Eliminations Consolidated ASSETS Current assets Cash and cash equivalents $ 6 $ 199 $ 112 $ — $ 317 Accounts receivable, net of allowances — third parties 34 910 387 — 1,331 — related parties 745 341 59 (1,109 ) 36 Inventories 51 744 229 — 1,024 Prepaid expenses and other current assets 4 46 11 — 61 Fair value of derivative instruments 9 76 19 (5 ) 99 Deferred income tax assets — 148 3 — 151 Assets held for sale — 24 57 — 81 Total current assets 849 2,488 877 (1,114 ) 3,100 Property, plant and equipment, net 123 2,019 547 — 2,689 Goodwill (2 ) 601 12 — 611 Intangible assets, net 7 666 5 — 678 Investments in and advances to non-consolidated affiliates — 683 — — 683 Investments in consolidated subsidiaries 1,411 — — (1,411 ) — Fair value of derivative instruments, net of current portion — 1 1 — 2 Deferred income tax assets — 51 22 1 74 Other long-term assets 2,391 157 40 (2,404 ) 184 Total assets $ 4,779 $ 6,666 $ 1,504 $ (4,928 ) $ 8,021 LIABILITIES AND SHAREHOLDER’S EQUITY Current liabilities Current portion of long-term debt $ 17 $ 5 $ 1 $ — $ 23 Short-term borrowings — third parties — — 18 — 18 — related parties 10 316 27 (353 ) — Accounts payable — third parties 79 757 409 — 1,245 — related parties 80 529 192 (750 ) 51 Fair value of derivative instruments 1 75 24 (5 ) 95 Accrued expenses and other current liabilities 125 274 83 (6 ) 476 Deferred income tax liabilities — 32 2 — 34 Liabilities held for sale — 10 47 — 57 Total current liabilities 312 1,998 803 (1,114 ) 1,999 Long-term debt, net of current portion — third parties 4,227 51 43 — 4,321 — related parties 74 2,275 55 (2,404 ) — Deferred income tax liabilities — 571 10 — 581 Accrued postretirement benefits 56 475 156 — 687 Other long-term liabilities 21 282 7 — 310 Total liabilities 4,690 5,652 1,074 (3,518 ) 7,898 Commitments and contingencies Shareholder’s equity Common stock — — — — — Additional paid-in capital 1,659 — — — 1,659 Retained earnings (accumulated deficit) (1,379 ) 1,206 470 (1,676 ) (1,379 ) Accumulated other comprehensive income (loss) (191 ) (191 ) (74 ) 265 (191 ) Total equity of our common shareholder 89 1,015 396 (1,411 ) 89 Noncontrolling interests — (1 ) 34 1 34 Total equity 89 1,014 430 (1,410 ) 123 Total liabilities and equity $ 4,779 $ 6,666 $ 1,504 $ (4,928 ) $ 8,021 —NOVELIS INC. Nine months ended December 31, 2011 Parent Guarantors Non-
Guarantors Eliminations Consolidated $ (24 ) $ (114 ) $ 111 $ 232 $ 205 (32 ) (195 ) (70 ) — (297 ) — 11 — — 11 — 1 — — 1 — (5 ) — — (5 ) 3 75 17 — 95 (29 ) (113 ) (53 ) — (195 ) 220 11 43 — 274 — 347 — (347 ) — (12 ) (4 ) — — (16 ) (11 ) (4 ) (11 ) 26 — 208 1 2 — 211 (7 ) (93 ) 11 89 — — — (1 ) — (1 ) (343 ) — — — (343 ) (2 ) — — — (2 ) 53 258 44 (232 ) 123 — 31 102 — 133 — (12 ) 4 — (8 ) 1 225 85 — 311 $ 1 $ 244 $ 191 $ — $ 436 Three Months Ended June 30, 2012 Parent Guarantors Eliminations Consolidated OPERATING ACTIVITIES Net cash (used in) provided by operating activities $ (84 ) $ 76 $ 98 $ (95 ) $ (5 ) INVESTING ACTIVITIES Capital expenditures (13 ) (123 ) (31 ) — (167 ) Proceeds from sales of assets — 12 — — 12 Proceeds from investment in and advances to non-consolidated affiliates, net — — — — — (Outflow) proceeds from related party loans receivable, net — 2 — — 2 (Outflow) proceeds from settlement of undesignated derivative instruments, net 4 (3 ) — — 1 Net cash (used in) provided by investing activities (9 ) (112 ) (31 ) — (152 ) FINANCING ACTIVITIES Proceeds from issuance of debt — third parties — 12 — — 12 — related parties 49 1 — (50 ) — Principal payments — third parties (4 ) (1 ) — — (5 ) — related parties (4 ) — (23 ) 27 — Short-term borrowings, net — third parties 40 52 — — 92 — related parties 12 (130 ) — 118 — Dividends — noncontrolling interests — — (1 ) — (1 ) Net cash provided by (used in) financing activities 93 (66 ) (24 ) 95 98 Net increase (decrease) in cash and cash equivalents — (102 ) 43 — (59 ) Effect of exchange rate changes on cash balances held in foreign currencies — 6 (1 ) — 5 Cash and cash equivalents — beginning of period 6 199 112 — 317 Cash and cash equivalents — end of period $ 6 $ 103 $ 154 $ — $ 263 —NOVELIS INC. Nine Months Ended December 31, 2010 Parent Guarantors Non-
Guarantors Eliminations Consolidated $ (673 ) $ 839 $ 52 $ — $ 218 (15 ) (86 ) (31 ) — (132 ) — 17 1 — 18 — 10 — — 10 — 1 — — 1 — 8 — — 8 (4 ) 67 18 — 81 (19 ) 17 (12 ) — (14 ) 3,985 — — — 3,985 (1,527 ) (859 ) (100 ) — (2,486 ) 57 52 (23 ) (86 ) — 99 (58 ) 8 — 49 (36 ) (48 ) (2 ) 86 — (1,700 ) — — — (1,700 ) — — (18 ) — (18 ) (174 ) — — — (174 ) 704 (913 ) (135 ) — (344 ) 12 (57 ) (95 ) — (140 ) — (3 ) 3 — — 22 266 149 — 437 $ 34 $ 206 $ 57 $ — $ 297 Three Months Ended June 30, 2011 Parent Guarantors Eliminations Consolidated OPERATING ACTIVITIES Net cash provided by (used in) operating activities $ (138 ) $ 56 $ 36 $ (69 ) $ (115 ) INVESTING ACTIVITIES Capital expenditures (4 ) (50 ) (13 ) — (67 ) Proceeds from sales of assets — — — — — Changes to investment in and advances to non-consolidated affiliates — 1 — — 1 Proceeds from loans receivable, net — related parties — (6 ) — — (6 ) Net proceeds from settlement of derivative instruments — (5 ) (2 ) — (7 ) Net cash provided by (used in) investing activities (4 ) (60 ) (15 ) — (79 ) FINANCING ACTIVITIES Proceeds from issuance of debt, third parties — 3 — — 3 Principal payments, third parties (4 ) (1 ) — — (5 ) Related parties borrowings, net (5 ) — (5 ) 10 — Short-term borrowings, net — third parties 160 34 (4 ) — 190 — related parties (5 ) (55 ) 1 59 — Net cash provided by (used in) financing activities 146 (19 ) (8 ) 69 188 Net increase (decrease) in cash and cash equivalents 4 (23 ) 13 — (6 ) Effect of exchange rate changes on cash balances held in foreign currencies — — 2 — 2 Cash and cash equivalents — beginning of period 1 225 85 — 311 Cash and cash equivalents — end of period $ 5 $ 202 $ 100 $ — $ 307 world’sworld's leading aluminum rolled products producer based on shipment volume.volume in fiscal 2012. We produce aluminum sheet and light gauge products for use in the packaging market, which includes beverage and food can transportation, electronics, construction and industrial, and foil products, as well as for use in the transportation, electronics, architectural and industrial product markets. We are also the world's largest recycler of used-beverage cans (UBCs) and have recycling operations in many of our plants to recycle post-consumer aluminum. As of December 31, 2011,June 30, 2012, we had manufacturing operations in elevennine countries on four continents: 29continents, which include 26 operating plants, including three stand-aloneand recycling facilities, and seven research and development facilities.operations in ten of these plants. In addition to aluminum rolled products plants, our South American businesses include bauxite mining, primary aluminum smelting and power generation facilities. We are the only company of our size and scope focused solely on the aluminum rolled products markets and capable of local supply of technologically sophisticated products in all of these geographic regions.References hereinregions, but with the global footprint to “Novelis,”service global customers.“Company,”terms “we,” “our,” or “us”“us,” “Company,” and “Novelis” refer to Novelis Inc., a company incorporated in Canada under the Canadian Business Corporations Act (CBCA) and its subsidiaries unless the context specifically indicates otherwise.subsidiaries. References herein to “Hindalco” refer to Hindalco Industries Limited.Limited, which acquired Novelis in May 2007, through its indirect wholly-owned subsidiary. In October 2007, the Rio Tinto Group purchased all of the outstanding shares of Alcan Inc. and became Rio Tinto Alcan Inc. References herein to “Rio Tinto Alcan”“Alcan” refer to Rio Tinto Alcan Inc. One MMBTU is the equivalent of one decatherm, or one million British Thermal Units.2011,2012, filed with the United States Securities and Exchange Commission (SEC) on May 26, 2011.On May 15, 2007,24, 2012.Companyfirst quarter of fiscal 2013 compared to our record first quarter last year. We reported favorable impacts from conversion premiums and product mix within all segments in the first quarter of fiscal 2013 compared to the same period in fiscal 2012.acquiredlower by Hindalco through its indirect wholly-owned subsidiary pursuant6% compared to our record shipment levels in the first quarter of last year. Our shipments were impacted by lower volumes with a plankey customer in North America as well as production and supply chain issues in North America and Europe which delayed shipments early in the first quarter of arrangement (the Arrangement) atfiscal 2013. Our shipments in Asia continue to be impacted by economic uncertainty which is constraining exports into Europe.pricedecrease of $44.93 per share.18% compared to the $3.1 billion reported in the same period a year ago. The aggregate purchase price for alldecrease was the result of lower aluminum prices and, to lesser extent, unfavorable volumes compared to the first quarter of the Company’s common shares was $3.4 billionprevious year.Hindalco also assumed $2.8 billion$136 million in the three months ended June 30, 2012 and 2011, respectively. Included in our pre-tax income are “Unrealized gains on derivative instruments, net” of Novelis’ debt$13 million and $25 million, in the three months ended June 30, 2012 and 2011, respectively.a total transaction valuethe three months ended June 30, 2012 compares to cash flow used in operations of $6.2 billion. Subsequent$115 million for the three months ended June 30, 2011. We used less cash for working capital