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POST-EFFECTIVE AMENDMENT NO. 1 TO | Form S-4 | |
Form S-4 | REGISTRATION STATEMENT | |
REGISTRATION STATEMENT | UNDER | |
UNDER | THE SECURITIES ACT OF 1933 | |
THE SECURITIES ACT OF 1933 |
NOVELIS INC.* (Exact name of registrant as specified in its charter) Canada (State or other jurisdiction of incorporation or organization) 98-0442987 (I.R.S. Employer Identification Number) 3399 Peachtree Road, NE, Suite 1500 Atlanta, Georgia 30326 (404) 814-4200 (Address, including zip code, and telephone number, including area code, of Registrants’ principal executive offices) 3350 (Primary standard industrial classification code number) | NOVELIS FINANCES USA LLC** Delaware (Jurisdiction of formation) N/A (I.R.S. Employer Identification Number) 70 York Street, Suite 1510 Toronto, Ontario MSJ 159 Canada (Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices) NOVELIS SOUTH AMERICA HOLDINGS LLC** Delaware (Jurisdiction of formation) 20-5137684 (I.R.S. Employer Identification Number) ALUMINUM UPSTREAM HOLDINGS LLC** 20-5137700 (I.R.S. Employer Identification Number ) 3399 Peachtree Road, NE, Suite 1500 Atlanta, Georgia 30326 (404) 814-4200 (Address, including zip code, telephone number, including area code, of Registrants’ principal executive offices) 3350 (Primary standard industrial classification code number for each Registrant) |
Proposed Maximum | Amount of | |||||||||||
Title of Each Class of | Amount to be | Proposed Maximum | Aggregate | Registration | ||||||||
Securities to be Registered | Registered | Offering per Note(1) | Offering Price(1) | Fee | ||||||||
71/4% Senior Notes due 2015 | $1,400,000,000 | 100% | $1,400,000,000 | $164,780(2) | ||||||||
Guarantees of 71/4% Senior Notes due 2015 by the additional Registrants(3) | — | — | $0 | None(4) | ||||||||
Guarantees of 71/4% Senior Notes due 2015 by New Registrants | — | — | $0 | None(4) | ||||||||
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Jurisdiction of | IRS Employer | |||||
Exact Name of Additional Registrants* | Formation | Identification No. | ||||
Novelis Corporation | Texas | 41-2098321 | ||||
Eurofoil Inc. (USA) | New York | 13-3783544 | ||||
Novelis PAE Corporation | Delaware | 36-4266108 | ||||
Novelis Cast House Technology Ltd. | Canada | Not applicable | ||||
4260848 Canada Inc. | Canada | Not applicable | ||||
4260856 Canada Inc. | Canada | Not applicable | ||||
Novelis Europe Holdings Ltd. | United Kingdom | Not applicable | ||||
Novelis UK Ltd. | United Kingdom | Not applicable | ||||
Novelis do Brasil Ltda. | Brazil | Not applicable | ||||
Novelis AG | Switzerland | Not applicable | ||||
Novelis Switzerland S.A. | Switzerland | Not applicable | ||||
Novelis Technology AG | Switzerland | Not applicable | ||||
Novelis Aluminium Holding Company | Ireland | Not applicable | ||||
Novelis Deutschland GmbH | Germany | Not applicable |
* | The address for the additional Registrants is c/o Novelis Inc., 3399 Peachtree Rd., N.E., Suite 1500, Atlanta, Georgia 30326. The primary standard industrial classification number for each of the additional Registrants is 3350. |
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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. |
71/4% Senior Notes due 2015.
• | You will receive an equal principal amount of Notes for all old notes that you validly tender and do not validly withdraw. | |
• | The exchange should not be a taxable exchange for United States federal income tax purposes. Similarly, the exchange will not constitute a disposition for Canadian federal income tax purposes. | |
• | There has been no public market for the old notes and we cannot assure you that any public market for the Notes will develop. We do not intend to list the Notes on any national securities exchange or any automated quotation system. |
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• | the level of our indebtedness and our ability to generate cash; | |
• | relationships with, and financial and operating conditions of, our customers and suppliers; | |
• | changes in the prices and availability of aluminum (or premiums associated with such prices) or other materials and raw materials we use; |
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• | the effect of metal price ceilings in certain of our sales contracts; | |
• | the effectiveness of our metal hedging activities, including our internal used beverage can (UBC) and smelter hedges; | |
• | fluctuations in the supply of, and prices for, energy in the areas in which we maintain production facilities; | |
• | our ability to access financing for future capital requirements; | |
• | continuing obligations and other relationships resulting from our spin-off from Alcan, Inc.; | |
• | changes in the relative values of various currencies; | |
• | factors affecting our operations, such as litigation, environmental remediation andclean-up costs, labor relations and negotiations, breakdown of equipment and other events; | |
• | 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; | |
• | changes in general economic conditions; | |
• | our ability to improve and maintain effective internal control over financial reporting and disclosure controls and procedures in the future; | |
• | changes in the fair value of derivatives; | |
• | cyclical demand and pricing within the principal markets for our products as well as seasonality in certain of our customers’ industries; | |
• | changes in government regulations, particularly those affecting taxes, environmental, health or safety compliance; and | |
• | changes in interest rates that have the effect of increasing the amounts we pay under our principal credit agreement and other financing agreements. |
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Year Ended December 31, | At Period End | Average Rate(1) | High | Low | ||||||||||||
2001 | 1.5925 | 1.5519 | 1.6023 | 1.4933 | ||||||||||||
2002 | 1.5800 | 1.5702 | 1.6128 | 1.5108 | ||||||||||||
2003 | 1.2923 | 1.3916 | 1.5750 | 1.2923 | ||||||||||||
2004 | 1.2034 | 1.2984 | 1.3970 | 1.1775 | ||||||||||||
2005 | 1.1656 | 1.2083 | 1.2703 | 1.1507 | ||||||||||||
2006 (through November 17, 2006) | 1.1458 | 1.1325 | 1.1726 | 1.0989 |
(1) | The average of the noon buying rates on the last day of each month during the period. The 2006 period includes the noon buying rate through November 17, 2006. |
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The Exchange Offer | We are offering to exchange $1,000 principal amount of our Notes that we have registered under the Securities Act for each $1,000 principal amount of outstanding old notes. In order for us to exchange your old notes, you must validly tender them to us and we must accept them. We will exchange all outstanding old notes that are validly tendered and not validly withdrawn. | |
Resale of the Notes | Based on interpretations by the staff of the SEC set forth in no-action letters issued to other parties, we believe that you may offer for resale, resell and otherwise transfer your Notes without compliance with the registration and prospectus delivery provisions of the Securities Act if you are not our affiliate, you acquired the Notes issued in the Exchange Offer in the ordinary course of your business, and you are not participating, do not intend to participate and have no arrangement or understanding with any person to participate in the distribution of the Notes we issue to you in the Exchange Offer. | |
Each broker-dealer that receives Notes in the Exchange Offer for its own account in exchange for old notes that it acquired as a result of market-making or other trading activities must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of the Notes issued in the Exchange Offer. See “Plan of Distribution.” | ||
Expiration date | The Exchange Offer will expire at 5:00 p.m., Eastern Standard Time, , unless we decide to extend the expiration date. We may extend the expiration date for any reason. If we fail to consummate the Exchange Offer, you will have certain rights against us under the registration rights agreement we entered into as part of the offering of the old notes. | |
Special procedures for beneficial owners | If you are the beneficial owner of old notes and you registered your old notes in the name of a broker or other institution, and you wish to participate in the exchange, you should promptly contact the person in whose name you registered your old notes and instruct that person to tender the old notes on your behalf. If you wish to tender on your own behalf, you must, prior to completing and executing the letter of transmittal and delivering your outstanding old notes, either make appropriate arrangements to register ownership of the outstanding old notes in your name or obtain a properly completed bond power from the registered holder. The transfer of record ownership may take considerable time. | |
Guaranteed delivery procedures | If you wish to tender your old notes, but time will not permit your required documents to reach the exchange agent by the expiration date, or you cannot complete the procedure for book-entry transfer, |
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you may still tender your old notes pursuant to the procedures described in this prospectus under the heading “The Exchange Offer-How to Use the Guaranteed Delivery Procedures if You Will Not Have Enough Time to Send All Documents to Us.” | ||
Withdrawal rights | You may withdraw the tender of your old notes at any time prior to the expiration date. | |
Certain Canadian federal and United States federal income tax consequences | An exchange of old notes for Notes should not be subject to United States federal income tax. Similarly, the exchange will not constitute a disposition for Canadian federal income tax purposes. See “Important Canadian Federal and United States Federal Income Tax Considerations.” | |
Use of proceeds | We will not receive any proceeds from the issuance of Notes pursuant to the Exchange Offer. Old notes that are validly tendered and exchanged will be retired and canceled. We will pay all expenses incident to the Exchange Offer. | |
Exchange agent | You can reach The Bank of New York Trust Company, N.A., the exchange agent, at Corporate Trust Operations, Reorganization Unit, 101 Barclay Street 7 East, New York, NY 10286, Attention: Randolph Holder. For more information with respect to the Exchange Offer, you may call the exchange agent on(212) 815-5098; the fax number for the exchange agent is(212) 298-1915 (eligible institutions only). | |
Dissenter or Appraisal Rights | Holders of old notes will not have dissenters’ or appraisal rights in connection with the Exchange Offer. |
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Issuer | Novelis Inc., a Canadian corporation | |
Securities Offered | $1,400,000,000 aggregate principal amount of 71/4% senior notes due 2015. | |
Maturity | The Notes will mature on February 15, 2015. | |
Interest rate and Payment Dates | The Notes will bear interest at the rate of 71/4% per annum. Interest on the Notes will be payable semiannually in arrears on February 15 and August 15 of each year commencing August 15, 2005. Interest on the Notes will accrue from the most recent date through which interest has been paid. | |
Guarantees | The Notes will be fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis, by all of our existing and future Canadian and U.S. wholly-owned restricted subsidiaries, certain of our existing foreign wholly-owned restricted subsidiaries and our other restricted subsidiaries that guarantee debt in the future under any credit facilities, provided that the borrower of such debt is our company or a Canadian or a U.S. subsidiary. For the nine months ended September 30, 2006, on a historical combined basis, our subsidiaries that will not be guarantors at the consummation of this Exchange Offer had sales and operating revenues of $2.1 billion, and, at September 30, 2006, those subsidiaries had assets of $1.9 billion and debt and other liabilities of $1.3 billion (including inter-company balances). | |
Ranking | The Notes will be: | |
• our senior unsecured obligations; | ||
• effectively junior in right of payment to all of our existing and future secured debt to the extent of the value of the assets securing that debt, including the $711 million of secured debt under our senior secured credit facilities as of September 30, 2006 (and up to an additional $413 million of revolving credit debt that we may borrow thereunder from time to time), which debt is secured by our assets and the assets of our principal subsidiaries; | ||
• effectively junior in right of payment to all debt and other liabilities (including trade payables) of any of our subsidiaries that do not guarantee the Notes; | ||
• equal in right of payment to all of our existing and future senior debt; and | ||
• senior in right of payment to all of our future subordinated debt. |
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The guarantees of each guarantor will be: | ||
• senior unsecured obligations of that guarantor; | ||
• effectively junior in right of payment to all existing and future secured debt of that guarantor to the extent of the value of the assets securing that debt, including the debt or guarantee of debt of that guarantor under the senior secured credit facilities, which debt or guarantee will be secured by the assets of that guarantor; | ||
• equal in right of payment to all of that guarantor’s existing and future senior debt; and | ||
• senior in right of payment to all of that guarantor’s future subordinated debt. | ||
At September 30, 2006, Novelis Inc. and the guarantors had $711 million of secured debt. The indenture governing the Notes will permit us, subject to specified limitations, to incur additional debt, some or all of which may be senior debt. | ||
Optional Redemption | Prior to February 15, 2010, we may from time to time redeem all or a portion of the Notes by paying a special “make-whole” premium specified in this prospectus under “Description of Notes — Optional Redemption.” | |
At any time on or after February 15, 2010, we may from time to time redeem all or a portion of the Notes at the redemption prices specified in this prospectus under “Description of Notes — Optional Redemption.” | ||
In addition, at any time prior to February 15, 2008 we may also redeem up to 35% of the original aggregate principal amount of the old notes and the Notes in an amount not to exceed the amount of proceeds of one or more equity offerings, at a price equal to 107.250% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, provided that at least 65% of the original aggregate principal amount of the old notes and the Notes issued remains outstanding after the redemption. | ||
Additional Amounts and Tax Redemption | Any payments made by us with respect to the Notes will be made without withholding or deduction, unless required by law. If we are required by law to withhold or deduct for taxes with respect to a payment to the holders of Notes, we will, subject to certain exceptions, pay the additional amount necessary so that the net amount received by the holder of Notes (other than certain excluded holders) after the withholding is not less than the amount they would have received in the absence of the withholding. | |
If we are required to pay additional amounts as a result of changes in laws applicable to tax-related withholdings or deductions in respect of payments on the old notes and Notes but not the guarantees, we will have the option to redeem the old notes and Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount of the old notes and Notes, plus any accrued and unpaid interest to the date of redemption and any additional amounts that may be then payable. |
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Covenants | We will issue the Notes under an indenture between us and The Bank of New York Trust Company, N.A., as trustee, which is the same indenture under which we issued the old notes. The indenture governing the Notes will contain covenants that limit our ability and the ability of our restricted subsidiaries to: | |
• incur additional debt and provide additional guarantees; | ||
• pay dividends beyond certain amounts and make other restricted payments; | ||
• create or permit certain liens; | ||
• make certain asset sales; | ||
• use the proceeds from the sales of assets and subsidiary stock; | ||
• create or permit restrictions on the ability of our restricted subsidiaries to pay dividends or make other distributions to us; | ||
• engage in certain transactions with affiliates; | ||
• enter into sale and leaseback transactions; | ||
• designate subsidiaries as unrestricted subsidiaries; and | ||
• consolidate, merge or transfer all or substantially all of our assets and the assets of our restricted subsidiaries. | ||
During any future period in which either Standard & Poor’s Rating Services, a division of the McGraw-Hill Companies, Inc., or Moody’s Investors Service, Inc. have assigned an investment grade credit rating to the Notes and no default or event of default under the indenture has occurred and is continuing, most of the covenants, including our obligation to repurchase Notes following certain asset sales, will be suspended. If either of these ratings agencies then withdraws its ratings or downgrades the ratings assigned to the Notes below the required investment grade rating, or a default or event of default occurs and is continuing, the suspended covenants will again be in effect. If at any time both ratings agencies have assigned an investment grade rating to the Notes, those covenants, including our obligation to repurchase Notes following certain asset sales, will terminate and no longer be applicable regardless of any subsequent changes in the rating of those Notes. See “Description of the Notes — Certain Covenants — Covenant Termination and Suspension.” | ||
These covenants are subject to a number of important limitations and exceptions. For more details, see “Description of the Notes — Certain Covenants.” | ||
Change of Control | Following a change of control, we will be required to offer to purchase all of the Notes at a purchase price of 101% of their principal amount, plus accrued and unpaid interest, if any, to the date of purchase. | |
Exchange Offer; Registration Rights | Pursuant to a registration rights agreement among us and the initial purchasers of the old notes, we were required to complete the Exchange Offer of the old notes by November 11, 2005. We did not complete the Exchange Offer by that date. As a result, we |
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began to accrue additional special interest at a rate of 0.25% from November 11, 2005. The indenture and the registration rights agreement provide that the rate of additional special interest increases by 0.25% during each subsequent90-day period until the Exchange Offer closes, with the maximum amount of additional special interest being 1.00% per year. On August 8, 2006, the rate of additional special interest increased to 1.00%. On October 17, 2006, we extended the Exchange Offer to December 15, 2006. We will cease paying additional special interest once the Exchange Offer is completed. | ||
Offering; Transfer Restrictions | The Notes are not being offered for sale and may not be offered or sold directly or indirectly in Canada except in accordance with applicable securities laws of the provinces and territories of Canada. We are not required, and do not intend, to qualify by prospectus in Canada the Notes, and accordingly, the Notes will be subject to restrictions on resale in Canada. | |
Absence of a Public Market for the Notes | The Notes are a new issue of securities, and currently there is no existing trading market for them. We do not intend to apply for listing of the Notes on any national securities exchange or to arrange for quotation of the Notes on any automated dealer quotation system. The initial purchasers may make a market for the Notes, but they have no obligation to do so. Accordingly, we cannot assure you that a liquid market will develop for the Notes. See “Risk Factors — Risks Related to the Notes — There is no public market for the Notes and we do not know if a market will ever develop or, if a market does develop, whether it will be sustained.” | |
Amendments and Waivers | Except for specific amendments, the indenture may be amended and any existing default or compliance with any provisions of the indenture may be waived, with the consent of the holders of a majority of the aggregate principal amount then outstanding of the old notes and the Notes. | |
Risk Factors | Investing in the Notes involves substantial risks. You should carefully consider the information set forth in the section entitled “Risk Factors” and the other information included in this prospectus in deciding whether to tender your old notes. | |
Certain Income Tax Considerations | You should carefully read the information under the heading “Important Canadian Federal and United States Federal Income Tax Considerations.” |
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• | our combined statements of income for the years ended December 31, 2002 and 2001; and | |
• | our combined balance sheets as of December 31, 2003, 2002 and 2001, none of which are included in this prospectus, and which were prepared using historical financial information based on Alcan’s accounting records. |
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As of and for the Period Ended September 30, | As of and for the Year Ended December 31, | |||||||||||||||||||||||||||
2006 | 2005 | 2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||||||||
($ in millions, except per share data) | ||||||||||||||||||||||||||||
Net sales | $ | 7,377 | $ | 6,337 | $ | 8,363 | $ | 7,755 | $ | 6,221 | $ | 5,893 | $ | 5,777 | ||||||||||||||
Net income (loss) | (170 | ) | 32 | 90 | 55 | 157 | (9 | ) | (137 | ) | ||||||||||||||||||
Total assets | 5,680 | 5,264 | 5,476 | 5,954 | 6,316 | 4,558 | 4,390 | |||||||||||||||||||||
Long-term debt (including current portion) | 2,333 | 2,650 | 2,603 | 2,737 | 1,659 | 623 | 514 | |||||||||||||||||||||
Other debt | 113 | 35 | 27 | 541 | 964 | 366 | 445 | |||||||||||||||||||||
Cash and cash equivalents | 71 | 124 | 100 | 31 | 27 | 31 | 17 | |||||||||||||||||||||
Shareholders’/invested equity | 322 | 404 | 433 | 555 | 1,974 | 2,181 | 2,234 | |||||||||||||||||||||
Earnings (loss) per share: | ||||||||||||||||||||||||||||
Basic: | ||||||||||||||||||||||||||||
Income (loss) before cumulative effect of accounting change | $ | (2.30 | ) | $ | 0.43 | $ | 1.29 | $ | 0.74 | $ | 2.12 | $ | 1.01 | $ | (1.85 | ) | ||||||||||||
Cumulative effect of accounting change — net of tax | — | — | (0.08 | ) | — | — | (1.13 | ) | — | |||||||||||||||||||
Net income (loss) per share — basic | $ | (2.30 | ) | $ | 0.43 | $ | 1.21 | $ | 0.74 | $ | 2.12 | $ | (0.12 | ) | $ | (1.85 | ) | |||||||||||
Diluted: | ||||||||||||||||||||||||||||
Income (loss) before cumulative effect of accounting change | $ | (2.30 | ) | $ | 0.43 | $ | 1.29 | $ | 0.74 | $ | 2.11 | $ | 1.00 | $ | (1.85 | ) | ||||||||||||
Cumulative effect of accounting change — net of tax | — | — | (0.08 | ) | — | — | (1.13 | ) | — | |||||||||||||||||||
Net income (loss) per share — diluted | $ | (2.30 | ) | $ | 0.43 | $ | 1.21 | $ | 0.74 | $ | 2.11 | $ | (0.13 | ) | $ | (1.85 | ) | |||||||||||
Dividends per common share | $ | 0.19 | $ | 0.27 | $ | 0.36 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
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Nine Months | ||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
September 30, | Year Ended December 31, | |||||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||||||||||
Ratio of Earnings to Fixed Charges(1)(2) | (3 | ) | 2.1 | x | 3.8 | x | 5.5 | x | 3.7 | x | (4 | ) |
(1) | Earnings consist of income before the cumulative effect of accounting changes, before fixed charges (excluding capitalized interest) and income taxes, and eliminating undistributed income of persons owned less than or equal to 50% by us. Fixed charges consist of interest expenses and amortization of debt issuance costs and that portion of rental payments which is considered as being representative of the interest factor implicit in our operating leases. | |
(2) | Includes restructuring and asset impairment charges for certain businesses that we acquired from Alcan in the reorganization transactions of $13 million, $17 million, $95 million, $12 million, $25 million and $208 million which were recorded in relation to these programs for the nine months ended September 30, 2006 and in the years ended December 31, 2005, 2004, 2003, 2002 and 2001, respectively. | |
(3) | Due to our net loss in the nine months ended September 30, 2006, the ratio coverage was less than 1:1. We would have needed to generate additional earnings of $141 million to achieve coverage of 1:1. | |
(4) | Due to our net loss in the year ended December 31, 2001, the ratio coverage was less than 1:1. We would have needed to generate additional earnings of $144 million to achieve coverage of 1:1. |
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• | increases in costs of natural gas; | |
• | significant increases in costs of supplied electricity or fuel oil related to transportation; | |
• | interruptions in energy supply due to equipment failure or other causes; and | |
• | the inability to extend energy supply contracts upon expiration on economical terms. |
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• | lack of sufficient resources in our accounting and finance organization; | |
• | inadequate monitoring of non-routine and non-systematic transactions; | |
• | lack of effective controls over the accounting for accrued expenses; | |
• | lack of effective controls over the accounting for income taxes; and | |
• | lack of effective controls over the accounting for derivative transactions. |
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• | limiting our ability to borrow additional amounts for working capital, capital expenditures, debt service requirements, execution of our growth strategy, or other general corporate purposes; | |
• | limiting our ability to use operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to service the debt; | |
• | increasing our vulnerability to general adverse economic and industry conditions; | |
• | placing us at a competitive disadvantage as compared to our competitors that have less leverage; | |
• | limiting our ability to capitalize on business opportunities and to react to competitive pressures and adverse changes in government regulation; | |
• | limiting our ability or increasing the costs to refinance indebtedness; and | |
• | limiting our ability to enter into marketing, hedging, optimization and trading transactions by reducing the number of counterparties with whom we can enter into such transactions as well as the volume of those transactions. |
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• | incur additional debt and provide additional guarantees; | |
• | pay dividends beyond certain amounts and make other restricted payments; | |
• | create or permit certain liens; | |
• | make certain asset sales; | |
• | use the proceeds from the sales of assets and subsidiary stock; | |
• | create or permit restrictions on the ability of our restricted subsidiaries to pay dividends or make other distributions to us; |
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• | engage in certain transactions with affiliates; | |
• | enter into sale and leaseback transactions; | |
• | designate subsidiaries as unrestricted subsidiaries; and | |
• | consolidate, merge or transfer all or substantially all of our assets or the assets of our restricted subsidiaries. |
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• | our ratings with major credit rating agencies; | |
• | the prevailing interest rates being paid by companies similar to us; and | |
• | the overall condition of the financial and credit markets. |
• | incurred the guarantee with the intent of hindering, defeating, delaying or defrauding current or future creditors or of giving one creditor a preference over others; or | |
• | received less than reasonably equivalent value or fair consideration for incurring the guarantee, and | |
• | was insolvent, on the eve of insolvency, or was rendered insolvent by reason of the incurrence; | |