in the first quarter of fiscal 2013, due to completion oflower average pricing levels for aluminum.Arrangement on May 15, 2007, allthree months ended June 30, 2012, which primarily relates to our strategic expansion projects in Oswego, New York; Yeongju, South Korea; Ulsan, South Korea; and Pindamonhangaba, Brazil. All of our common shares were indirectly held by Hindalco.HIGHLIGHTSstrategic expansion projects are on schedule to be completed as planned.Our focusfundamentals of our business in our corepremium markets of can, automotive and specialty products, and on expanding our agility in reactingrecycling leadership. We revised our estimated loss on sale to changes$106 million by recording a $5 million "Gain on assets held for sale" adjustment in the market have driven solid performance by our business even in a periodfirst quarter of economic uncertainty. We reported favorable conversion premiums within all segments in bothfiscal 2013. In the thirdfourth quarter and the first nine months of fiscal 2012, we recognized an estimated $111 million "Loss on assets held for sale" related to the transaction.same periodsthree months ended June 30, 2011, our "Net sales" and rolled product shipments were down in fiscalthe three months ended June 30, 2012. Our "Net sales" were negatively impacted by lower prices of aluminum which averaged $1,977 per metric tonne during the three months ended June 30, 2012 compared to $2,603 per metric tonne during the three months ended June 30, 2011 which wasand $2,177 per metric tonne during the result of tight market conditions and our focus on our core markets. We continue to see increasing demand for our automotive applications and expect this trend to continue, although unfavorable macroeconomic conditions and customer destocking resulted in lower than expected shipmentsthree months ended March 31, 2012. Shipments of our flat rolled products were 722 kt in our other market segments during the thirdfirst quarter of fiscal 2013, which is down compared to the record 767 kt in the first quarter of fiscal 2012, but higher compared to 703 kt we reported in the fourth quarter of fiscal 2012. Despite an overall declineEconomic uncertainty continues to constrain global economic demand, leading to lower pricing for aluminum and other commodities. Our premium product categories have performed reasonably well in volumes during the quarter,these conditions, particularly automotive products which are growing as a result of industry trends towards lighter weight vehicles. Can demand continues to be reasonably strong globally, although our results for the nine months ended December 31, 2011 continue to outpace the prior year.Shipments of flat rolled products totaled 648 kt for the third quarter of fiscal 2012, a decrease of 9% compared to the third quarter of the previous year. In the first nine months of fiscal 2012, shipments of flat rolled products totaled 2,135 kt, a decrease of 3% compared to the previous year. These unfavorable declines in volumes were driven from our three largest regions: Asia, Europe and to a lesser extent North America.“Net sales” for the third quarter of fiscal 2012 were $2.5 billion, a decrease of 4% compared to the $2.6 billion reportedbusiness has been impacted in the same periodnear term by lower volumes with a year ago. “Net sales” for the nine months ended December 31, 2011 were $8.5 billion, an increase of 11% compared to $7.6 billion reported in the same period a year ago.We reported pre-tax losses of $21 million and $2 million in the three months ended December 31, 2011 and 2010, respectively. We reported pre-tax income of $238 million and $201 million for the nine months ended December 31, 2011 and 2010, respectively. Included in our pre-tax income and pre-tax loss are “Unrealized gains (losses) onderivative instruments, net,” other than foreign currency remeasurement derivatives, of $(63) million and $9 million, in the three months ended December 31, 2011 and December 31, 2010, respectively. “Unrealized gains (losses) on derivative instruments, net,” other than foreign currency remeasurement derivatives, were $(38) million and $(37) million, for the nine months ended December 31, 2011 and 2010, respectively.Cash flow provided by operations of $205 million for the nine months ended December 31, 2011 compares to cash flow provided by operations of $218 million for the nine months ended December 31, 2010. Additionally, as expected, we spent $297 million on capital expenditures for the nine months ended December 31, 2011 as compared to $132 million of capital expenditures for the same period of the prior year.We completed the acquisition of 31.2 percent of the outstanding shares of our Korean subsidiary for $343 million, raising our ownership to 99 percent. We funded the acquisition through a $225 million secured term loan executed in December 2011, additional borrowings on our asset backed loan facility and other available cash.We reported strong liquidity of $857 million as of December 31, 2011 as compared to liquidity of $993 million as of September 30, 2011 and $848 million as of December 31, 2010. The decline is attributable to the short-term borrowings made in December 2011 for the acquisition of the outstanding shares of our Korean subsidiary.BUSINESS AND INDUSTRY CLIMATEHistorically, the third quarter is our seasonally slow quarterkey customer in North America Europeas well as production and Asia. Globalsupply chain issues in North America and Europe. The impacts of global economic uncertainty led to soft demand during the quarter. Although we experienced some additional customer destocking, we expect recoveryhave been most significant in the fourth quarter and to produce strong results for fiscal 2012.(in millions, except shipments which are in kt) Three Months Ended Year Ended Three Months Ended
ended June 30,
2010 September 30,
2010 December 31,
2010 March 31,
2011 March 31,
2011 June 30,
2011 September 30,
2011 December 31,
2011 December 31,
2011 $ 2,533 $ 2,524 $ 2,560 $ 2,960 $ 10,577 $ 3,113 $ 2,880 $ 2,462 $ 8,455 29 % 16 % 21 % 22 % 22 % 23 % 14 % (4 )% 11 % 278 285 262 280 1,105 288 274 248 810 232 227 208 240 907 237 227 183 647 146 134 148 152 580 152 131 117 400 90 91 97 99 377 90 88 100 278 746 737 715 771 2,969 767 720 648 2,135 425 429 424 453 1,731 462 437 404 1,303 321 308 291 318 1,238 305 283 244 832 746 737 715 771 2,969 767 720 648 2,135 (in millions, except shipments which are in kt) Three Months Ended Year Ended Three Months Ended
ended June 30,
2010 September 30,
2010 December 31,
2010 March 31,
2011 March 31,
2011 June 30,
2011 September 30,
2011 December 31,
2011 December 31,
2011 9 % 10 % 8 % 2 % 7 % 4 % (4 )% (5 )% (2 )% 25 % 12 % 11 % 6 % 13 % 2 % — % (12 )% (3 )% 12 % (4 )% 10 % 18 % 9 % 4 % (2 )% (21 )% (7 )% 11 % (2 )% 15 % 15 % 10 % — % (3 )% 3 % — % 15 % 6 % 10 % 8 % 10 % 3 % (2 )% (9 )% (3 )% 7 % 5 % 14 % 12 % 10 % 9 % 2 % (5 )% 2 % 26 % 8 % 5 % 3 % 10 % (5 )% (8 )% (16 )% (10 )% 15 % 6 % 10 % 8 % 10 % 3 % (2 )% (9 )% (3 )% (in millions, except shipments which are in kt) Three Months Ended Year Ended Three Months Ended March 31, 2012 March 31, 2012 June 30, 2012 Net sales $ 3,113 $ 2,880 $ 2,462 $ 2,608 $ 8,455 $ 2,550 Percentage increase (decrease) in net sales versus comparable previous year period 23 % 14 % (4 )% (12 )% 5 % (18 )% Rolled product shipments: North America 288 274 248 254 1,064 266 Europe 237 227 183 228 875 231 Asia 152 131 117 124 524 136 South America 90 88 100 97 375 89 Total 767 720 648 703 2,838 722 Beverage and food cans 462 437 404 419 1,722 432 All other rolled products 305 283 244 284 1,116 290 Total 767 720 648 703 2,838 722 Three Months Ended Year Ended Three Months Ended March 31, 2012 March 31, 2012 June 30, 2012 North America 4 % (4 )% (5 )% (9 )% (4 )% (8 )% Europe 2 % — (12 )% (5 )% (4 )% (3 )% Asia 4 % (2 )% (21 )% (18 )% (10 )% (11 )% South America — (3 )% 3 % (2 )% (1 )% (1 )% Total 3 % (2 )% (9 )% (9 )% (4 )% (6 )% Beverage and food cans 9 % 2 % (5 )% (8 )% (1 )% (6 )% All other rolled products (5 )% (8 )% (16 )% (11 )% (10 )% (5 )% Total 3 % (2 )% (9 )% (9 )% (4 )% (6 )% “net“Net sales,” “cost“Cost of goods sold (exclusive of depreciation and amortization)” and working capital, albeit on a lag basis. These impacts are referred to as metal price lag. Metal price lag is caused by inventory and sales price exposure which we actively work to mitigate through our comprehensive risk management practices. shipment and pricing of that inventory to our customers. Specifically, a portion of our metal purchases are based on average prices for a period of time prior to the period at which we order the metal. Further, there is a period of time between when we place an order for metal, when we receive it and when we shipprice the finished products which will be shipped to our customers. Additionally, a cost recognition delay occurs due to the flow of metal costs through moving average inventory cost values and cost“Cost of goods sold (exclusive of depreciation and amortization).” The recognition of these timing differences in sales and metal costs vary based on contractual arrangements with customers and metal suppliers in each region.USU.S. dollars, but the majority of our conversion costs are paid in Brazilian real. We discuss this foreign currency risk further below.LME Aluminum PricesThe average (based on the simple average of the monthly averages) and closing prices based upon the LME for aluminum for the three and nine months ended December 31, 2011 and 2010 are as follows: Three Months
Ended
December 31, Percent Nine Months
Ended