• | was engaged, or about to engage, in a business or transaction for which the assets remaining with it constituted unreasonably small capital to carry on such business; | |
• | intended to incur, or believed that it would incur, debts beyond its ability to pay as those debts matured; or | |
• | was a defendant in an action for money damages, or had a judgment for money damages entered against it, if, in either case, after final judgment the judgment was unsatisfied. |
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• | the sum of its debts and liabilities, including contingent liabilities, was greater than its assets at fair valuation; | |
• | the present fair saleable value of its assets was less than the amount required to pay the probable liability on its total existing debts and liabilities, including contingent liabilities, as they became absolute and matured; or | |
• | it could not pay its debts generally as they become due. |
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Nine Months Ended | ||||||||||||||||||||||||
September 30, | Year Ended December 31, | |||||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||||||||||
Ratio of Earnings to Fixed Charges(1)(2) | (3 | ) | 2.1 | x | 3.8 | x | 5.5 | x | 3.7 | x | (4 | ) |
(1) | Earnings consist of income before the cumulative effect of accounting changes, before fixed charges (excluding capitalized interest) and income taxes, and eliminating undistributed income of persons owned less than or equal to 50% by us. Fixed charges consist of interest expense and amortization of debt issuance costs and that portion of rental payments which is considered as being representative of the interest factor implicit in our operating leases. | |
(2) | Includes restructuring and asset impairment charges for certain businesses that we acquired from Alcan in the reorganization transactions of $13 million, $17 million, $95 million, $12 million, $25 million and $208 million which were recorded in relation to these programs for the nine months ended September 30, 2006 and in the years ended December 31, 2005, 2004, 2003, 2002 and 2001, respectively. | |
(3) | Due to our net loss in the nine months ended September 30, 2006, the ratio coverage was less than 1:1. We would have needed to generate additional earnings of $141 million to achieve coverage of 1:1. | |
(4) | Due to our net loss in the year ended December 31, 2001, the ratio coverage was less than 1:1. We would have needed to generate additional earnings of $144 million to achieve coverage of 1:1. |
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As of | ||||
September 30, | ||||
2006 | ||||
($ in millions) | ||||
Cash and cash equivalents | $ | 71 | ||
Short-term borrowings | $ | 113 | ||
Long-term debt | ||||
Term Loan B | 711 | |||
71/4% Notes | 1,400 | |||
Other third party debt | 222 | |||
Total debt | 2,446 | |||
Shareholders’ equity | ||||
Common shares at par | — | |||
Additional paid-in capital | 427 | |||
Accumulated deficit | (92 | ) | ||
Accumulated other comprehensive loss | (13 | ) | ||
Shareholders’ equity | 322 | |||
Total capitalization | $ | 2,768 | ||
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• | our combined statements of income for the years ended December 31, 2002 and 2001; and | |
• | our combined balance sheets as of December 31, 2003, 2002 and 2001, none of which are included in this prospectus, and which were prepared using historical financial information based on Alcan’s accounting records. |
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As of and for the | ||||||||||||||||||||||||||||
Period Ended September 30, | As of and for the Year Ended December 31, | |||||||||||||||||||||||||||
2006 | 2005 | 2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||||||||
($ in millions, except per share data) | ||||||||||||||||||||||||||||
Net sales | $ | 7,377 | $ | 6,337 | $ | 8,363 | $ | 7,755 | $ | 6,221 | $ | 5,893 | $ | 5,777 | ||||||||||||||
Net income (loss) | (170 | ) | 32 | 90 | 55 | 157 | (9 | ) | (137 | ) | ||||||||||||||||||
Total assets | 5,680 | 5,264 | 5,476 | 5,954 | 6,316 | 4,558 | 4,390 | |||||||||||||||||||||
Long-term debt (including current portion) | 2,333 | 2,650 | 2,603 | 2,737 | 1,659 | 623 | 514 | |||||||||||||||||||||
Other debt | 113 | 35 | 27 | 541 | 964 | 366 | 445 | |||||||||||||||||||||
Cash and cash equivalents | 71 | 124 | 100 | 31 | 27 | 31 | 17 | |||||||||||||||||||||
Shareholders’/invested equity | 322 | 404 | 433 | 555 | 1,974 | 2,181 | 2,234 | |||||||||||||||||||||
Earnings (loss) per share: | ||||||||||||||||||||||||||||
Basic: | ||||||||||||||||||||||||||||
Income (loss) before cumulative effect of accounting change | $ | (2.30 | ) | $ | 0.43 | $ | 1.29 | $ | 0.74 | $ | 2.12 | $ | 1.01 | $ | (1.85 | ) | ||||||||||||
Cumulative effect of accounting change — net of tax | — | — | (0.08 | ) | — | — | (1.13 | ) | — | |||||||||||||||||||
Net income (loss) per share — basic | $ | (2.30 | ) | $ | 0.43 | $ | 1.21 | $ | 0.74 | $ | 2.12 | $ | (0.12 | ) | $ | (1.85 | ) | |||||||||||
Diluted: | ||||||||||||||||||||||||||||
Income (loss) before cumulative effect of accounting change | $ | (2.30 | ) | $ | 0.43 | $ | 1.29 | $ | 0.74 | $ | 2.11 | $ | 1.00 | $ | (1.85 | ) | ||||||||||||
Cumulative effect of accounting change — net of tax | — | — | (0.08 | ) | — | — | (1.13 | ) | — | |||||||||||||||||||
Net income (loss) per share — diluted | $ | (2.30 | ) | $ | 0.43 | $ | 1.21 | $ | 0.74 | $ | 2.11 | $ | (0.13 | ) | $ | (1.85 | ) | |||||||||||
Dividends per common share | $ | 0.19 | $ | 0.27 | $ | 0.36 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
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Nine Months Ended | ||||||||||||||||||||||||||||
September 30, | Year Ended December 31, | |||||||||||||||||||||||||||
2006 | 2005 | 2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||||||||
Restructuring charges | $ | 13 | $ | 4 | $ | 10 | $ | 20 | $ | 8 | $ | 7 | $ | 196 | ||||||||||||||
Impairment charges on long-lived assets | — | 5 | 7 | 75 | 4 | 18 | 12 | |||||||||||||||||||||
Total | $ | 13 | $ | 9 | $ | 17 | $ | 95 | $ | 12 | $ | 25 | $ | 208 | ||||||||||||||
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FINANCIAL CONDITION AND RESULTS OF OPERATIONS
• | We had net sales of $7.4 billion and a net loss of $170 million, or $(2.30) per share for the nine months ended September 30, 2006, compared to net sales of $6.3 billion and net income of $32 million, or $0.43 per share for the nine months ended September 30, 2005. We had net sales of $8.4 billion and net income of $90 million, or $1.21 per share for our year ended December 31, 2005, compared to net sales of $7.8 billion and net income of $55 million, or $0.74 per share in 2004. | |
• | Total rolled products shipments increased from 2,168kt for the nine months ended September 30, 2005 to 2,231kt for the nine months ended September 30, 2006, while ingot products shipments declined from 174kt to 125kt in those same periods. Total rolled products shipments increased from 2,785kt in the year ended December 31, 2004 to 2,873kt in the year ended December 31, 2005, while ingot products shipments declined from 234kt to 214kt in those same years. | |
• | Since the inception of the company, we have reduced our total debt by $505 million, which is in excess of our principal payment obligations. | |
• | London Metal Exchange (LME) pricing for aluminum (metal) was an average of 37% higher during the nine months ended September 30, 2006 than the same period for 2005 and LME pricing for aluminum was an average of 10% higher in 2005 than 2004. |
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• | Net sales for the nine months ended September 30, 2006 and the year ended December 31, 2005 increased 16% and 8%, respectively, over the comparable prior year periods due mainly to the rise in LME prices. However, the benefit of higher LME prices on our net sales was limited by metal price ceilings in sales contracts representing approximately 20% of our estimated total shipments. During the first nine months of 2006 and the year ended December 31, 2005, we were unable to pass through approximately $350 million and approximately $75 million, respectively, of metal price increases associated with sales under these contracts. The metal price ceilings are discussed in more detail below. | |
• | We restated our consolidated and combined financial statements for our quarters ended March 31, 2005 and June 30, 2005 and delayed the filing of certain other SEC reports. As a result of our restatement and review process, delayed filings and continued reliance on third party consultants, we continue to incur higher corporate costs and interest expense in 2006 than in 2005. For the nine months ended September 30, 2006, we estimate that these expenses approximated $32 million. We expect to continue to incur these higher costs until we complete our registered Exchange Offer for our Notes and until our accounting and finance functions are permanently staffed with the appropriate complement of personnel to support our ongoing financial reporting requirements. The restatement and review process and delayed filings are discussed in more detail below. | |
• | During the nine months ended September 30, 2006 and the year ended December 31, 2005, we recognized pre-tax gains of $58 million and $269 million, respectively, related to the change in fair value of derivative instruments. These amounts are included in Other (income) expenses — net. Regional Income includes approximately $193 and $129 million of cash-settled derivative gains for the nine months ended September 30, 2006 and the year ended December 31, 2005, respectively. These derivative instruments and the related accounting are discussed in more detail below. | |
• | For the nine months ended September 30, 2006, we recorded a $30 million provision for taxes on our pre-tax loss of $150 million, before our equity in net income of non-consolidated affiliates and minority interests’ share, which represented an effective tax rate of (20)%. Our effective tax rate differs from the benefit at the Canadian statutory rate of 33% due to (1) a $42 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 and (2) $38 million of expense for (a) pre-tax foreign currency gains or losses with no tax effect, (b) the tax effect of U.S. dollar denominated currency gains or losses with no pre-tax effect and (c) the remeasurement of deferred income taxes. Cash taxes paid during the nine months ended September 30, 2006 were $24 million. |
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• | lack of sufficient resources in our accounting and finance organization; | |
• | inadequate monitoring of non-routine and non-systematic transactions; | |
• | lack of effective controls over the accounting for accrued expenses; | |
• | lack of effective controls over the accounting for income taxes; and | |
• | lack of effective controls over the accounting for derivative transactions. |
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Nine Months Ended | 2005 | 2004 | ||||||||||||||||||||||||||||||
September 30, | Percent | Year Ended December 31, | Versus | Versus | ||||||||||||||||||||||||||||
2006 | 2005 | Change | 2005 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||||||||||||
(Shipments in kt(1)) | ||||||||||||||||||||||||||||||||
Shipments | ||||||||||||||||||||||||||||||||
Rolled products, including tolling (the conversion of customer-owned metal) | 2,231 | 2,168 | 3 | % | 2,873 | 2,785 | 2,491 | 3 | % | 12 | % | |||||||||||||||||||||
Ingot products, including primary and secondary ingot and recyclable aluminum(2) | 125 | 174 | (28 | )% | 214 | 234 | 290 | (9 | )% | (19 | )% | |||||||||||||||||||||
Total shipments | 2,356 | 2,342 | 1 | % | 3,087 | 3,019 | 2,781 | 2 | % | 9 | % | |||||||||||||||||||||
(1) | One kilotonne (kt) is 1,000 metric tonnes. One metric tonne is equivalent to 2,204.6 pounds. | |
(2) | Ingot products shipments include primary ingot in Brazil, foundry products sold in Korea and Europe, secondary ingot in Europe and other miscellaneous recyclable aluminum sales made mainly for logistical purposes. |
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Nine Months Ended | 2005 | 2004 | ||||||||||||||||||||||||||||||
September 30, | Percent | Year Ended December 31, | Versus | Versus | ||||||||||||||||||||||||||||
Operating Results | 2006 | 2005 | Change | 2005 | 2004 | 2003 | 2004 | 2003 | ||||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||||||
Net sales | $ | 7,377 | $ | 6,337 | 16 | % | $ | 8,363 | $ | 7,755 | $ | 6,221 | 8 | % | 25 | % | ||||||||||||||||
Cost and expenses | ||||||||||||||||||||||||||||||||
Cost of goods sold (exclusive of depreciation and amortization shown below) | 6,931 | 5,678 | 22 | % | 7,570 | 6,856 | 5,482 | 10 | % | 25 | % | |||||||||||||||||||||
Selling, general and administrative expenses | 293 | 260 | 13 | % | 352 | 289 | 255 | 22 | % | 13 | % | |||||||||||||||||||||
Depreciation and amortization | 174 | 173 | 1 | % | 230 | 246 | 222 | (7 | )% | 11 | % | |||||||||||||||||||||
Research and development expenses | 29 | 29 | — | % | 41 | 58 | 62 | (29 | )% | (6 | )% | |||||||||||||||||||||
Restructuring charges — net | 13 | 4 | 225 | % | 10 | 20 | 8 | (50 | )% | 150 | % | |||||||||||||||||||||
Impairment charges on long-lived assets | — | 5 | (100 | )% | 7 | 75 | 4 | (91 | )% | 1,775 | % | |||||||||||||||||||||
Interest expense and amortization of debt issuance costs — net | 149 | 148 | 1 | % | 194 | 48 | 33 | 304 | % | 45 | % | |||||||||||||||||||||
Equity in net income of non-consolidated affiliates | (12 | ) | (6 | ) | 100 | % | (6 | ) | (6 | ) | (6 | ) | — | % | — | % | ||||||||||||||||
Other income — net | (62 | ) | (72 | ) | (14 | )% | (299 | ) | (62 | ) | (49 | ) | 382 | % | 27 | % | ||||||||||||||||
7,515 | 6,219 | 21 | % | 8,139 | 7,524 | 6,011 | 8 | % | 25 | % | ||||||||||||||||||||||
Income (loss) before provision for taxes on income and minority interests’ share | (138 | ) | 118 | (217 | )% | 224 | 231 | 210 | (3 | )% | 10 | % | ||||||||||||||||||||
Provision for taxes on income (loss) | 30 | 67 | (55 | )% | 107 | 166 | 50 | (36 | )% | 232 | % | |||||||||||||||||||||
Income (loss) before minority interests’ share | (168 | ) | 51 | (429 | )% | 117 | 65 | 160 | 80 | % | (59 | )% | ||||||||||||||||||||