December 31, Percent 2011 2010 Change 2011 2010 Change $ 2,207 $ 2,314 (5 )% $ 2,600 $ 2,288 14 % $ 2,089 $ 2,343 (11 )% $ 2,364 $ 2,176 9 % $ 1,971 $ 2,461 (20 )% $ 1,971 $ 2,461 (20 )% Aluminum prices have declined approximately $200 per ton during the third quarter of fiscal 2012. This resulted in $49 million of unrealized losses on undesignated metal derivatives and deferred gains of $7 million on designated metal hedges. Average aluminum prices were approximately $250 per ton lower in the third quarter of fiscal 2012 compared to the same period in the prior year. Additionally, although average aluminum prices were higher for the nine month period ended December 31, 2011 as compared to the same period in the prior year, prices actually decreased from the beginning of fiscal 2012 through December 31, 2011. Aluminum prices have risen during the first part of our fourth quarter of fiscal 2012.shipment and pricing of that inventory to our customers. These LME aluminum forward contracts directly hedge the economic risk of future metal price fluctuations on our inventory to synthetically ensure we sell metal for the same price at which we purchase metal. any risk by purchasing LME aluminum forward contracts simultaneous with our sales contracts to customers that contain fixed metal prices. These LME aluminum forward contracts directly hedge the economic risk of future metal price fluctuation attributable to the fixed forward price exposure combined with hedges of metal price lag to synthetically help ensure we purchase metal for the same price at which we agree to sell metal. Percent 2012 2011 Change London Metal Exchange Prices Aluminum (per metric tonne, and presented in U.S. dollars): Closing cash price as of beginning of period $2,099 $2,600 (19 )% Average cash price during the period $1,977 $2,603 (24 )% Closing cash price as of end of period $1,835 $2,509 (27 )% and revenue recognition, under metal price lag and the related fixed forward priced contracts.realized gains or losses of the derivatives. The timing difference between the recognition of unrealized gains and losses on undesignated metal derivatives and cost or revenue recognition impacts “Income before income taxes” and “Net income (loss).income.” Gains and losses on metal derivative contracts are not recognized in “Segment income” until realized.settle derivative contractsuse natural gas swaps to manage our exposure to fluctuating natural gas prices in advanceNorth America. We also own an interest in an electricity swap which we formerly designated as a cash flow hedge of billing onour exposure to fluctuating electricity prices. In fiscal 2011, due to significant credit deterioration of our counterparty, we discontinued hedge accounting for the underlying physical inventory and collecting from our customers, which temporarily impacts our liquidity position. The lag between derivative settlement and customer collection typically ranges from 30 to 90 days.results.results as we translate the operating results from the functional currency into the U.S. dollar reporting currency at the current average rates. We recognize foreign exchange remeasurement gains and losses when business transactions are denominated in currencies other than the functional currency of that operation. The following table presents the exchange rate as of the end of each period and the average of the month-end exchange rates for the three and nine months ended December 31, 2011June 30, 2012 and 2010: Average Exchange Rate Average Exchange Rate Exchange Rate as of Three Months Ended Nine Months Ended December 31,
2011 March 31,
2011 December 31, December 31, 2011 2010 2011 2010 1.292 1.419 1.340 1.338 1.402 1.304 1.863 1.627 1.784 1.696 1.674 1.739 1,153 1,107 1,136 1,141 1,105 1,163 1.020 0.971 1.018 1.014 0.991 1.033 Average Exchange Rate Exchange Rate as of Three Months Ended June 30, 2012 March 31, 2012 June 30, 2012 2011 U.S. dollar per Euro 1.269 1.335 1.278 1.458 Brazilian real per U.S. dollar 2.017 1.823 1.978 1.572 South Korean won per U.S. dollar 1,154 1,138 1,155 1,077 Canadian dollar per U.S. dollar 1.026 0.997 1.012 0.963 thirdfirst quarter of fiscal 2012,2013, the U.S. dollar strengthened against the Euro andeuro, Brazilian real, was relatively flat against the South Korean won and weakened against the Canadian dollar. In Europe, South Korea, and Canada the strengthening of the U.S. dollar resulted in unfavorable foreign exchange lossestranslation when comparing the first quarter of fiscal 2013 operating results with first quarter of fiscal 2012, as these operations are recorded in their local currency and translated into the U.S. dollar reporting currency. In Brazil, where the U.S. dollar is the functional currency due to predominantly U.S. dollar selling prices and local currencywhile our costs are predominately based in the Brazilian real. The strengthening of the U.S. dollar compared to the Brazilian real resulted in a favorable remeasurement of our operating costs we incurred foreign exchange gains as real denominated liabilities are remeasuredinto the U.S. dollar in the first quarter of fiscal 2013 compared to the U.S. dollar.thirdfirst quarter of fiscal 2013 and 2012 resulted in $2 million of unrealized losses and $6 million of unrealized gains on undesignated foreign currency derivatives, respectively.deferred gains of $4 millionlosses on designatedforeign exchange contracts and cross-currency swaps are not recognized in "Segment income" until realized, except for foreign currency hedges. The movementremeasurement derivatives which are recognized in "Segment income" throughout the life of the U.S. dollar duringderivative contract. See Segment Review below for each of the third quarterperiods presented for additional discussion of fiscal 2011 resulted in $13 millionthe impact of unrealized gainsthe foreign exchange on undesignated foreign currency derivatives.DECEMBER 31, 2011JUNE 30, 2012 COMPARED TO THE THREE MONTHS ENDED DECEMBER 31, 2010 operational performance remains strongsolid despite the continued global economic uncertainty and some temporary production challenges experienced in the early part of the three months ended June 30, 2012, which negatively impacted our volumes when compared to the record quarter we reported in the quarter.three months ended June 30, 2011. Shipments of our flat rolled products declined to 722 kt for the three months ended June 30, 2012, compared to 767 kt in the same period in prior year. “Net sales” for the three months ended December 31, 2011 decreased 4%June 30, 2012 were 18% lower as compared to the three months ended December 31, 2010,June 30, 2011, primarily driven by an 11% decrease in average aluminum prices and a decline in volumes.the average aluminum price by 24% and, to a lesser extent a decline in our flat rolled product volumes by 6%. These declines were partially offset by favorable impacts from higher conversion premiums and product mix across all of our segments and continued increases in demand for our automotive products.remained flat at $2.2declined from $2.7 billion in the thirdfirst quarter of fiscal 2012 as compared to $2.2 billion in the same period in fiscal 2011.first quarter 2013. “Cost of goods sold (exclusive of depreciation and amortization)” was impacted by an overall decline in shipments and lower average aluminum prices offset by higher inputconversion costs. (loss) before income taxes” for the thirdfirst quarter of fiscal 20122013 was a $(21)$112 million loss,, which compared to a $(2)$136 million loss reported in the thirdfirst quarter of fiscal 2011.2012. In addition to the factors noted above, the following items affected “Income (loss) before income taxes:”79102 million of "Selling, general and administrative expenses" for the first quarter of 2013, an increase of $7 million compared to the first quarter of 2012 as a result of higher costs associated with the implementation of a global enterprise resource planning (ERP) system;thirdfirst quarter of fiscal 20122013, a decrease of $16 million as compared to $100 million for the thirdfirst quarter of fiscal 20112012 as a result of groups of our fixed assets reaching their fully depreciated balances since our purchase by Hindalco and reduced depreciation as a result ofdue to certain facility shut-downs over the past several yearsyears;745 million of “Interest expense and amortization of debt issuance costs” for the third quarter of fiscal 2012 as compared to $46 million for the third quarter of fiscal 2011 as a result of our higher debt balances and amortization of debt issuance costs from our refinancing in the third quarter of fiscal 2011$74 million of “Loss on early extinguishment of debt” related to a series of refinancing transactions executed and recorded in the third quarter of prior year$1 million of “Restructuring charges, net” for the thirdfirst quarter of fiscal 2013, primarily due to severance charges we incurred related to the planned closure of our Saguenay Works plant in Quebec, Canada, compared to $19 million in the first quarter of 2012 related to the shutdown of one of our foil lines in South America and the shutdown and sale of our facility in Bridgnorth, U.K.;$20losses of $10 million in the same period in the prior year, related primarily towhich is reported as "Other (income), expense, net"; andrestructuring activities initiated and recognized in the thirdfirst quarter of fiscal year 2011 with our Bridgenorth, U.K. facilityforeign currency remeasurement gains, net of related derivatives, of $4 million for the third quarter of fiscal 2012 as compared to losses of $11 million in the same period in the prior yearunrealized losses of $63 million for