Minority interests’ share | (2 | ) | (19 | ) | (89 | )% | (21 | ) | (10 | ) | (3 | ) | 110 | % | 233 | % | ||||||||||||||||
Net income (loss) before cumulative effect of accounting change | (170 | ) | 32 | (631 | )% | 96 | 55 | 157 | 75 | % | (65 | )% | ||||||||||||||||||||
Cumulative effect of accounting change — net of tax | — | — | (6 | ) | — | — | — | % | — | % | ||||||||||||||||||||||
Net income (loss) | $ | (170 | ) | $ | 32 | $ | 90 | $ | 55 | $ | 157 | 64 | % | (65 | )% | |||||||||||||||||
Nine Months Ended | 2005 | 2004 | ||||||||||||||||||||||||||||||
September 30, | Percent | As of December 31, | Versus | Versus | ||||||||||||||||||||||||||||
London Metal Exchange Prices | 2006 | 2005 | Change | 2005 | 2004 | 2003 | 2004 | 2003 | ||||||||||||||||||||||||
Aluminum (per metric tonne, and presented in U.S. dollars): | ||||||||||||||||||||||||||||||||
Closing cash price | $ | 2,572 | $ | 1,857 | 39 | % | $ | 2,285 | $ | 1,964 | $ | 1,593 | 16 | % | 23 | % | ||||||||||||||||
Average cash price | $ | 2,516 | $ | 1,839 | 37 | % | $ | 1,897 | $ | 1,717 | $ | 1,432 | 10 | % | 20 | % |
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Dollar | Dollar | Dollar | ||||||||||||||||||||||||||||||
Strengthen/ | Strengthen/ | Strengthen/ | ||||||||||||||||||||||||||||||
(Weaken) | (Weaken) | (Weaken) | ||||||||||||||||||||||||||||||
Nine Months Ended | 2006 | 2005 | 2004 | |||||||||||||||||||||||||||||
September 30, | Versus | Year Ended December 31, | Versus | Versus | ||||||||||||||||||||||||||||
2006 | 2005 | 2005 | 2005 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||||||||||||
Federal Reserve Bank of New York Exchange Rates | ||||||||||||||||||||||||||||||||
Average of the month end rates: | ||||||||||||||||||||||||||||||||
U.S. dollar per Euro | 1.252 | 1.258 | — | % | 1.240 | 1.248 | 1.141 | (1 | )% | 9 | % | |||||||||||||||||||||
Brazilian real per U.S. dollar | 2.171 | 2.456 | (12 | )% | 2.408 | 2.915 | 3.058 | (17 | )% | (5 | )% | |||||||||||||||||||||
South Korean won per U.S. dollar | 956 | 1,021 | (6 | )% | 1,023 | 1,139 | 1,193 | (10 | )% | (5 | )% | |||||||||||||||||||||
Canadian dollar per U.S. dollar | 1.127 | 1.221 | (8 | )% | 1.208 | 1.298 | 1.392 | (7 | )% | (7 | )% |
Nine Months Ended | 2005 | 2004 | ||||||||||||||||||||||||||||||
September 30, | Percent | Year Ended December 31, | Versus | Versus | ||||||||||||||||||||||||||||
2006 | 2005 | Change | 2005 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||||||||||||
New York Mercantile Exchange — Energy Price Quotations | ||||||||||||||||||||||||||||||||
Light Sweet Crude | ||||||||||||||||||||||||||||||||
Average settlement price (per barrel) | $ | 67.09 | $ | 49.10 | 37 | % | $ | 50.03 | $ | 37.41 | $ | 27.69 | 34 | % | 35 | % | ||||||||||||||||
Natural Gas | ||||||||||||||||||||||||||||||||
Average Henry Hub contract settlement price (per MMBTU)(1) | $ | 7.44 | $ | 7.16 | 4 | % | $ | 8.62 | $ | 6.14 | $ | 5.39 | 40 | % | 14 | % |
(1) | One MMBTU is the equivalent of one decatherm, or one million BTUs (British Thermal Units). |
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Nine Months Ended September 30, | ||||||||||||||||
2006 | 2005 | |||||||||||||||
$ in millions | % of net sales | $ in millions | % of net sales | |||||||||||||
Cost of goods sold (exclusive of depreciation and amortization) | $ | 6,931 | 94.0 | % | $ | 5,678 | 89.6 | % | ||||||||
Selling, general and administrative expenses | 293 | 4.0 | % | 260 | 4.1 | % | ||||||||||
Depreciation and amortization | 174 | 2.3 | % | 173 | 2.7 | % | ||||||||||
Research and development expenses | 29 | 0.4 | % | 29 | 0.5 | % | ||||||||||
Restructuring charges — net | 13 | 0.2 | % | 4 | 0.1 | % | ||||||||||
Impairment of long-lived assets | — | — | % | 5 | 0.1 | % | ||||||||||
Interest expense and amortization of debt issuance costs — net | 149 | 2.0 | % | 148 | 2.3 | % | ||||||||||
Equity in net income of non-consolidated affiliates | (12 | ) | (0.2 | )% | (6 | ) | (0.1 | )% | ||||||||
Other income — net | (62 | ) | (0.8 | )% | (72 | ) | (1.1 | )% | ||||||||
$ | 7,515 | 101.9 | % | $ | 6,219 | 98.1 | % | |||||||||
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Other | ||||
Income | ||||
Net | ||||
Other income — net for the nine months ended September 30, 2005 | $ | (72 | ) | |
Net gains of $58 million on the change in fair value of derivative instruments in 2006, compared to net gains of $56 million in 2005 | (2 | ) | ||
Loss on disposal of business in 2006 of $15 million | 15 | |||
Loss on disposal of property, plant and equipment in 2006 of $1 million compared to gains of $11 million in 2005 | 12 | |||
Exchange gains of $15 million in 2006 compared to losses of $1 million in 2005 | (16 | ) | ||
Other — net | 1 | |||
Other income — net for the nine months ended September 30, 2006 | $ | (62 | ) | |
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Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
Regional Income | ||||||||
North America | $ | 64 | $ | 141 | ||||
Europe | 208 | 161 | ||||||
Asia | 70 | 80 | ||||||
South America | 122 | 86 | ||||||
Total Regional Income | 464 | 468 | ||||||
Interest expense and amortization of debt issuance costs | (160 | ) | (155 | ) | ||||
Gains on cash settlement of derivative instruments — net, included in Regional Income | (193 | ) | (10 | ) | ||||
Gains on change in fair value of derivative instruments — net | 58 | 56 | ||||||
Depreciation and amortization | (174 | ) | (173 | ) | ||||
Minority interests’ share | (2 | ) | (19 | ) | ||||
Adjustment to eliminate proportional consolidation(A) | (26 | ) | (27 | ) | ||||
Restructuring charges — net | (13 | ) | (4 | ) | ||||
Impairment charges on long-lived assets | — | (5 | ) | |||||
Gains (losses) on disposals of fixed assets and businesses | (16 | ) | 11 | |||||
Corporate selling, general and administrative expenses | (88 | ) | (49 | ) | ||||
Other corporate costs — net | 10 | 6 | ||||||
Provision for taxes on income (loss) | (30 | ) | (67 | ) | ||||
Net income (loss) | $ | (170 | ) | $ | 32 | |||
(A) | Our financial information for our segments (including Regional Income) includes the results of our non-consolidated affiliates on a proportionately consolidated basis, which is consistent with the way we manage our business segments. However, under GAAP, these non-consolidated affiliates are accounted for using the equity method of accounting. Therefore, in order to reconcile Total Regional Income to Net income (loss), the proportional Regional Income of these non-consolidated affiliates is removed from Total Regional Income, net of our share of their net after-tax results, which is reported as Equity in net income of non-consolidated affiliates in the accompanying condensed consolidated and combined statements of operations. See Note 6 — Investment in and Advances to Non-consolidated Affiliates and Related Party Transactions to our condensed consolidated and combined financial statements for the nine months ended September 30, 2006 for further information about these non-consolidated affiliates. |
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Nine Months Ended | ||||||||||||
September 30, | Percent | |||||||||||
2006 | 2005 | Change | ||||||||||
($ in millions) | ||||||||||||
Shipments (kt): | ||||||||||||
Rolled products | 883 | 852 | 3.6 | % | ||||||||
Ingot products | 59 | 61 | (3.3 | )% | ||||||||
Total shipments | 942 | 913 | 3.2 | % | ||||||||
Net sales | $ | 2,841 | $ | 2,500 | 13.6 | % | ||||||
Regional Income | $ | 64 | $ | 141 | (54.6 | )% | ||||||
Total assets | $ | 1,487 | $ | 1,388 | 7.1 | % |
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Nine Months Ended | ||||||||||||
September 30, | Percent | |||||||||||
2006 | 2005 | Change | ||||||||||
($ in millions) | ||||||||||||
Shipments (kt): | ||||||||||||
Rolled products | 797 | 768 | 3.8 | % | ||||||||
Ingot products | 15 | 63 | (76.2 | )% | ||||||||
Total shipments | 812 | 831 | (2.3 | )% | ||||||||
Net sales | $ | 2,688 | $ | 2,376 | 13.1 | % | ||||||
Regional Income | $ | 208 | $ | 161 | 29.2 | % | ||||||
Total assets | $ | 2,392 | $ | 2,129 | 12.4 | % |
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Nine Months Ended | ||||||||||||
September 30, | Percent | |||||||||||
2006 | 2005 | Change | ||||||||||
($ in millions) | ||||||||||||
Shipments (kt): | ||||||||||||
Rolled products | 347 | 356 | (2.5 | )% | ||||||||
Ingot products | 32 | 30 | 6.7 | % | ||||||||
Total shipments | 379 | 386 | (1.8 | )% | ||||||||
Net sales | $ | 1,235 | $ | 1,025 | 20.5 | % | ||||||
Regional Income | $ | 70 | $ | 80 | (12.5 | )% | ||||||
Total assets | $ | 1,021 | $ | 971 | 5.1 | % |
Nine Months Ended | ||||||||||||
September 30, | Percent | |||||||||||
2006 | 2005 | Change | ||||||||||
($ in millions) | ||||||||||||
Shipments (kt): | ||||||||||||
Rolled products | 204 | 191 | 6.8 | % | ||||||||
Ingot products | 19 | 21 | (9.5 | )% | ||||||||
Total shipments | 223 | 212 | 5.2 | % | ||||||||
Net sales | $ | 626 | $ | 448 | 39.7 | % | ||||||
Regional Income | $ | 122 | $ | 86 | 41.9 | % | ||||||
Total assets | $ | 814 | $ | 780 | 4.4 | % |
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Year Ended December 31, | ||||||||||||||||
2005 | 2004 | |||||||||||||||
$ in millions | % of net sales | $ in millions | % of net sales | |||||||||||||
Cost of goods sold (exclusive of depreciation and amortization) | $ | 7,570 | 90.5 | % | $ | 6,856 | 88.4 | % | ||||||||
Selling, general and administrative expenses | 352 | 4.2 | % | 289 | 3.7 | % | ||||||||||
Litigation settlement — net of insurance recoveries | 40 | 0.5 | % | — | — | % | ||||||||||
Depreciation and amortization | 230 | 2.8 | % | 246 | 3.2 | % | ||||||||||
Research and development expenses | 41 | 0.5 | % | 58 | 0.7 | % | ||||||||||
Restructuring charges — net | 10 | 0.1 | % | 20 | 0.3 | % | ||||||||||
Impairment of long-lived assets | 7 | 0.1 | % | 75 | 1.0 | % | ||||||||||
Interest expense and amortization of debt issuance costs — net | 194 | 2.3 | % | 48 | 0.6 | % | ||||||||||
Equity in net income of non-consolidated affiliates | (6 | ) | (0.1 | )% | (6 | ) | (0.1 | )% | ||||||||
Other income — net | (299 | ) | (3.6 | )% | (62 | ) | (0.8 | )% | ||||||||
$ | 8,139 | 97.3 | % | $ | 7,524 | 97.0 | % | |||||||||
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Other | ||||
Income — Net | ||||
Other income — net for the year ended December 31, 2004 | $ | (62 | ) | |
Elements comprising the difference in Other income — net: | ||||
Gains of $269 million on the change in fair value of derivatives in 2005, compared to $69 million in 2004 | (200 | ) | ||
Service fee income earned in 2004 only | 17 | |||
Gains of $17 million on the disposals of fixed assets in 2005 compared to gains in 2004 of $5 million | (12 | ) | ||
Other — net | (42 | ) | ||
Total elements comprising the difference in Other income — net | (237 | ) | ||
Other income — net for the year ended December 31, 2005 | $ | (299 | ) | |
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Year Ended December 31, | ||||||||||||||||
2004 | 2003 | |||||||||||||||
$ in millions | % of net sales | $ in millions | % of net sales | |||||||||||||
Cost of goods sold (exclusive of depreciation and amortization) | $ | 6,856 | 88.4 | % | $ | 5,482 | 88.1 | % | ||||||||
Selling, general and administrative expenses | 289 | 3.7 | % | 255 | 4.1 | % | ||||||||||
Depreciation and amortization | 246 | 3.2 | % | 222 | 3.6 | % | ||||||||||
Research and development expenses | 58 | 0.7 | % | 62 | 1.0 | % | ||||||||||
Restructuring charges — net | 20 | 0.3 | % | 8 | 0.1 | % | ||||||||||
Impairment charges of long-lived assets | 75 | 1.0 | % | 4 | 0.1 | % | ||||||||||
Interest expense and amortization of debt issuance costs — net | 48 | 0.6 | % | 33 | 0.5 | % | ||||||||||
Equity in net income of non-consolidated affiliates | (6 | ) | (0.1 | )% | (6 | ) | (0.1 | )% | ||||||||
Other income — net | (62 | ) | (0.8 | )% | (49 | ) | (0.8 | )% | ||||||||
$ | 7,524 | 97.0 | % | $ | 6,011 | 96.6 | % | |||||||||
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Other | ||||
Income — Net | ||||
Other income — net for the year ended December 31, 2003 | $ | (49 | ) | |
Elements comprising the difference in Other income — net: | ||||
Gains of $69 million on the change in fair value of derivatives in 2004, compared to $20 million in 2003 | (49 | ) | ||
Foreign exchange losses of $2 million in 2004 compared to $17 million in 2003 | (15 | ) | ||
Service fee income of $17 million earned in 2004 compared to $13 million in 2003 | (4 | ) | ||
Gains of $5 million on the disposals of fixed assets in 2004 compared to $28 million in 2003 | 23 | |||
Other — net | 32 | |||
Total elements comprising the difference in Other income — net | (13 | ) | ||
Other income — net for the year ended December 31, 2004 | $ | (62 | ) | |
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• | BGP excluded restructuring charges related only to major corporate-wide acquisitions or initiatives, whereas Regional Income excludes all restructuring charges; | |
• | BGP included pension costs based on the normal current service cost with all actuarial gains, losses and other adjustments being included in Intersegment and other. Regional Income includes all pension costs in the applicable operating segment; and | |
• | BGP excluded certain corporate non-operating costs incurred by an operating segment and included such costs in Intersegment and other. Regional Income includes these costs in the operating segment. |
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Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
($ in millions) | ||||||||||||
Regional Income | ||||||||||||
North America | $ | 196 | $ | 240 | $ | 176 | ||||||
Europe | 206 | 200 | 175 | |||||||||
Asia | 108 | 80 | 69 | |||||||||
South America | 110 | 134 | 88 | |||||||||
Total Regional Income | 620 | 654 | 508 | |||||||||
Interest expense and amortization of debt discounts and fees | (203 | ) | (74 | ) | (40 | ) | ||||||
Unrealized gains due to changes in the fair value of derivatives(1) | 140 | 77 | 20 | |||||||||
Depreciation and amortization | (230 | ) | (246 | ) | (222 | ) | ||||||
Litigation settlement — net of insurance recoveries | (40 | ) | — | — | ||||||||
Impairment charges on long-lived assets | (7 | ) | (75 | ) | (4 | ) | ||||||