the third quarter of fiscal 20122013 comprised of changes in fair value of undesignated derivatives other than foreign currency remeasurement as compared to $9$25 million of gains for the third quarter of fiscal 2011realized gains of $66 million for the thirdfirst quarter of fiscal 2012, comprisedwhich is reported as "Other (income), expense, net."changes in fair value of undesignated derivatives other than foreign currency remeasurement asfiscal 2013 was 18%, compared to $2143% in the first quarter of fiscal 2012. The decline in the effective tax rate was primarily the result of foreign exchange remeasurement of Brazilian real denominated deferred income taxes.realized gainsfiscal 2012, we acquired outstanding shares of our South Korea subsidiary increasing our ownership percentage to over 99%, which results in prior year.the reduction of net income attributable to the noncontrolling interest. (loss) attributable to our common shareholder” of $(12)$91 million loss for the thirdfirst quarter of fiscal 20122013 as compared to a $(46)$62 million loss for the thirdfirst quarter of fiscal 2011,2012, primarily as a result of the factors discussed above. Also impacting these results in the third quarter of fiscal 2012 was a $22 million increase in valuation allowances primarily related to tax losses in certain jurisdictions where we believe it is more likely than not that we will not be able to utilize those losses, a $10 million benefit from non-taxable dividends and a $20 million benefit related to decreases in uncertain tax positions.“impairmentimpairment of goodwill”;goodwill; (f) impairment charges on long-lived assets (other than goodwill); (g) gain or loss on extinguishment of debt; (h) noncontrolling interests’ share; (i) adjustments to reconcile our proportional share of “Segment income” from non-consolidated affiliates to income as determined on the equity method of accounting; (j) “restructuring charges, net”; (k) gains or losses on disposals of property, plant and equipment and businesses, net; (l) other costs, net; (m) litigation settlement, net of insurance recoveries; (n) sale transaction fees; (o) provision or benefit for taxes on income (loss) and (p) cumulative effect of accounting change, net of tax. Our presentation of “Segment income” on a consolidated basis is a non-GAAP financial measure. See “Non-GAAP Financial Measures” below for additional discussion about our use of total “Segment income.”USU.S. GAAP-based measures, we must adjust proportional consolidation of each line item. See Note 45 — Consolidation and Note 56 — Investment in and Advances to Non-Consolidated Affiliates and Related Party Transactions for further information about these non-consolidated affiliates.1516 — Segment, Major Customer and Major Supplier Information. North
America Europe Asia South
America Other and
Eliminations Total $ 912 $ 804 $ 398 $ 321 $ 27 $ 2,462 248 183 117 100 — 648 2 19 6 7 — 34 250 202 123 107 — 682 North
America Europe Asia South
America Other and
Eliminations Total $ 901 $ 835 $ 470 $ 321 $ 33 $ 2,560 262 208 148 97 — 715 5 17 — 14 — 36 267 225 148 111 — 751 Selected Operating Results Three Months Ended June 30, 2012 Europe Asia Total Net sales $ 920 $ 863 $ 428 $ 308 $ 31 $ 2,550 Shipments Rolled products 266 231 136 89 — 722 Non-rolled products 3 7 — 16 — 26 Total shipments 269 238 136 105 — 748 Selected Operating Results Three Months Ended June 30, 2011 Europe Asia Total Net sales $ 1,107 $ 1,080 $ 560 $ 318 $ 48 $ 3,113 Shipments Rolled products 288 237 152 90 — 767 Non-rolled products 4 16 1 9 — 30 Total shipments 292 253 153 99 — 797 December 31, 2010June 30, 2011 to the three months ended December 31, 2011June 30, 2012 (in millions). Variances include the related realized derivative gain or loss and unrealized gains or losses on foreign currency derivatives which hedge our foreign currency balance sheet exposure. North
America Europe Asia South
America Total $ 97 $ 47 $ 59 $ 35 $ 238 (9 ) (25 ) (18 ) 3 (49 ) 15 27 13 14 69 (15 ) (26 ) (9 ) (7 ) (57 ) 5 (4 ) 12 (5 ) 8 — 2 (15 ) 13 — — — — 2 2 1 3 1 (3 ) 2 $ 94 $ 24 $ 43 $ 52 $ 213 Changes in Segment income Europe Asia Total Segment Income - Three Months Ended June 30, 2011 $ 114 $ 97 $ 57 $ 38 $ 306 Volume (19 ) (4 ) (12 ) (1 ) (36 ) Conversion premium and product mix 18 4 5 5 32 Conversion costs(A) (16 ) (2 ) (9 ) 2 (25 ) Metal price lag — (8 ) 11 (3 ) — Foreign exchange (3 ) (2 ) (3 ) 13 5 Primary metal production — — — 1 1 Other changes(B) (5 ) (11 ) (3 ) (5 ) (24 ) Segment Income - Three Months Ended June 30, 2012 $ 89 $ 74 $ 46 $ 50 $ 259 (A) Conversion costs include expenses incurred in production such as direct and indirect labor, energy, freight, scrap usage, alloys and hardeners, coatings, alumina, melt loss, the incremental benefit of used beverage cans (UBCs) and other metal costs. Fluctuations in this component reflect cost efficiencies (inefficiencies) during the period as well as cost inflation (deflation). (B) Other changes include selling, general & administrative costs and research and development for all segments and certain other items which impact one or more regions. Significant fluctuations in these items are discussed below. December 31, 2011,June 30, 2012, our North American operations manufactured aluminum sheet and light gauge products through 11 operating plants, including two dedicated recycling facilities.operations in four plants. Important end-use applications include beverage cans, containers and packaging, automotive and other transportation applications and other industrial applications. Our $200 millionThe expansion project at our Oswego, NY facility is scheduledon schedule and expected to be operational in mid calendar year 2013.thirdfirst quarter of fiscal 2012 increased $112013 were down $187 million, or 1%17%, as compared to the thirdfirst quarter of fiscal 20112012 reflecting improved conversion premiums, partially offset bylower average price of aluminum and, to a decrease in thelesser extent, lower volumes of flat rolled productsproducts. Shipments of our can and a decrease in the average price of aluminum. We experienced lower volumes in can, light gauge and industrial products were lower, partially offset by higher volumes inshipments of our automotive and specialty products.thirdfirst quarter of fiscal 20122013 was $94$89 million, down $3 million22% as compared to the comparablesame period in the prior year, driven by lower volumes and the lower average pricehigher conversion costs, partially offset by favorable conversion premiums as a result of aluminum discussed above. Additionally,our focus on core premium products. Our conversion costs were negatively impacted by higher headcountcontract labor costs due to the production and supply chain issues noted above, an increase in our plants, decreasestolling costs related to processing scrap, and a reduction in the incremental benefits from the utilization of UBCs,scrap and higher melt loss. Other changes includeUBC's due to lower researchvolumes and development costs and lower general and administrative costs.EuropeDecember 31, 2011,June 30, 2012, our European segment provided European markets, and to a lesser extent Asia, with value-added sheet and light gauge products through 12nine operating plants, including one dedicated recycling facility.operations in three plants. Europe serves a broad range of aluminum rolled product end-use markets in various applications including beverage and food can, automotive, lithographic, foil products and painted products. During the first quarter ofIn fiscal 2012, we announced that we were investing to increase our recycling capacity at two of our aluminum rolled products facilities in Europe. The recycling furnace at one of the capital expansion projects started in the second quarter and the other is expected to bePieve, Italy facility, which will become operational in midlate calendar year 2012.thirdfirst quarter of fiscal 2013 were down $217 million, or 20% as compared to the first quarter of fiscal 2012 decreased $31 million, or 4%, as comparedreflecting lower average prices of aluminum and, to a lesser extent, lower shipments of flat rolled products. We experienced lower volumes in light gauge, industrial, and lithographic products, partially offset by higher volumes in our can and automotive products. The decline in volumes in the thirdquarter was primarily attributable to production and supply challenges we experienced in Europe in the early part of the first quarter of fiscal 2011 driven by a reduction in volumes2013.our flat rolled products and a decline in the average price of aluminum. Our can stock volumes werefiscal 2013 was $74 million, down compared to the prior year driven by customer destocking during the quarter. We experienced some softness in demand in our industrial and light gauge flat rolled products due to the financial instability in Europe, while demand for our automotive products increased24% compared to the same period in the prior year. Partially offsetting these unfavorable variances wereyear, driven by lower volumes, higher conversion premiums as a resultcosts, higher general and administrative costs, unfavorable metal price lag, and the impact of a moreweaker euro compared to the U.S. dollar, partially offset by higher conversion premiums. Conversion costs were negatively impacted by higher utility costs, offset by the favorable product miximpact of higher usage of UBC and higher volumesscrap. The weakening of other non-FRP metal sales.“Segment income” for the thirdeuro compared to the U.S. dollar resulted in an unfavorable foreign currency translation difference in the first quarter of fiscal 2012 was $24 million, down $23 million2013 when compared to the same periodfirst quarter of the prior year, driven by the lower volumes noted above and higher conversion costs. Higher prices of scrap metal and UBCs and an increase in contractor costs contributed to the unfavorable results in conversion costs. We also experiencedfiscal 2012. Other changes include the negative effects in the value of changes in metal price lag. Other changes include lower researchcertain derivative instruments and development costs and lower general and administrative costs.AsiaDecember 31, 2011,June 30, 2012, Asia operated three operating plants, including recycling operations in two plants, with production balanced between beverage and food can, specialty (including electronics) and foil end-use applications. Our $400 millionproducts. The expansion of our rollingrecycling facility in Yeongju, South Korea is expected become operational in September 2012 and will eventually increase our annual recycling capacity by approximately 220 kt. The expansion of our rolling capacity in South Korea is on schedule and expected to become operational at the end of calendar year 2013.thirdfirst quarter of fiscal 2012 decreased $722013 were down $132 million, or 15%24%, as compared to the thirda first quarter of fiscal 20112012 reflecting lower volumes of our flat rolled products and a decline inlower average aluminum prices. The reduction in our can stock volumes was driven by some of our customers’ efforts to destock inventory levels during the quarter, which resulted in a decline in demand. We experienced a decreaselower volumes in can, foil stock, and our electronics shipmentsproducts. The declines were due to the continued macro-economic challenges in Europe and some slow down we are experiencing in China. The unfavorable European economic conditions have negatively impacted the Asian manufacturing industries which rely heavily on exports. Our volumes were also impacted by a slowing economy in China. Our Asia volumes also declined due to shifting some Middle East supply responsibilities from our Asia region to North America in the thirdfirst quarter fiscal 2013 compared to the first quarter fiscal 2012.the continued global economic uncertainty. The declines in ourlower volumes werediscussed above, partially offset by favorable product mix which resulted in an increase in ourhigher conversion premium in the third quarter,premiums. Conversion costs were unfavorable due to higher prices of electricity, natural gas, oil, and alloys and hardeners compared to the same period in the prior year.“Segment income” We also experienced pressures on UBC and scrap prices, which negatively impacted the incremental benefits from the utilization of $43 millionUBC and scrap. The effects of metal price lag had a positive impact on "Segment income" in the thirdcurrent quarter of fiscal 2012 compared unfavorably to $59 million for the third quarter of fiscal 2011. The unfavorable change in segment incomewhen compared to the same period in prior year was driven by declining volumes stated above, the negative impact of foreign currency exchange rates, an increase in labor costs, fuel and electricity, and the price of scrap metal, partially offset by positive metal price lag.in South America manufactureproduce various aluminum rolled products for the beverage and food can, construction and industrial and transportation end-use markets. Our South American operations included 3 operating plants in Brazil, including one smelter, power generation facilities and bauxite mines as of December 31, 2011. OurThe previously announced $300 million expansion of our Pinda facility in Brazil is expected to come onlinebe commissioned at the end of calendar year 2012. Additionally, we have announced plans to invest $50 million to install a new coating line for beverage can end stock and $30 million to expand recycling capacity in our Pinda facility which is expected to become operational at the Pinda facility.remained relatively flatfor the first quarter of fiscal 2013 were down $10 million, or 3%, as compared to the prior year period, despite a decrease infirst quarter of fiscal 2012 reflecting lower average price of aluminum, prices.partially offset by higher non-flat rolled product volumes. Shipments of our flat rolled products increasedremained relatively flat compared to the same quarter in prior year, driven by higher demand for beverage and food can products, offset by a decrease in non-FRP volumes.increased $17was $50 million to $52 million, up 32%, in the thirdfirst quarter of fiscal year 20122013 compared to theperiod. Improved conversion premiums andperiod, due to the positive effects of changes in foreign currency exchange rates and improved conversion premiums due to a favorable product mix. Conversion costs were partially offset by higherlower due to favorable impacts in the incremental benefits of utilizing UBC prices, higher utility costs and unfavorable metal price lag.income (loss)”(loss) attributable to our common shareholder” for the three months ended December 31, 2011June 30, 2012 and 20102011 (in millions). Three Months Ended
December 31, 2011 2010 $ 94 $ 97 24 47 43 59 52 35 213 238 (79 ) (100 ) (74 ) (46 ) 3 4 (9 ) (11 ) (63 ) 9 (3 ) 4 — (74 ) (1 ) (20 ) (8 ) (6 ) (21 ) (2 ) (10 ) 33 (11 ) (35 ) 1 11 $ (12 ) $ (46 ) “Depreciation and amortization” decreased $21 million primarily as a result of facilities that have been shut-down and are no longer being depreciated, as well as assets which became fully depreciated as they reached the end of the useful lives assigned at the time of the purchase of Novelis by Hindalco.“Interest expense and amortization of debt issuance costs” increased by $28 million primarily due to higher average debt balances and higher capitalized debt issuance costs as a result of refinancing our debt in the third quarter of fiscal 2011. Three Months Ended June 30, 2012 2011 North America $ 89 $ 114 Europe 74 97 Asia 46 57 South America 50 38 Total Segment income 259 306 Depreciation and amortization (73 ) (89 ) Interest expense and amortization of debt issuance costs (74 ) (77 ) Interest income 1 4 Adjustment to eliminate proportional consolidation (11 ) (13 ) Unrealized gains on change in fair value of derivative instruments, net 13 25 Realized gains on derivative instruments not included in segment income 2 2 Restructuring charges, net (5 ) (19 ) Gain on assets held for sale 5 — Other costs, net (5 ) (3 ) Income before income taxes 112 136 Income tax provision 21 59 Net income 91 77 Net income attributable to noncontrolling interests — 15 Net income attributable to our common shareholder $ 91 $ 62 (Norf)(Alunorf) joint venture. Income taxes related to our equity method investments are reflected in the carrying value of the investment and not in our consolidated “Income tax (benefit) provision.” (losses) on change in fair value of derivative instruments, net” is comprised of unrealized gains and losses on undesignedundesignated derivatives other than foreign currency remeasurement.“Loss on early extinguishment$249 million of “Depreciation and amortization” for the nine months ended December 31, 2011 as compared to $307 million for the same period in fiscal 2011 as a result of groups of our fixed assets reaching their fully depreciated balances since our purchase by Hindalco and reduced depreciation as a result of certain facility shut-downs over the past several years$228 million of “Interest expense and amortization of debt issuance costs” for the nine months ended December 31, 2011 as compared to $125 million for the nine months ended December 31, 2010 as a result of our higher debt balances and amortization of debt issuance costs from refinancing our debt in the third quarter of fiscal 2011$74 million of “Loss on early extinguishment of debt” related to a series of refinancing transactions executed and recorded in the prior yearforeign currency remeasurement losses, net of related derivatives, of $5 million for first nine months of fiscal 2012 compared to $10 million of losses in the same period in the prior yearunrealized losses of $38 million for the nine months ended December 31, 2011 comprised of changes in fair value of undesignated derivatives other than foreign currency remeasurement as compared to $37 million of losses in the same period of fiscal 2011realized gains of $136 million for the nine months ended December 31, 2011 comprised of changes in fair value of undesignated derivatives other than foreign currency remeasurement as compared to $95 million of realized gains in prior year$8 million gain on a litigation settlement in Brazil and $1 million loss on sale of assets in the first nine months of fiscal 2012, compared to an $11 million gain on sale of assets in the same period in the prior year.We reported “Net income (loss) attributable to our common shareholder” of $170 million for the nine months ended December 31, 2011 as compared to $66 million for the nine months ended December 31, 2010, primarily as a result of the factors discussed above. Also impacting these results in the nine months ended December 31, 2011 was a $13 million benefit for pre-tax foreign currency gains or losses with no tax effect and the tax effect of U.S. dollar denominated currency gains or losses with no pre-tax effect, a $30 million benefit for exchange remeasurement of deferred income taxes, a $61 million increase in valuation allowances primarily related to tax losses in certain jurisdictions where we believe it is more likely than not that we will not be able to utilize those losses, a $41 million benefit from non-taxable dividends, a $12 million expense from differences between the Canadian and foreign statutory tax rates applied to entities in different jurisdictions and a $19 million benefit related to decreases in uncertain tax positions.Segment ReviewThe tables below show selected segment financial information (in millions, except shipments which are in kt). For additional financial information related to our operating segments, see Note 15 — Segment, Major Customer and Major Supplier Information. North