Minority interests’ share | (21 | ) | (10 | ) | (3 | ) | ||||||
Adjustment to eliminate proportional consolidation(2) | (36 | ) | (41 | ) | (36 | ) | ||||||
Restructuring charges | (10 | ) | (20 | ) | (8 | ) | ||||||
Gain on disposals of fixed assets and businesses | 17 | 5 | 28 | |||||||||
Corporate costs | (72 | ) | (49 | ) | (36 | ) | ||||||
Gains on the monetization of cross-currency interest rate swaps | 45 | — | — | |||||||||
Provision for taxes on income | (107 | ) | (166 | ) | (50 | ) | ||||||
Net income before cumulative effect of accounting change | 96 | 55 | 157 | |||||||||
Cumulative effect of accounting change — net of tax | (6 | ) | — | — | ||||||||
Net income | $ | 90 | $ | 55 | $ | 157 | ||||||
(1) | Except for Korean foreign exchange derivatives. | |
(2) | Our financial information for our segments (including Regional Income) includes the results of our non-consolidated affiliates on a proportionately consolidated basis, which is consistent with the way we manage our business segments. However, under GAAP, these non-consolidated affiliates are accounted for using the equity method of accounting. Therefore, in order to reconcile Total Regional Income to Net income, the proportional Regional Income of these non-consolidated affiliates is removed from Total Regional Income, net of our share of their net after-tax results, which is reported asEquity in net income of non-consolidated affiliateson our consolidated and combined statements of income. See Note 8 — Investment in and Advances to Non-Consolidated Affiliates to our consolidated and combined financial statements for the year ended December 31, 2005 for further information about these non-consolidated affiliates. |
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2005 | 2004 | |||||||||||||||||||
Year Ended December 31, | Versus | Versus | ||||||||||||||||||
North America | 2005 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||
($ in millions) | ||||||||||||||||||||
Total shipments(kt) | 1,194 | 1,175 | 1,083 | 2 | % | 8 | % | |||||||||||||
Net sales | $ | 3,265 | $ | 2,964 | $ | 2,385 | 10 | % | 24 | % | ||||||||||
Regional Income | $ | 196 | $ | 240 | $ | 176 | (18 | )% | 36 | % | ||||||||||
Total assets | $ | 1,547 | $ | 1,406 | $ | 2,392 | 10 | % | (41 | )% |
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2005 | 2004 | |||||||||||||||||||
Year Ended December 31, | Versus | Versus | ||||||||||||||||||
Europe | 2005 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||
($ in millions) | ||||||||||||||||||||
Total shipments(kt) | 1,081 | 1,089 | 1,012 | (1 | )% | 8 | % | |||||||||||||
Net sales | $ | 3,093 | $ | 3,081 | $ | 2,510 | — | % | 23 | % | ||||||||||
Regional Income | $ | 206 | $ | 200 | $ | 175 | 3 | % | 14 | % | ||||||||||
Total assets | $ | 2,139 | $ | 2,885 | $ | 2,364 | (26 | )% | 22 | % |
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2005 | 2004 | |||||||||||||||||||
Year Ended December 31, | Versus | Versus | ||||||||||||||||||
Asia | 2005 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||
($ in millions) | ||||||||||||||||||||
Total shipments(kt) | 524 | 491 | 428 | 7 | % | 15 | % | |||||||||||||
Net sales | $ | 1,391 | $ | 1,194 | $ | 918 | 16 | % | 30 | % | ||||||||||
Regional Income | $ | 108 | $ | 80 | $ | 69 | 35 | % | 16 | % | ||||||||||
Total assets | $ | 1,002 | $ | 954 | $ | 904 | 5 | % | 6 | % |
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2005 | 2004 | |||||||||||||||||||
Year Ended December 31, | Versus | Versus | ||||||||||||||||||
South America | 2005 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||
($ in millions) | ||||||||||||||||||||
Total shipments(kt) | 288 | 264 | 258 | 9 | % | 2 | % | |||||||||||||
Net sales | $ | 630 | $ | 525 | $ | 414 | 20 | % | 27 | % | ||||||||||
Regional Income | $ | 110 | $ | 134 | $ | 88 | (18 | )% | 52 | % | ||||||||||
Total assets | $ | 790 | $ | 779 | $ | 808 | 1 | % | (4 | )% |
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2005 | 2004 | |||||||||||||||||||||||||||||||
Nine Months Ended September 30, | Year Ended December 31, | Versus | Versus | |||||||||||||||||||||||||||||
2006 | 2005 | Change | 2005 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||||||||||||
Net cash provided by operating activities | $ | 6 | $ | 366 | $ | (360 | ) | $ | 449 | $ | 208 | $ | 444 | $ | 241 | $ | (236 | ) | ||||||||||||||
Dividends(A) | (28 | ) | (27 | ) | (1 | ) | (34 | ) | (4 | ) | — | (30 | ) | (4 | ) | |||||||||||||||||
Capital expenditures | (77 | ) | (104 | ) | 27 | (178 | ) | (165 | ) | (189 | ) | (13 | ) | 24 | ||||||||||||||||||
Premiums paid to purchase derivative instruments | (2 | ) | (26 | ) | 24 | — | — | — | — | — | ||||||||||||||||||||||
Net proceeds from settlement of derivative instruments | 227 | 96 | 131 | — | — | — | — | — | ||||||||||||||||||||||||
Free cash flow | $ | 126 | $ | 305 | $ | (179 | ) | $ | 237 | $ | 39 | $ | 255 | $ | 198 | $ | (216 | ) | ||||||||||||||
2005 | 2004 | |||||||||||||||||||||||||||||||
September 30, | December 31, | December 31, | Versus | Versus | ||||||||||||||||||||||||||||
2006 | 2005 | Change | 2005 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||||||||||||
Cash and cash equivalents | $ | 71 | $ | 100 | $ | (29 | ) | $ | 100 | $ | 31 | $ | 27 | $ | 69 | $ | 4 | |||||||||||||||
(A) | Dividends for the year ended December 31, 2004 include only those paid by our less than wholly-owned subsidiaries to their minority shareholders. |
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Nine Months Ended | 2005 | 2004 | ||||||||||||||||||||||||||||||
September 30, | Year Ended December 31, | Versus | Versus | |||||||||||||||||||||||||||||
2006 | 2005 | Change | 2005 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||||||
Proceeds from settlement of derivative instruments, less premiums paid to purchase derivative instruments | $ | 225 | $ | 70 | $ | 155 | $ | 91 | $ | — | $ | — | $ | 91 | $ | — | ||||||||||||||||
Capital expenditures | (77 | ) | (104 | ) | 27 | (178 | ) | (165 | ) | (189 | ) | (13 | ) | 24 | ||||||||||||||||||
Proceeds from (advances on) loans receivable — net | 27 | 392 | (365 | ) | 393 | 874 | (1,210 | ) | (481 | ) | 2.084 | |||||||||||||||||||||
Cash advance received on pending transfer of rights | 15 | — | 15 | — | — | — | — | — | ||||||||||||||||||||||||
Payments related to disposal of business | (7 | ) | — | (7 | ) | — | — | — | — | — | ||||||||||||||||||||||
Changes in investment in and advances to non-consolidated affiliates | 4 | — | 4 | — | — | (11 | ) | — | 11 | |||||||||||||||||||||||
Proceeds from sales of assets | 3 | 9 | (6 | ) | 19 | 17 | 33 | 2 | (16 | ) | ||||||||||||||||||||||
Net cash provided by (used in) investing activities | $ | 190 | $ | 367 | $ | (177 | ) | $ | 325 | $ | 726 | $ | (1,377 | ) | $ | (401 | ) | $ | 2,103 | |||||||||||||
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Nine Months Ended | 2005 | 2004 | ||||||||||||||||||||||||||||||
September 30, | Year Ended December 31, | Versus | Versus | |||||||||||||||||||||||||||||
2006 | 2005 | Change | 2005 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||||||
Capital expenditures | $ | 77 | $ | 104 | $ | (27 | ) | $ | 178 | $ | 165 | $ | 189 | $ | 13 | $ | (24 | ) | ||||||||||||||
Depreciation and amortization | 174 | 173 | 1 | 230 | 246 | 222 | (16 | ) | 24 | |||||||||||||||||||||||
Reinvestment rate | 44 | % | 60 | % | 77 | % | 67 | % | 85 | % |
• | any obligation under certain guarantees or contracts; | |
• | a retained or contingent interest in assets transferred to an unconsolidated entity or similar entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets; | |
• | any obligation under certain derivative instruments; and | |
• | any obligation under a material variable interest held by the registrant in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the registrant, or engages in leasing, hedging or research and development services with the registrant. |
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As of September 30, 2006 | ||||||||||||||||||
Maturity | Net Fair | |||||||||||||||||
Dates | Assets | Liabilities | Value | |||||||||||||||
Forward foreign exchange contracts | 2006 through 2011 | $ | 12 | $ | (11 | ) | $ | 1 | ||||||||||
Interest rate swaps | 2007 through 2008 | 3 | — | 3 | ||||||||||||||
Cross-currency interest rate swaps | 2006 through 2015 | — | (76 | ) | (76 | ) | ||||||||||||
Aluminum forward contracts | 2006 through 2009 | 68 | (21 | ) | 47 | |||||||||||||
Aluminum options | 2006 | 25 | — | 25 | ||||||||||||||
Fixed price electricity contract | 2016 | 49 | — | 49 | ||||||||||||||
Embedded derivative instruments | 2007 | 5 | — | 5 | ||||||||||||||
162 | (108 | ) | 54 | |||||||||||||||
Less: current portion | 107 | (41 | ) | 66 | ||||||||||||||
$ | 55 | $ | (67 | ) | $ | (12 | ) | |||||||||||
• | wholly-owned or majority-owned subsidiaries; | |
• | variable interest entities consolidated under FASB Interpretation No. 46 (Revised),Consolidation of Variable Interest Entities; and | |
• | Aluminium Norf GmbH, which is a fifty percent (50%) owned joint venture that does not meet the consolidation tests under FASB Interpretation No. 46 (Revised). |
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Maximum | Liability | Assets | ||||||||||
Potential Future | Carrying | Held for | ||||||||||
Type of Entity | Payment | Value | Collateral | |||||||||
Wholly-owned subsidiaries | $ | 35 | $ | 21 | $ | — | ||||||
Majority-owned subsidiaries | 2 | — | — | |||||||||
Aluminium Norf GmbH | 13 | — | — |
2007- | 2009- | 2011 and | ||||||||||||||||||
Total | 2006 | 2008 | 2010 | Thereafter | ||||||||||||||||
($ in millions) | ||||||||||||||||||||
Long-term debt(1) | $ | 2,581 | $ | 28 | $ | 217 | $ | 1 | $ | 2,335 | ||||||||||
Interest on long-term debt(2) | 1,313 | 170 | 333 | 318 | 492 | |||||||||||||||
Capital leases(3) | 78 | 6 | 12 | 12 | 48 | |||||||||||||||
Operating leases(4) | 57 | 14 | 20 | 11 | 12 | |||||||||||||||
Purchase obligations(5) | 10,284 | 2,814 | 4,100 | 1,844 | 1,526 | |||||||||||||||
Unfunded pension plan benefits(6) | 324 | 25 | 54 | 60 | 185 | |||||||||||||||
Other post-employment benefits(6) | 78 | 7 | 14 | 14 | 43 | |||||||||||||||
Funded pension plans(6) | 26 | 26 | — | — | — | |||||||||||||||
Total | $ | 14,741 | $ | 3,090 | $ | 4,750 | $ | 2,260 | $ | 4,641 | ||||||||||
(1) | Includes only principal payments on our Notes, term loans, revolving credit facilities and notes payable to banks and others. These amounts exclude payments under capital lease obligations. | |
(2) | Interest on our fixed rate debt is estimated using the stated interest rate. Interest on our variable rate debt is estimated using the rate in effect as of December 31, 2005 and includes the effect of current interest rate swap agreements. Actual future interest payments may differ from these amounts based on changes in floating interest rates or other factors or events. These amounts include an estimate for unused commitment fees. Excluded from these amounts are interest related to capital lease obligations, the amortization |
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of debt issuance and other costs related to indebtedness, any additional “special interest” under the terms of our Notes and additional costs related to consents and waivers. | ||
(3) | Includes both principal and interest components of future minimum capital lease payments. Excluded from these amounts are insurance, taxes and maintenance associated with the property. | |
(4) | Includes the minimum lease payments for non-cancelable leases for property and equipment used in our operations. We do not have any operating leases with contingent rents. Excluded from these amounts are insurance, taxes and maintenance associated with the property. | |
(5) | Include agreements to purchase goods (including raw materials and capital expenditures) and services that are enforceable and legally binding on us, and that specify all significant terms. Some of our raw material purchase contracts have minimum annual volume requirements. In these cases, we estimate our future purchase obligations using annual minimum volumes and costs per unit that are in effect as of December 31, 2005. Due to volatility in the cost of our raw materials, actual amounts paid in the future may differ from these amounts. Excluded from these amounts are the impact of any derivative instruments and any early contract termination fees, such as those typically present in energy contracts. | |
(6) | Obligations for post-retirement benefit plans are estimated based on actuarial estimates using benefit assumptions for, among other factors, discount rates, expected long-term rates of return on assets, rates of compensation increases, and healthcare cost trends. Payments for unfunded pension plan benefits and other post-employment benefits are estimated through 2015. For funded pension plans, estimating the requirements beyond 2006 is not practical, as it depends on the performance of the plans’ investments, among other factors. |
Declaration Date | Record Date | Dividend/Share | Payment Date | |||||
March 1, 2005 | March 11, 2005 | $ | 0.09 | March 24, 2005 | ||||
April 22, 2005 | May 20, 2005 | $ | 0.09 | June 20, 2005 | ||||
July 27, 2005 | August 22, 2005 | $ | 0.09 | September 20, 2005 | ||||
October 28, 2005 | November 21, 2005 | $ | 0.09 | December 20, 2005 | ||||
February 23, 2006 | March 8, 2006 | $ | 0.09 | March 23, 2006 | ||||
April 27, 2006 | May 20, 2006 | $ | 0.09 | June 20, 2006 | ||||
August 28, 2006 | September 7, 2006 | $ | 0.01 | September 25, 2006 | ||||
October 26, 2006 | November 20, 2006 | $ | 0.01 | December 20, 2006 |
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Effect if Actual Results | ||||
Description | Judgments and Uncertainties | Differ from Assumptions | ||
Inventory | ||||
We carry our inventories at the lower of their cost or market value, reduced by allowances for | A significant component of our inventory is aluminum. The market price of aluminum and | If actual results are not consistent with our assumptions and judgments, we may be exposed to |
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Effect if Actual Results | ||||
Description | Judgments and Uncertainties | Differ from Assumptions | ||
excess and obsolete items. We use both the ‘‘average cost” and‘‘first- in/first-out” methods to determine cost | scrap are subject to market price changes. During periods when market prices decline below book value, we may need to provide an allowance to reduce the carrying value of our inventory to its net realizable value. During periods when market prices increase we continue to state our inventories at the lower of their cost or market value. | gains or losses that could be material. A decrease of $1 per tonne in the market price below our carrying value would result in a pre-tax charge and corresponding decline in inventory value of approximately $0.5 million. | ||
Derivative Financial Instruments | ||||
Our operations and cash flows are subject to fluctuations due to changes in commodity prices, foreign currency exchange rates, energy prices and interest rates. We use derivative financial instruments to manage commodity prices, foreign currency exchange rates and interest rate exposures, though not for speculative purposes. Derivatives we use are primarily commodity forward contracts, foreign currency forward contracts and interest rate swaps. | We are exposed to changes in aluminum prices through arrangements where the customer has received a fixed price commitment from us. We manage this risk by hedging future purchases of metal required for these firm commitments. In addition, we hedge a portion of our future production. Short term exposures to changing foreign currency exchange rates occur due to operating cash flows denominated in foreign currencies. We manage this risk with currency exchange options, forward and swap contracts. Our most significant foreign currency exposures relate to the Euro, Brazilian real and the Korean won. We assess market conditions and determine an appropriate amount to hedge based on pre-determined policies. We are exposed to changes in interest rates due to our financing, investing and cash management activities. We may enter into interest rate swap contracts to protect against our exposure to changes in future interest rates, which requires estimating in what direction and by how much rates will change, and deciding how much of the exposure to hedge. | To the extent that these exposures are not fully hedged, we are exposed to gains and losses when changes occur in the market price of aluminum. Hedges of specific arrangements and future production increase or decrease the fair value by $90.2 million (as of December 31, 2005) for a 10% change in the market value of aluminum. To the extent that operating cash flows are not fully hedged, we are exposed to foreign exchange gains and losses. In the event that we chose not to hedge a cash flow, an adverse movement in rates could impact our earnings and cash flows. The change in the fair value of the foreign currency hedge portfolio as of December 31, 2005 that would result from a 10% instantaneous appreciation or depreciation in foreign exchange rates would result in an increase or decrease of $74.8 million. To the extent that we choose to hedge our interest costs, we are able to avoid the impacts of changing interest rates on our interest costs. In the event that we do not hedge a floating rate debt an adverse movement in market interest rates could impact our interest cost. As of December 31, 2005, a 10% change in the market interest rate would increase or decrease the fair value of our interest rate hedges by $1.8 million. A 12.5 basis point |
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Effect if Actual Results | ||||
Description | Judgments and Uncertainties | Differ from Assumptions | ||
change in market interest rates would increase or decrease our unhedged interest cost on floating rate debt by $0.5 million. | ||||
Long-lived assets | ||||
Long-lived assets, such as property and equipment, are reviewed for impairment when events or changes in circumstances indicate that the carrying value of the assets contained in our financial statements may not be recoverable. When evaluating long-lived assets for potential impairment, we first compare the carrying value of the asset to the asset’s estimated, future net cash flows (undiscounted and without interest charges). If the estimated future cash flows are less than the carrying value of the asset, we calculate an impairment loss. The impairment loss calculation compares the carrying value of the asset to the asset’s estimated fair value, which may be based on estimated future cash flows (discounted and with interest charges). We recognize an impairment loss if the amount of the asset’s carrying value exceeds the asset’s estimated fair value. If we recognize an impairment loss, the adjusted carrying amount of the asset will be its new cost basis. For a depreciable long-lived asset, the new cost basis will be depreciated over the remaining useful life of that asset. Restoration of a previously recognized impairment loss is prohibited. | Our impairment loss calculations require management to apply judgments in estimating future cash flows and asset fair values, including forecasting useful lives of the assets and selecting the discount rate that represents the risk inherent in future cash flows. | Using the impairment review methodology described herein, we recorded long-lived asset impairment charges of $7 million during the year ended December 31, 2005. If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be exposed to additional impairment losses that could be material to our results of operations. | ||
Goodwill and Intangible Assets | ||||
Goodwill represents the excess of the purchase price over the fair value of the net assets of acquired companies. We follow the guidance in FASB Statement No. 142,Goodwill and Intangible Assets, and test goodwill for impairment using a fair value approach, at the reporting unit | We have recognized goodwill in our Europe operating segment, which is also our reporting unit for purposes of performing our goodwill impairment testing. We determine the fair value of our reporting units using the discounted cash flow valuation technique, which requires us to | We performed our annual testing for goodwill impairment as of October 31, 2005 using the methodology described herein, and determined that no goodwill impairment existed. If actual results are not consistent with our assumptions and |
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Effect if Actual Results | ||||
Description | Judgments and Uncertainties | Differ from Assumptions | ||
level. We are required to test for impairment at least annually, absent some triggering event that would accelerate an impairment assessment. On an ongoing basis, absent any impairment indicators, we perform our goodwill impairment testing as of October 31 of each year. Our intangible assets consist of acquired trademarks and both patented and non-patented technology and are amortized over 15 years. As of December 31, 2005, we do not have any intangible assets with indefinite useful lives. We continue to review the carrying values of amortizable intangible assets whenever facts and circumstances change in a manner that indicates their carrying values may not be recoverable. | make assumptions and estimates regarding industry economic factors and the profitability of future business strategies. | estimates, we may be exposed to additional goodwill impairment charges. | ||
Retirement and Pension Plans | ||||
We account for our defined benefit pension plans and non-pension post-retirement benefit plans using actuarial models required by FASB Statements No. 87,Employers’ Accounting for Pensions, and No. 106,Employers’ Accounting for Postretirement Benefits Other Than Pensions, respectively. These models use an attribution approach that generally spreads the financial impact of changes to the plan and actuarial assumptions over the average remaining service lives of the employees in the plan. Changes in liability due to changes in actuarial assumptions such as discount rate, rate of compensation increases and mortality, as well as annual deviations between what was assumed and what was experienced by the plan are treated as gains or losses. Additionally, gains and losses are amortized over the group’s service lifetime. The average remaining service lives of the employee plan | All net actuarial gains and losses are amortized over the expected average remaining service life of the employees. The costs and obligations of pension and other postretirement benefits are calculated based on assumptions including the long-term rate of return on pension assets, discount rates for pension and other postretirement benefit obligations, expected service period, salary increases, retirement ages of employees and health care cost trend rates. These assumptions bear the risk of change as they require significant judgment and they have inherent uncertainties that management may not be able to control. The two most significant assumptions used to calculate the obligations in respect of the net employee benefit plans are the discount rates for pension and other postretirement benefits, and the expected return on assets. The discount rate for pension and other postretirement benefits is the | An increase in the discount rate of 0.5%, assuming inflation remains unchanged, will result in a decrease of $67 million in the pension and other postretirement obligations and in a decrease of $9 million in the net periodic benefit cost. A decrease in the discount rate of 0.5%, assuming inflation remains unchanged, will result in an increase of $74 million in the pension and other postretirement obligations and in an increase of $10 million in the net periodic benefit cost. The calculation of the estimate of the expected return on assets is described in Note 15 — Post-Retirement Plans to our consolidated and combined financial statements for the year ended December 31, 2005. The weighted average expected return on assets was 7.4% for 2005, 8.3% for 2004 and 8.0% for 2003. The expected return on assets is a long-term assumption whose accuracy can only be measured |
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Effect if Actual Results | ||||
Description | Judgments and Uncertainties | Differ from Assumptions | ||
is 14.3 years. The principle underlying the required attribution approach is that employees render service over their average remaining service lives on a relatively smooth basis and, therefore, the accounting for benefits earned under the pension or non-pension postretirement benefits plans should follow the same relatively smooth pattern. Our pension obligations relate to funded defined benefit pension plans we have established in the United States, Canada and the United Kingdom, unfunded pension benefits primarily in Germany, and lump sum indemnities payable upon retirement to employees of businesses in France, Korea, Malaysia and Italy. Pension benefits are generally based on the employee’s service and either on a flat dollar rate or on the highest average eligible compensation before retirement. In addition, some of our entities participate in defined benefit plans managed by Alcan in the U.S., the U.K. and Switzerland. | interest rate used to determine the present value of benefits. It is based on spot rate yield curves and individual bond matching models for pension plans in Canada and the U.S., and on published long-term high quality corporate bond indices for pension plans in other countries, at the end of each fiscal year. In light of the average long duration of pension plans in other countries, no adjustments were made to the index rates. The weighted average discount rate used to determine the benefit obligation was 5.1% as of December 31, 2005, compared to 5.4% for 2004 and 5.8% for 2003. The weighted average discount rate used to determine the net periodic benefit cost is the rate used to determine the benefit obligation in the previous year. | over a long period based on past experience. A variation in the expected return on assets by 0.5% will result in a variation of approximately $2 million in the net periodic benefit cost. | ||
Income Taxes | ||||
We account for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. In addition, deferred tax assets are also recorded with respect to net operating losses and other tax attribute carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Valuation allowances are | The ultimate recovery of certain of our deferred tax assets is dependent on the amount and timing of taxable income that we will ultimately generate in the future and other factors such as the interpretation of tax laws. This means that significant estimates and judgments are required to determine the extent that valuation allowances should be provided against deferred tax assets. We have provided valuation allowances as of December 31, 2005 aggregating $73 million against such assets based on our current assessment of future operating results and these other factors. | Although management believes that the estimates and judgments discussed herein are reasonable, actual results could differ, and we may be exposed to gains or losses that could be material. |
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Effect if Actual Results | ||||
Description | Judgments and Uncertainties | Differ from Assumptions | ||
established when realization of the benefit of deferred tax assets is not deemed to be more likely than not. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. | ||||
Contingent tax liabilities must be accounted for separately from deferred tax assets and liabilities. FASB Statement No. 5,Accounting for Contingenciesis the governing standard for contingent liabilities. It must be probable that a contingent tax benefit will be sustained before the contingent benefit is recognized for financial reporting purposes. | ||||
Assessment of Loss Contingencies | ||||