America Europe Asia South
America Other and
Eliminations Total $ 3,052 $ 2,916 $ 1,432 $ 942 $ 113 $ 8,455 810 647 400 278 — 2,135 9 63 12 26 — 110 819 710 412 304 — 2,245 North
America Europe Asia South
America Other and
Eliminations Total $ 2,743 $ 2,551 $ 1,340 $ 876 $ 107 $ 7,617 825 667 428 278 — 2,198 13 51 1 34 — 99 838 718 429 312 — 2,297 The following table reconciles changes in “Segment income” for the nine months ended December 31, 2010 to nine months ended December 31, 2011 (in millions). Variances include the related realized derivative gain or loss and unrealized gains or losses on foreign currency derivatives which hedge our foreign currency balance sheet exposure. North
America Europe Asia South
America Total $ 298 $ 217 $ 162 $ 115 $ 792 (9 ) (20 ) (17 ) — (46 ) 37 49 38 35 159 (13 ) (25 ) (29 ) (29 ) (96 ) 20 (21 ) 2 (2 ) (1 ) (6 ) 10 (12 ) 23 15 — — — 4 4 (3 ) 3 5 (12 ) (7 ) $ 324 $ 213 $ 149 $ 134 $ 820 (A)Conversion costs include expenses incurred in production such as direct and indirect labor, energy, freight, scrap usage, alloys and hardeners, coatings, alumina and melt loss. Fluctuations in this component reflect cost efficiencies during the period as well as cost inflation (deflation).(B)Other changes include selling, general & administrative costs and research and development for all segments and certain other items which impact one or more regions, including such items as the impact of purchase accounting and metal price ceiling contracts. Significant fluctuations in these items are discussed below.North AmericaOur North American operations reported strong operating results in the first nine months of fiscal 2012 compared to the same period in prior year, although we continue to see some softness in our can business due to customer destocking and a decline in demand for our light gauge products. “Net sales” for the nine months ended December 31, 2011 was $3.1 billion, up 11% as compared to $2.7 billion for the nine months ended December 31, 2010. This reflects higher average aluminum prices and strong conversion premiums as a result of focusing on our core premium products, offset by lower shipments.“Segment income” for the nine months ended December 31, 2011 was $324 million, up 9% as compared to the same period in prior year. This increase was primarily due to improved conversion premiums and favorable changes in metal price lag offset by higher conversion costs and the negative effects of changes in foreign currency exchange rates. The higher conversion costs were driven by unfavorable melt loss, higher outbound freight, repairs and maintenance, and labor costs offset by favorable prices of scrap metal and an increase in the usage of lower priced UBCs.EuropeOur European segment reported strong operating results compared to prior year driven by favorable results from our can and automotive products despite a challenging economic environment. We continue to experience some softness in our industrial, light gauge and foil products, which resulted in a decline of 21kt in our flat rolled product shipments compared to the same period in prior year. “Net sales” was $2.9 billion, up 14% compared to the nine months ended December 31, 2010, which reflects higher average aluminum prices, improved conversion premiums as a result of continued focus on our premium products and higher volumes of our automotive, can and other non-FRP metal sales.“Segment income” for the nine months ended December 31, 2011 was $213 million, down 2% compared to the same period of the prior year. Improved conversion premiums were partially offset by higher conversion costs and the negative effects of metal price lag. Higher conversion costs compared to the same period in prior year were driven by unfavorable scrap and UBC prices and higher subcontractor costs, offset by favorable metal discounts and lower labor costs. Other changes include lower research and development costs, lower general and administrative costs, and the positive impact of foreign exchange rates.AsiaOur Asia operating results remain positive, although the global macroeconomic uncertainties have had an impact on our shipments. During the nine months ended December 31, 2011, the can market of our Asian business had favorable results despite unseasonably cold and wet weather. We experienced continued softness in the electronics business as a result of economic uncertainty in the U.S. and Europe, but we believe this is a short-term trend and continue to believe in the long-term growth prospects of the electronics end market. Flat rolled product shipments were down as compared to the prior year, driven by the decline in electronics and foil stock volumes. “Net sales” increased $92 million, or 7%, for the nine months ended December 31, 2011 as compared to the same period in the prior year primarily as a result of higher average aluminum prices and improved conversion premiums.“Segment income” for the nine months ended December 31, 2011 was $149 million, down $13 million as compared to the prior year period driven by higher conversion costs, lower volumes, and the negative impact of foreign currency changes, offset by improved conversion premiums. Conversion costs increased due to higher scrap prices, labor costs, fuel and utility costs and negative effects of increased melt loss. Other changes reflect a positive impact from fixed forward price sales contracts.South AmericaOur South America operations had positive operating results for the nine months ended December 31, 2011, compared to prior year, despite unseasonably cold and wet weather earlier in our fiscal year and some customer destocking. “Net sales” increased $66 million, or 8%, as compared to the same period in fiscal 2011 primarily as a result of higher average aluminum prices and improved conversion premiums. Our flat rolled product shipments remained flat as compared to prior year.“Segment income” for the nine months ended December 31, 2011 increased $19 million, or 17%, as compared to the prior year period. Improved conversion premiums and the positive effects of changes in foreign currency exchange rates were partially offset by higher UBC and scrap prices, unfavorable melt loss, and higher costs for alloys and hardeners. Other changes include higher general and administrative costs.Reconciliation of segment results to Net incomeCosts such as depreciation and amortization, interest expense and unrealized gains (losses) on changes in the fair value of derivatives, except for derivatives used to manage our foreign currency balance sheet exposure, are not utilized by our chief operating decision maker in evaluating segment performance. The table below reconciles income from reportable segments to “Net income attributable to our common shareholder” for the nine months ended December 31, 2011 and 2010 (in millions). Nine Months Ended
December 31, 2011 2010 $ 324 $ 298 213 217 149 162 134 115 820 792 (249 ) (307 ) (228 ) (125 ) 11 10 (38 ) (37 ) (1 ) 4 (34 ) (33 ) — (74 ) (31 ) (35 ) (12 ) 6 238 201 42 104 196 97 26 31 $ 170 $ 66 For the nine months ended December 31, 2011, we recorded a $42 million “Income tax provision” on our pre-tax income before our equity in net income of non-consolidated affiliates of $247 million, which represented an effective tax rate of 17%. Our effective tax rate differs from the expense at the Canadian statutory rate primarily due to the following factors: (1) a $13 million benefit for pre-tax foreign currency gains or losses with no tax effect and the tax effect of U.S. dollar denominated currency gains or losses with no pre-tax effect, (2) a $30 million benefit for exchange remeasurement of deferred income taxes, (3) a $61 million increase in valuation allowances primarily related to tax losses in certain jurisdictions where we believe it is more likely than not that we will not be able to utilize those losses, (4) a $41 million benefit from non-taxable dividends, (5) a $12 million expense from differences between the Canadian and foreign statutory tax rates applied to entities in different jurisdictions, and (6) a $19 million benefit related to decreases in uncertain tax positions.For the nine months ended December 31, 2010, we recorded a $104 million “Income tax provision” on our pre-tax income before our equity in net income of non-consolidated affiliates of $212 million, which represented an effective tax rate of 49%. Our effective tax rate differs from the expense at the Canadian statutory rate primarily due to the following factors: (1) a $15 million expense for exchange remeasurement of deferred income taxes, (2) a $30 million increase in valuation allowances primarily related to tax losses in certain jurisdictions where we believe it is more likely than not that we will not be able to utilize those losses, (3) a $5 million benefit from differences between the Canadian and foreign statutory tax rates applied to entities in different jurisdictions, and (4) a $2 million benefit related to decreases in uncertain tax positions.December 31, 2011,June 30, 2012, we had available liquidity of $857$868 million which reflects a decrease of 19% and 14% from March 31, 2011 and September 31, 2011, respectively, driven by higher capital expenditures, higher working capital needs and short-term borrowings used to purchase, despite the noncontrolling interestsignificant investments we made in the Company’s Korean operationsquarter in December 2011.our expansion projects and a decline in aluminum prices. We expect to maintain adequate liquidity throughout fiscal 20122013 despite the changingchallenging economic uncertaintyconditions and the significant investments we are making with our expansion projects in Oswego, NY facility, Pinda, Brazil facility and expansion in South Korea.December 31, 2011June 30, 2012 and March 31, 20112012 is as follows (in millions): December 31,