We have legal and other contingencies, including environmental liabilities, which could result in significant losses upon the ultimate resolution of such contingencies. Environmental liabilities that are not legal asset retirement obligations are accrued on an undiscounted basis when it is probable that a liability exists for past events. | We have provided for losses in situations where we have concluded that it is probable that a loss has been or will be incurred and the amount of the loss is reasonably estimable. A significant amount of judgment is involved in determining whether a loss is probable and reasonably estimable due to the uncertainty involved in determining the likelihood of future events and estimating the financial statement impact of such events. | If further developments or resolution of a contingent matter are not consistent with our assumptions and judgments, we may need to recognize a significant charge in a future period related to an existing contingency. |
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Change in | Change in | |||||||
Rate/Price | Fair Value | |||||||
(In millions) | ||||||||
Aluminum Options | 10 | % | $ | 9 | ||||
Aluminum Forward Contracts | 10 | % | 35 |
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Change in | Change in | |||||||
Rate/Price | Fair Value | |||||||
(In millions) | ||||||||
Electricity | 10 | % | $ | 12 | ||||
Natural Gas | 10 | % | — |
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Change in | Change in | |||||||
Rate | Fair Value | |||||||
(In millions) | ||||||||
Currency measured against the U.S. dollar | ||||||||
Euro | 10 | % | $ | 46 | ||||
Korean won | 10 | % | 28 | |||||
Brazilian real | 10 | % | 21 |
Change in | Change in | |||||||
Rate | Fair Value | |||||||
(In millions) | ||||||||
Currency measured against the U.S. dollar | ||||||||
Euro | 10 | % | $ | 73 |
Change in | Change in | |||||||
Rate | Fair Value | |||||||
(In millions) | ||||||||
Interest Rate Swap contracts | ||||||||
North America | 10 | % | $ | 1 | ||||
Asia | 10 | % | — |
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• | “hot mills” — that require sheet ingot, a rectangular slab of aluminum, as starter material; and | |
• | “continuous casting mills” — that can convert molten metal directly into semi-finished sheet. |
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• | Move towards a premium product conversion model to maximize the value of our assets. | |
• | Effectively manage our significant risk exposures impacting cash flows and earnings, including price volatility for aluminum, foreign currency exchange rates, interest rates and energy prices. | |
• | Disposal of non-core assets to reshape our existing portfolio of businesses to provide for stable and predictable earnings and cash profiles. |
• | Maintain high asset utilization rates. | |
• | Maintain or improve our cost position in all regions where we operate versus our competitors. We will continue to use continuous process improvement initiatives to focus on higher cost per ton products, with the goal of decreasing the cost per ton. | |
• | Focus on productivity improvements to increase our capacity. |
• | Optimize our portfolio of flat rolled products, improving our product mix and margins by leveraging our assets and technical capabilities into products and markets that have higher margins, stability, barriers to entry and growth. Supply these differentiated and demanding higher value flat rolled products in all regions in which we operate. | |
• | Grow through the development of new market applications and through the substitution of existing market applications, such as our Novelis Fusiontm technology(1), where our customers benefit from superior characteristicsand/or a substitution to a higher value product. |
• | Move towards higher technology and more profitable end-use markets by delivering proprietary products and processes that will be unique and attractive to our customers. |
• | Continuously review acquisition or partnership opportunities that would enhance both our value and geographical footprint. |
• | Continue to reduce our debt using our cash flows and proceeds from the sale of non-core assets, in order to provide flexibility in our capital structure and establish a solid financial platform from which we can take advantage of opportunities to increase shareholder value. |
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Nine Months Ended September 30, | Year Ended December 31, | |||||||||||||||||||
Operating Segment | 2006 | 2005 | 2005 | 2004 | 2003 | |||||||||||||||
(All amounts in $ millions, except shipments, | ||||||||||||||||||||
which are in kt) | ||||||||||||||||||||
North America | ||||||||||||||||||||
Net sales(i) | $ | 2,841 | $ | 2,500 | $ | 3,265 | $ | 2,964 | $ | 2,385 | ||||||||||
Regional Income(ii) | 64 | 141 | 196 | 240 | 176 | |||||||||||||||
Total assets | 1,487 | 1,388 | 1,547 | 1,406 | 2,392 | |||||||||||||||
Total shipments(i) | 942 | 913 | 1,194 | 1,175 | 1,083 | |||||||||||||||
Rolled product shipments(i) | 883 | 852 | 1,119 | 1,115 | 1,042 | |||||||||||||||
Europe | ||||||||||||||||||||
Net sales(i) | $ | 2,688 | $ | 2,376 | $ | 3,093 | $ | 3,081 | $ | 2,510 | ||||||||||
Regional Income(ii) | 208 | 161 | 206 | 200 | 175 | |||||||||||||||
Total assets | 2,392 | 2,129 | 2,139 | 2,885 | 2,364 | |||||||||||||||
Total shipments(i) | 812 | 831 | 1,081 | 1,089 | 1,012 | |||||||||||||||
Rolled product shipments(i) | 797 | 768 | 1,009 | 984 | 860 | |||||||||||||||
Asia | ||||||||||||||||||||
Net sales(i) | $ | 1,235 | $ | 1,025 | $ | 1,391 | $ | 1,194 | $ | 918 | ||||||||||
Regional Income(ii) | 70 | 80 | 108 | 80 | 69 | |||||||||||||||
Total assets | 1,021 | 971 | 1,002 | 954 | 904 | |||||||||||||||
Total shipments(i) | 379 | 386 | 524 | 491 | 428 | |||||||||||||||
Rolled product shipments(i) | 347 | 356 | 484 | 452 | 385 | |||||||||||||||
South America | ||||||||||||||||||||
Net sales(i) | $ | 626 | $ | 448 | $ | 630 | $ | 525 | $ | 414 | ||||||||||
Regional Income(ii) | 122 | 86 | 110 | 134 | 88 | |||||||||||||||
Total assets | 814 | 780 | 790 | 779 | 808 | |||||||||||||||
Total shipments(i) | 223 | 212 | 288 | 264 | 258 | |||||||||||||||
Rolled product shipments(i) | 204 | 191 | 261 | 234 | 204 |
(i) | The net sales and shipments information presented excludes intersegment sales and shipments. | |
(ii) | Prior to our spin-off from Alcan, profitability of the operating segments was measured based on business group profit, or BGP. See “Operating Segment Review for the Year Ended December 31, 2005 Compared to the Year Ended December 31, 2004 and Year Ended December 31, 2004 Compared to the Year Ended December 31, 2003” for a reconciliation. Prior periods have been recast to conform to the definition of Regional Income. |
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• | the contributed businesses, liabilities or contracts; | |
• | liabilities or obligations associated with the contributed businesses, as defined in the separation agreement, or otherwise assumed by us pursuant to the separation agreement; and | |
• | any breach by us of the separation agreement or any of the ancillary agreements we entered into with Alcan in connection with the spin-off. |
• | liabilities of Alcan other than those of an entity forming part of our group or otherwise assumed by us pursuant to the separation agreement; | |
• | any liability of Alcan or its subsidiaries, other than us, retained by Alcan under the separation agreement; and | |
• | any breach by Alcan of the separation agreement or any of the ancillary agreements we entered into with Alcan in connection with the spin-off. |
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• | Alcan transferred to us certain assets and liabilities of the automotive and other aluminum rolled products businesses relating to the sales and marketing output of the Sierre North Building, which comprises a portion of the Sierre facility in Switzerland. Pursuant to the terms of the separation and asset transfer agreements, the transfer price was determined by a valuation; | |
• | Alcan leased to us the Sierre North Building and the machinery and equipment located in the Sierre North Building (including the hot and cold mills) for a term of 15 years, renewable at our option for additional five-year periods, at an annual base rent in an amount equal to 8.5% of the book value of the Sierre North Building, the leased machinery or equipment, as applicable, pursuant to the terms of the real estate lease and equipment lease agreements; | |
• | We and Alcan have access to, and use of, property and assets that are common to each of our respective operations at the Sierre facility, pursuant to the terms of the access and easement agreement; | |
• | Alcan agreed to supply us with all our requirements of aluminum rolling ingots for the production of aluminum rolled products at the Sierre facility for a term of ten years, subject to availability, and provided the aluminum rolling slabs meet applicable quality standards and are competitively priced, pursuant to the terms of the metal supply agreement; | |
• | Alcan provides certain services to us at the Sierre facility, including services consisting of or relating to environmental testing, chemical laboratory services, utilities, waste disposal, facility |
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safety and security, medical services, employee food service and rail transportation, and we provide certain services to Alcan at the Sierre facility, including services consisting of or relating to hydraulic and mechanical maintenance, roll grinding and recycled process material for a two-year renewable term, pursuant to the terms of the shared services agreement; and |
• | Alcan retains access to all of the total plate production capacity of the Sierre facility, which represents a portion of Sierre’s total hot mill production capacity. The formula for the price to be charged to Alcan for products from the Sierre hot mill is based upon its proportionate share of the fixed production costs relating to the Sierre hot mill (determined by reference to actual production hours utilized by Alcan) and the variable production costs (determined by reference to the volume of product produced for Alcan). Under the tolling agreement, we have agreed to maintain the pre-spin-off standards of maintenance, management and operation of the Sierre hot mill. |
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Location | Plant Process | Major End-Use Markets/Applications | ||
Berea, Kentucky | Recycling | Recycled ingot | ||
Burnaby, British Columbia | Finishing | Foil containers | ||
Fairmont, West Virginia | Cold rolling, finishing | Foil, HVAC material | ||
Greensboro, Georgia | Recycling | Recycled ingot | ||
Kingston, Ontario | Cold rolling, finishing | Automotive, construction/industrial | ||
Logan, Kentucky(i) | Hot rolling, cold rolling, finishing | Can stock | ||
Louisville, Kentucky | Cold rolling, finishing | Foil, converter foil | ||
Oswego, New York | Hot rolling, cold rolling, recycling, finishing | Can stock, construction/industrial, semi-finished coil | ||
Saguenay, Quebec | Continuous casting | Semi-finished coil | ||
Terre Haute, Indiana | Cold rolling, finishing | Foil | ||
Toronto, Ontario | Finishing | Foil, foil containers | ||
Warren, Ohio | Coating | Can end stock |
(i) | We own 40% of the outstanding common shares of Logan Aluminum Inc., but we have made subsequent equipment investments such that we now have rights to approximately 65% of Logan’s total production capacity. |
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Location | Plant Process | Major End-Use Markets/Applications | ||
Annecy, France(i) | Hot rolling, cold rolling, finishing | Painted sheet, circles | ||
Berlin, Germany | Converting | Packaging | ||
Borgofranco, Italy(ii) | Recycling | Recycled ingot | ||
Bresso, Italy | Finishing | Painted sheet, construction/industrial | ||
Bridgnorth, United Kingdom | Cold rolling, finishing, converting | Foil, packaging | ||
Dudelange, Luxembourg | Continuous casting, cold rolling, finishing | Foil | ||
Göttingen, Germany | Cold rolling, finishing | Can end, lithographic, painted sheet | ||
Latchford, United Kingdom | Recycling | Recycled ingot | ||
Ludenscheid, Germany(iii) | Cold rolling, finishing, converting | Foil, packaging | ||
Nachterstedt, Germany | Cold rolling, finishing | Automotive, industrial | ||
Norf, Germany(iv) | Hot rolling, cold rolling | Can stock, foilstock, reroll automotive, industrial | ||
Ohle, Germany(iii) | Cold rolling, finishing, converting | Foil, packaging | ||
Pieve, Italy | Continuous casting, cold rolling | Paintstock, industrial | ||
Rogerstone, United Kingdom | Hot rolling, cold rolling | Foilstock, paintstock, reroll, industrial | ||
Rugles, France | Continuous casting, cold rolling, finishing | Foil | ||
Sierre, Switzerland(v) | Hot rolling, cold rolling | Automotive sheet, industrial |
(i) | We sold our aluminum rolling mill in Annecy, France to a third party in March 2006. | |
(ii) | Our operations in Borgofranco, Italy were closed in March 2006. | |
(iii) | We reorganized our plants in Ohle and Ludenscheid, Germany, including the closure of two non-core business lines located within those facilities as of May 2006. | |
(iv) | Operated as a 50/50 joint venture between us and Hydro Aluminium Deutschland GmbH (Hydro). | |
(v) | We have entered into an agreement with Alcan pursuant to which Alcan, following the spin-off, retains access to the plate production capacity utilized prior to spin-off at the Sierre facility, which represents a portion of the total production capacity of the Sierre hot mill. |
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Location | Plant Process | Major End-Use Markets/Applications | ||
Bukit Raja, Malaysia(i) | Continuous casting, cold rolling | Construction/industrial, foilstock foil, finstock | ||
Ulsan, Korea(ii) | Hot rolling, cold rolling, recycling | Can stock, construction/industrial, foilstock, recycled ingot | ||
Yeongju, Korea(iii) | Hot rolling, cold rolling | Can stock, construction/industrial, foilstock |
(i) | Ownership of the Bukit Raja plant corresponds to our 58% equity interest in Aluminium Company of Malaysia Berhad. | |
(ii) | We hold a 68% equity interest in the Ulsan plant. | |
(iii) | We hold a 68% equity interest in the Yeongju plant. |
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Location | Plant Process | Major End-Use Markets/Applications | ||
Pindamonhangaba, Brazil | Hot rolling, cold rolling, recycling | Construction/industrial, can stock, foilstock, recycled ingot, foundry ingot, forge stock | ||