2011 March 31,
2011 $ 436 $ 311 (1 ) (17 ) 422 767 $ 857 $ 1,061 June 30, 2012 March 31, 2012 Cash and cash equivalents $ 263 $ 317 Overdrafts (2 ) — Availability under the ABL facility 607 704 Total liquidity $ 868 $ 1,021 “cash“Cash and cash equivalents” balance above includes cash held in foreign countries in which we operate.“plus netplus "net cash provided by (used in) investing activities” and (c) less “net proceeds from sales of assets.” Management believes that “Free cash flow” is relevant to investors as it provides a measure of the cash generated internally that is available for debt service and other value creation opportunities. However, “Free cash flow” does not necessarily represent cash available for discretionary activities, as certain debt service obligations must be funded out of “Free cash flow.” Our method of calculating “Free cash flow” may not be consistent with that of other companies.theour negative “Free cash flow” for the ninethree months ended December 31,June 30, 2012 and 2011, and 2010, the change between periods, as well as the ending balances of cash and cash equivalents (in millions). Nine Months Ended
December 31, 2011 2010 Change $ 205 $ 218 $ (13 ) (195 ) (14 ) (181 ) (11 ) (28 ) 17 $ (1 ) $ 176 $ (177 ) $ 436 $ 297 $ 139 “Free 2012 2011 Change Net cash used in operating activities $ (5 ) $ (115 ) $ 110 Net cash used in investing activities (152 ) (79 ) (73 ) Less: Proceeds from sales of assets 12 — 12 Free cash flow $ (169 ) $ (194 ) $ 25 Ending cash and cash equivalents $ 263 $ 307 $ 139 decreased $177of $169 million in the ninethree months ended December 31, 2011June 30, 2012 as compared to $194 million in the ninethree months ended December 31, 2010.June 30, 2011. The changes in “Free cash flow” are described in greater detail below.Overallresults were strongactivities of $5 million for the ninethree months ended December 31, 2011, reflecting improvementsJune 30, 2012. This compares favorably to net cash used in conversion premiums offset by higher conversion costs, lower volumesoperating activities of $115 million in the three months ended June 30, 2011. Included in cash flows from operating activities was $120 million and $154$126 million of higher interest payments.payments in the three months ended June 30, 2012 and 2011, respectively. The change in cash flows from operating activities was primarily the result of changes in the timing of paymentsninethree months ended December 31, 2011June 30, 2012 can be found above in “Results of operations for the ninethree months ended December 31, 2011June 30, 2012 compared to the ninethree months ended December 31, 2010.June 30, 2011.”Duringremainder of fiscal 2012, we expectunderlying physical inventory and collecting from our customers, which temporarily impacts our liquidity position. The lag between derivative settlement and customer collection typically ranges from 30 to contribute an additional $23 million to our funded pension plans, $3 million to our unfunded pension plans and $4 million to our savings and defined contribution plans.We implemented a new retirement pension plan in South Korea at the end of December 2011, in accordance with the Employee Retirement Benefits Security Act of South Korea, which requires companies to convert from retirement insurance plans to retirement pension plans. Included in our expected contributions for the remainder of our fiscal 2012 is $5 million of contributions we plan to make related to interim settlement elections by employees.We exited our former defined contribution plan in Switzerland and have entered into a new defined contribution plan. We plan to contribute approximately $7 million over the next ten years to the new defined contribution plan.provided by (used in)used in investing activities” (in millions). Nine Months Ended
December 31, 2011 2010 Change $ (297 ) $ (132 ) $ (165 ) 95 81 14 11 28 (17 ) 1 1 — (5 ) 8 (13 ) $ (195 ) $ (14 ) $ (181 ) 2012 2011 Change Capital expenditures $ (167 ) $ (67 ) $ (100 ) Proceeds (outflow) from settlement of other undesignated derivative instruments, net 1 (7 ) 8 Proceeds from sales of assets, third parties 10 — 10 Proceeds from sales of assets, related parties 2 — 2 Proceeds from investment in and advances to non-consolidated affiliates, net — 1 (1 ) Proceeds (outflows) from related party loans receivable, net 2 (6 ) 8 Net cash used in investing activities $ (152 ) $ (79 ) $ (73 ) ninethree months ended December 31, 2011June 30, 2012 were attributable to our three major expansion projects in Brazil, South Korea and North America. The majority of our capital expenditures in the first nine months of the prior year were for projects devoted to product quality, technology, productivity enhancement and debottlenecking. We expect to increase our capital expenditures inthroughout the fourth quarterrest of the fiscal 20122013 as a result of ourthese three major expansions. We expect that our total annual capital expenditures for fiscal 20122013 will be between $550$650 and $600$700 million.The settlement of undesignated derivative instruments resulted in an inflow of $95 million in the nine months ended December 31, 2011 as compared to $81 million in cash inflow in the nine months ended December 31, 2010. Based on forward curves for metal, foreign currencies, interest rates and energy as of December 31, 2011, we forecast approximately $28cash inflowsproceeds, net of transaction fees, related to the settlementsale of derivative instrumentsthree foil plants in Europe in the fourth quarter.The majority of proceeds from asset sales in the ninethree months ended December 31, 2010 relate to asset sales in South America.(Outflow) proceedsProceeds (outflows) from related party loans receivable, net,” during allthe periods are primarily comprised of additional loans made tocash flows on a related party long-term loan receivable we have with our non-consolidated affiliate, Aluminium Norf GmbH (Norf), net of payments we received related to a previous loan due from Norf.(used in) financing activities” (in millions). Nine Months Ended
December 31, 2011 2010 Change $ 274 $ 3,985 $ (3,711 ) (16 ) (2,486 ) 2,470 211 49 162 — (1,700 ) 1,700 (1 ) (18 ) 17 (2 ) (174 ) 172 (343 ) — (343 ) $ 123 $ (344 ) $ 467 In December 2011, we acquired an additional 31.2% percent of 2012 2011 Change Proceeds from issuance of debt, third parties $ 12 $ 3 $ 9 Principal payments, third parties (5 ) (5 ) — Short-term borrowings, net 92 190 (98 ) Dividends, noncontrolling interest (1 ) — (1 ) Net cash provided by financing activities $ 98 $ 188 $ (90 ) outstanding noncontrolling interest shares of Novelis Korea Limited for cash of $343 million. We funded the acquisition with a $225 million secured term loan, which resulted in cash proceeds, net of the debt discount, of $219 million. The remaining purchase price was funded through short-term borrowings and other available cash.In the third quarter of fiscalthree months ended June 30, 2012 we executed three separate loan agreements with Korean banks, which resulted in $43 million of proceeds from the issuance of long-term debt and additional short-term borrowings of $17 million.In December 2010, we completed a series of refinancing transactions, which included the issuance of $1.1 billion of notes due 2012, $1.4 billion of notes due 2020 and a $1.5 billion secured term loan. The proceeds from the refinancing were used repay a prior secured loan credit facility, fund tender offers of old notes and pay various financing expenses. Additionally, a portion of the proceeds were used to fund a distribution of $1.7 billion as a return of capital to Hindalco.As of December 31, 2011,increased our short-term borrowings were $227 consisting of $208 million of short-term loans, which was primarily under our senior secured credit facilities (ABL Facility), $1. As of June 30, 2012, our short-term borrowings were $119 million consisting of $90 million of short-term loans under our ABL Facility, $2 million in bank overdrafts, $17 million of bank loans in South Korea and $1$10 million of other short term borrowings. As of December 31, 2011, $23 million of the ABL Facility was utilized for letters of credit and we had $422 millionborrowings in remaining availability under the ABL Facility.Brazil. The weighted average interest rate on our total short-term borrowings was 4.30%3.57% and 2.43%4.43% as of DecemberJune 30, 20112012 and March 31, 2011,2012, respectively.1011 — Financial Instruments and Commodity Contracts to our accompanying condensed consolidated financial statements for a full description of derivative instruments.December 31, 2011June 30, 2012 and March 31, 2011,2012, we are not involved in any unconsolidated SPE transactions.In December 2011, we entered into a $225 million Incremental Term Loan and three banks loans in the amount of $60 million. See Note 67 — Debt to our accompanying condensed consolidated financial statements for more details.ninethree months ended December 31, 2011,June 30, 2012, there were no significant changes to our critical accounting policies and estimates as reported in our Annual Report on Form 10-K for the year ended March 31, 2011.liquidity.USU.S. GAAP, and our total “Segment income” may not be comparable to similarly titled measures of other companies. Total “Segment income” has important limitations as an analytical tool and you should not consider this measurebe considered in isolation or as a substitute for analysis of our results as reported under USU.S. GAAP. For example, total “Segment income”:2011.December 31, 2011 condensedJune 30, 2012 consolidated balance sheet.simultaneouslysimultaneous with the sales contracts that contain fixed metal prices.Sensitivities$25$34 million pre-tax gain related to the change in fair value of our aluminum contracts as of December 31, 2011.December 31, 2011,June 30, 2012, natural gas and electricity represented approximately 88%89% of our energy consumption by cost. We also use fuel oil and transport fuel. The majority of energy usage occurs at our casting centers, at our smelters in South America and during the hot rolling of aluminum. Our cold rolling facilities require relatively less energy.December 31, 2011,June 30, 2012, we have a nominal amount of forward purchases outstanding related to natural gas.56%60% of our total electricity requirements in that segment.for our smelter operations. Additionally, we have entered into an electricity swap in North America to fix a portion of the cost of our electricity requirements.SensitivitiesDecember 31, 2011,June 30, 2012, given a 10% decline in spot prices for energy contracts ($ in millions). Change in
Price Change in
Fair Value (10 )% $ — (10 )% (3 ) Electricity (10 )% $ (1 ) Natural Gas (10 )% (2 ) Accumulated"Accumulated other comprehensive income (loss)" in the Shareholders’Shareholder's equity section of the accompanying condensed consolidated balance sheets. Net sales and expenses at these non-U.S. dollar functional currency entities are translated into varying amounts of U.S. dollars depending upon whether the U.S. dollar weakens or strengthens against other currencies. Therefore, changes in exchange rates may either positively or negatively affect our net sales and expenses as expressed in U.S. dollars.—- Business and Summary of Significant Accounting Policies and Note 10 —11 - Financial Instruments and Commodity Contracts.SensitivitiesDecember 31, 2011,June 30, 2012, given a 10% change in rates ($ in millions). Change in
Exchange Rate Change in
Fair Value (10 )% $ (40 ) 10 % (30 ) (10 )% (15 ) (10 )% (2 ) (10 )% (2 ) (10 )% (7 ) Currency measured against the U.S. dollar Brazilian real (10 )% $ (49 ) Euro 10 % (27 ) Korean won (10 )% (3 ) Canadian dollar (10 )% (3 ) British pound (10 )% (6 ) Swiss franc (10 )% (6 ) the benchmark LIBOR interest raterates which impactsimpact our variable-rate debt.thesewe had USD LIBOR based interest rate swaps that wererangingthat ranges from 2.75% to 3.00%. As of December 31, 2011,debt.debt with a spread of 3%. Due to the nature of fixed-rate debt, there would be no significant impact on our interest expense or cash flows from either a 10% increase or decrease in market rates of interest.March 31, 2011,June 30, 2012, would have no impact on our annual pre-tax income. To be above the 2011 Term Loan Facility floor feature, as of December 31, 2011,June 30, 2012, interest rates would have to increase by 4354 basis points (bp). From time to time, we have used interest rate swaps to manage our debt cost. As of June 30, 2012, there were no USD LIBOR based interest rate swaps outstanding.debt.debt in order to manage our exposure to changes in the 3M-CD interest rate. See Note 6 —7 - Debt for further information.SensitivitiesDecember 31, 2011,June 30, 2012, given a 100 bps negative shift in USD LIBORthe benchmark interest rate ($ in millions). Change in
Rate Change in
Fair Value (100 )bps $ (0.5 ) Interest Rate Contracts Asia - KRW-CD-3200 (100 ) bps $ (1 ) December 31, 2011.1415 — Commitments and Contingencies to our accompanying condensed consolidated financial statements.recent downgrade ofimplementation could cause temporary business interruption that could adversely impact our operating results and ability to report quarterly results in a timely manner and comply with existing covenants in all our debt agreements. We are investing significant financial and personnel resources into this project. However, there is no assurance that the U.S. credit ratingnew ERP will operate as designed during the initial months following system cutover, which could have a materialresult in an adverse impact on our operating results, cash flows and financial condition and results of operations.On August 5, 2011, Standard & Poor’s downgraded the credit rating for long-term U.S. government debt from AAA to AA+. The long-term impacts of the downgrade are unknown. The downgrade could have a material adverse impact on global financial markets and worldwide economic conditions, which could affect our credit ratings and liquidity and those of our customers and other business partners.There were no material changes in our risk factors as previously disclosed under “Risk Factors”condition.2011 and in Part II, Item 1A in our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2011 and September 30, 2011 . 2.1 Arrangement Agreement by and among Hindalco Industries Limited, AV Aluminum Inc. and Novelis Inc., dated as of February 10, 2007 (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed on February 13, 2007) (File No. 001-32312)) 3.1 Restated Certificate and Articles of Amalgamation of Novelis Inc. (incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 8-K filed on November 10, 2010 (File No. 001-32312)) 3.2 Novelis Inc. Amended and Restated Bylaws, adopted as of July 24, 2008 (incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K filed on July 25, 2008 (File No. 001-32312)) 4.1 Supplemental Indenture, relating to the 8.375% Senior Notes due 2017, dated as of December 7 2011 betweenamong Novelis Inc., the guarantor named on the signature page theretoNovelis Sheet Ingot GmbH, and The Bank of New York Mellon Trust Company, N.A., as Trustee.Trustee, dated as of August 8, 2012 4.2 Supplemental Indenture, relating to the 8.75% Senior Notes due 2020, dated as of December 7, 2011 betweenamong Novelis Inc., the guarantor named on the signature page theretoNovelis Sheet Ingot GmbH, and The Bank of New York Mellon Trust Company, N.A., as Trustee. 10.1$225 million Increase Joinder AgreementTrustee dated as of December 7, 2011 among Novelis, Inc., AV Metals Inc. The Third Party Security Providers named therein and Bank of America, N.A., as Administrative Agent under the Credit AgreementsAugust 8, 2012 10.1 10.2 31.1 Section 302 Certification of Principal Executive Officer 31.2 Section 302 Certification of Principal Financial Officer 32.1 Section 906 Certification of Principal Executive Officer 32.2 Section 906 Certification of Principal Financial Officer 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase 101.DEF XBRL Taxonomy Extension Definition Linkbase 101.LAB XBRL Taxonomy Extension Label Linkbase 101.PRE XBRL Taxonomy Extension Presentation Linkbase NOVELIS INC. By: Steven Fisher Chief Financial Officer (Principal Financial Officer and Authorized Officer) By Robert P. Nelson Vice President Finance — Controller (Principal Accounting Officer) February 8,August 14, 2012 2.1 Arrangement Agreement by and among Hindalco Industries Limited, AV Aluminum Inc. and Novelis Inc., dated as of February 10, 2007 (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed on February 13, 2007) (File No. 001-32312)) 3.1 Restated Certificate and Articles of Amalgamation of Novelis Inc. (incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 8-K filed on November 10, 2010 (File No. 001-32312)) 3.2 Novelis Inc. Amended and Restated Bylaws, adopted as of July 24, 2008 (incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K filed on July 25, 2008 (File No. 001-32312)) 4.1 Supplemental Indenture, relating to the 8.375% Senior Notes due 2017, dated as of December 7, 2011 betweenamong Novelis Inc., the guarantor named on the signature page theretoNovelis Sheet Ingot GmbH, and The Bank of New York Mellon Trust Company, N.A., as Trustee.Trustee, dated as of August 8, 2012 4.2 Supplemental Indenture, relating to the 8.75% Senior Notes due 2020, dated as of December 7, 2011 betweenamong Novelis Inc., the guarantor named on the signature page theretoNovelis Sheet Ingot GmbH, and The Bank of New York Mellon Trust Company, N.A., as Trustee. 10.1$225 million Increase Joinder AgreementTrustee dated as of December 7, 2011 among Novelis, Inc., AV Metals Inc. The Third Party Security Providers named therein and Bank of America, N.A., as Administrative Agent under the Credit AgreementsAugust 8, 2012 10.1 Novelis 2013 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on May 25, 2012 (File No. 001-32312)) 10.2 Novelis 2013 Annual Incentive Plan (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on May 25, 2012 (File No. 001-32312)) 31.1 Section 302 Certification of Principal Executive Officer 31.2 Section 302 Certification of Principal Financial Officer 32.1 Section 906 Certification of Principal Executive Officer 32.2 Section 906 Certification of Principal Financial Officer 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase 101.DEF XBRL Taxonomy Extension Definition Linkbase 101.LAB XBRL Taxonomy Extension Label Linkbase 101.PRE XBRL Taxonomy Extension Presentation Linkbase 63