Utinga, Brazil | Finishing | Foil |
Location | Plant Process | Major End-Use Markets/Applications | ||
Aratu, Brazil(i) | Smelting | Primary aluminum (sheet ingot and billets) | ||
Ouro Preto, Brazil(i) | Alumina refining, Smelting | Primary aluminum (sheet ingot and billets) | ||
Petrocoque, Brazil(i)(ii) | Refining calcined coke | Carbon products for smelter anodes |
(i) | We have begun exploring the sale of our non-core Brazilian upstream operations including mining, energy and smelting, at our Aratu and Ouro Preto facilities. In November 2006, we sold our interest in Petrocoque as well as our rights to develop a power generation facility at Caçu and Barra dos Coquieros, both located in Brazil. | |
(ii) | Operated as a joint venture in which we had a 25% interest. |
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Name | Age | Position | ||||
William T. Monahan | 59 | Chairman of the Board and Interim Chief Executive Officer | ||||
Edward Blechschmidt(1) (4) | 54 | Director | ||||
Charles G. Cavell(2) (3) | 64 | Director | ||||
Clarence J. Chandran(3) (4) | 57 | Director | ||||
C. Roberto Cordaro(3) (4) | 56 | Director | ||||
Helmut Eschwey(2) (3) | 57 | Director | ||||
David J. FitzPatrick(1) (2) | 52 | Director | ||||
Suzanne Labarge(1) (4) | 60 | Director | ||||
Rudolf Rupprecht(4) | 66 | Director | ||||
Kevin M. Twomey(1) (2) | 59 | Director | ||||
Edward V. Yang(3) (4) | 61 | Director |
(1) | Member of our Audit Committee. | |
(2) | Member of our Nominating and Corporate Governance Committee. | |
(3) | Member of our Human Resources Committee. | |
(4) | Member of our Customer Relations Committee. |
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Name | Age | Position | ||||
Martha Finn Brooks | 46 | Chief Operating Officer | ||||
Rick Dobson | 47 | Senior Vice President and Chief Financial Officer | ||||
Arnaud de Weert | 42 | Senior Vice President and President — Europe | ||||
Kevin Greenawalt | 49 | Senior Vice President and President — North America | ||||
Jack Morrison | 54 | Senior Vice President and President — Asia | ||||
Antonio Tadeu Coelho Nardocci | 48 | Senior Vice President and President — South America | ||||
Steven Fisher | 35 | Vice President, Strategic Planning and Corporate Development | ||||
Steven Fehling | 59 | Vice President Global Procurement and Metal Management | ||||
David Godsell | 50 | Vice President, Human Resources and Environment, Health and Safety | ||||
Robert M. Patterson | 33 | Vice President and Controller | ||||
Orville G. Lunking | 50 | Vice President and Treasurer | ||||
Leslie J. Parrette, Jr. | 44 | General Counsel | ||||
Brenda D. Pulley | 48 | Vice President, Corporate Affairs and Communications | ||||
Thomas Walpole | 51 | Vice President and General Manager, Can Products Business Unit | ||||
Nichole A. Robinson | 36 | Corporate Secretary |
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• | evaluating and compensating our independent registered public accounting firm; | |
• | making recommendations to the board and shareholders relating to the appointment, retention and termination of our independent registered public accounting firm; | |
• | discussing with our independent registered public accounting firm their independence from management; | |
• | reviewing with our independent registered public accounting firm the scope and results of their audit; | |
• | pre-approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm; | |
• | overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC; and | |
• | reviewing and monitoring our accounting principles, accounting policies and disclosure, internal control over financial reporting and disclosure controls and procedures. |
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Portion of Fees | ||||||||||||
Paid in the Form of | Portion of Fees | Amount of Fees | ||||||||||
Name | DDSUs | Paid in Cash | Paid in Cash (US$) | |||||||||
Edward Blechschmidt | 100% | 0% | — | |||||||||
Charles G. Cavell | 50% | 50% | 77,500 | |||||||||
Clarence J. Chandran | 100% | 0% | — | |||||||||
C. Roberto Cordaro | 50% | 50% | 75,000 | |||||||||
Helmut Eschwey | 50% | 50% | 75,000 | |||||||||
David J. FitzPatrick | 50% | 50% | 64,583 | |||||||||
Suzanne Labarge | 50% | 50% | 87,500 | |||||||||
William T. Monahan | 50% | 50% | 75,000 | |||||||||
Rudolf Rupprecht | 50% | 50% | 77,500 | |||||||||
Kevin Twomey | 50% | 50% | — | |||||||||
Edward Yang | 50% | 50% | 77,500 |
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Long-Term | ||||||||||||||||||||||||||||
Compensation Awards | ||||||||||||||||||||||||||||
Annual Compensation | Shares | |||||||||||||||||||||||||||
Bonus | Under | |||||||||||||||||||||||||||
(Executive | Options | All | ||||||||||||||||||||||||||
Performance | Other Annual | Restricted | Granted/ | Other | ||||||||||||||||||||||||
Salary | Award) | Compensation(1) | Share Units | SPAUs(2) | Compensation(3) | |||||||||||||||||||||||
Name And Principal Position | Year | ($) | ($) | ($) | ($) | (#) | ($) | |||||||||||||||||||||
Brian W. Sturgell(4) | 2005 | 985,000 | 820,147 | 426,371 | (5) | 3,876,090 | (6) | — | 223,157 | (8) | ||||||||||||||||||
(Former President and | 2004 | 781,200 | 932,257 | 280,686 | (5) | — | 438,751 | 41,301 | ||||||||||||||||||||
Chief Executive Officer) | 2003 | 600,000 | 561,845 | 254,115 | (5) | 347,212 | (7) | 138,114 | 29,679 | |||||||||||||||||||
Martha Finn Brooks | 2005 | 655,000 | 716,252 | 298,669 | (9) | 1,828,600 | (6) | — | 1,889,844 | (10) | ||||||||||||||||||
(Chief Operating Officer) | 2004 | 514,400 | 631,538 | 50,723 | (9) | — | 155,974 | 14,666 | ||||||||||||||||||||
2003 | 440,000 | 445,608 | 32,661 | — | 71,438 | 16,440 | ||||||||||||||||||||||
Christopher Bark-Jones | 2005 | 440,611 | 472,667 | 20,289 | 1,440,034 | (6) | — | — | ||||||||||||||||||||
(Former President — | 2004 | 440,600 | 395,210 | 43,892 | — | 127,398 | — | |||||||||||||||||||||
European Operations)(13) | 2003 | 375,000 | 465,972 | 9,659 | — | 54,769 | 8,348 | |||||||||||||||||||||
Kevin Greenawalt | 2005 | 310,000 | 317,205 | 18,450 | 439,044 | (6) | — | 11,933 | ||||||||||||||||||||
(President — North | 2004 | 255,400 | 192,850 | 582,751 | (11) | — | 29,766 | 15,655 | ||||||||||||||||||||
American Operations) | 2003 | 230,800 | 175,440 | 381,849 | (11) | — | 16,669 | 16,922 | ||||||||||||||||||||
David Godsell | 2005 | 310,000 | 275,244 | 129,590 | (12) | 211,582 | — | 13,604 | ||||||||||||||||||||
(Vice President, Human | 2004 | 225,850 | 148,781 | 15,802 | — | 18,455 | 14,817 | |||||||||||||||||||||
Resources and Environment, | 2003 | 216,263 | 98,762 | 13,646 | — | 8,930 | 13,751 | |||||||||||||||||||||
Health and Safety) |
(1) | In addition to tax equalization payments and perquisites listed separately below, amounts included in this column for one or more Named Executive Officers include the following perquisites that are either in the aggregate valued at the lesser of $50,000 or 10% of the Named Executive Officer’s total salary and bonus or represent less than 25% of the perquisites reported for a given year: amounts relating to professional financial advice, club memberships, automobile allowance, education expenses, relocation allowances, housing expenses (including interest on housing-related loans transferred to third party financial institutions) and cash payments to be used for perquisites at the Named Executive Officer’s discretion. | |
(2) | See “— Long-Term Incentives — Stock Options” above for a description of the Conversion Plan and “— Long-Term Incentives — Stock Price Appreciation Units” above for a description of the Stock Price Appreciation Unit Plan. On January 6, 2005, Alcan stock options held by employees of Alcan who became our employees following our spin-off from Alcan were replaced with options to purchase our common shares. The number of options shown for periods prior to 2005 have been recast from the number of Alcan options granted into the as-converted number of Novelis options. On January 6, 2005, all Alcan SPAUs held by our employees were replaced with Novelis SPAUs. The number of SPAUs for periods prior to 2005 have been recalculated from the number of Alcan SPAUs granted into the as-converted number of Novelis SPAUs. | |
(3) | In addition to the other amounts stated separately below, “All Other Compensation” for each of our Named Executive Officers for 2005 includes: |
• | savings plan contributions; and | |
• | amounts paid by us for term life insurance. |
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Savings Plan | Life | |||||||
Contributions | Insurance | |||||||
Name | ($) | ($) | ||||||
Brian W. Sturgell | 57,614 | 16,452 | ||||||
Martha Finn Brooks | 22,509 | 2,644 | ||||||
Christopher Bark-Jones | 0 | 0 | ||||||
Kevin Greenawalt | 10,617 | 1,316 | ||||||
David Godsell | 11,196 | 2,408 |
(4) | On August 29, 2006, our board of directors replaced Brian Sturgell, our president and chief executive officer. | |
(5) | Amounts include $393,941 (in 2005), $254,756 (in 2004) and $219,155 (in 2003) for tax equalization payments (i.e., amounts paid such that net income after taxes was not less than it would have been in the United States). | |
(6) | The Named Executive Officers were participants in the Alcan Total Shareholder Returns Performance Plan (TSR Plan) prior to the spin-off. On January 6, 2005, our employees who were Alcan employees immediately prior to the spin-off and who were eligible to participate in the Alcan TSR Plan ceased to actively participate in and accrue benefits under the TSR Plan. The accrued award amounts for each participant in the TSR Plan were converted into Novelis restricted share units. The then current three-year performance periods, namely 2002 — 2005 and 2003 — 2006, were truncated as of the date of the spin-off. At the end of each performance period, each holder of restricted share units will receive the net proceeds based on our common share price at that time, including declared dividends. The number of restricted share units granted to our Named Executive Officers and the dollar value of such restricted share units as of January 6, 2005 was as follows: |
Value of | ||||||||
Restricted | Restricted | |||||||
Share Units | Share Units | |||||||
Name | (#) | ($) | ||||||
Brian W. Sturgell | 166,213 | 3,876,090 | ||||||
Martha Finn Brooks | 78,413 | 1,828,600 | ||||||
Christopher Bark-Jones | 61,751 | 1,440,034 | ||||||
Kevin Greenawalt | 18,827 | 439,044 | ||||||
David Godsell | 9,073 | 211,582 |
(7) | Represents the value, at the time of the grant, of restricted share units granted prior to our spin-off from Alcan. These restricted share units vested in full and were paid in January 2005. | |
(8) | Includes $149,092 that we were obligated to pay under an Alcan employee compensation plan as part of our spin-off from Alcan. No future payments will be required under the plan. | |
(9) | Amounts for 2005 include reimbursement of relocation expenses of $266,245. Amounts for 2004 include $18,211 for tax equalization. | |
(10) | Includes $1,864,691 for the cash payout of deferred share units received prior to the spin-off that were converted to Novelis deferred share units as part of the spin-off. The deferred units vested and were paid in August 2005. | |
(11) | Amounts include $369,293 (in 2004) and $154,815 (in 2003) for tax equalization payments. | |
(12) | Amounts for 2005 include reimbursement of relocation expenses of $123,896. | |
(13) | Chris Bark-Jones stepped down as Senior Vice President and President — European Operations on May 1, 2006. |
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Value of Unexercised | ||||||||||||
Shares Underlying Unexercised | In-the-Money | |||||||||||
Options and SPAUs | Options and SPAUs | |||||||||||
on December 31, 2005(1) | on December 31, 2005(1) | |||||||||||
(#) | ($) | |||||||||||
Brian W. Sturgell | Options (E): | — | E: | — | ||||||||
(Former President and Chief Executive Officer) | Options (U): | 753,477 | U: | 508,995 | ||||||||
Martha Finn Brooks | Options (E): | 89,960 | E: | — | ||||||||
(Chief Operating Officer) | Options (U): | 298,121 | U: | 129,679 | ||||||||
Christopher Bark-Jones | Options (E): | — | E: | — | ||||||||
(Former President — | Options (U): | 4,630 | U: | 9,029 | ||||||||
European Operations) | SPAUs (E): | — | E: | — | ||||||||
SPAUs (U): | 213,850 | U: | 123,926 | |||||||||
Kevin Greenawalt | Options (E): | — | E: | — | ||||||||
(President — | Options (U): | 48,550 | U: | 35,438 | ||||||||
North American Operations) | SPAUs (E): | — | E: | — | ||||||||
SPAUs (U): | 22,952 | U: | 31,666 | |||||||||
David Godsell | Options (E): | 3,969 | E: | — | ||||||||
(Vice President, Human Resources and | Options (U): | 41,604 | U: | 43,384 | ||||||||
Environment, Health and Safety) |
(1) | E: Exercisable U: Unexercisable |
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Name | Units Granted | Performance Period | ||||||
Brian W. Sturgell(1) | 0 | March 24, 2005 to March 23, 2008 | ||||||
(Former President and | 70,275 | March 24, 2006 to March 23, 2008 | ||||||
Chief Executive Officer) | 70,275 | March 24, 2007 to March 23, 2008 | ||||||
Martha Finn Brooks | 23,750 | (2) | March 24, 2005 to March 23, 2008 | |||||
(Chief Operating Officer) | 23,750 | March 24, 2006 to March 23, 2008 | ||||||
23,750 | March 24, 2007 to March 23, 2008 | |||||||
Christopher Bark-Jones | 7,200 | (2) | March 24, 2005 to March 23, 2008 | |||||
(Former President — | 7,200 | March 24, 2006 to March 23, 2008 | ||||||
European Operations) | 7,200 | March 24, 2007 to March 23, 2008 | ||||||
Kevin Greenawalt | 7,200 | (2) | March 24, 2005 to March 23, 2008 | |||||
(President — North American | 7,200 | March 24, 2006 to March 23, 2008 | ||||||
Operations) | 7,200 | March 24, 2007 to March 23, 2008 | ||||||
David Godsell | 6,000 | (2) | March 24, 2005 to March 23, 2008 | |||||
(Vice President, Human Resources and | 6,000 | March 24, 2006 to March 23, 2008 | ||||||
Environment, Health and Safety) | 6,000 | March 24, 2007 to March 23, 2008 |
(1) | On March 14, 2006, Mr. Sturgell agreed with the board of directors’ decision that, in light of our 2005 and 2006 financial reporting delay and restatement, Mr. Sturgell would forfeit his performance share unit award for the first tranche of the award. The board of directors also approved an increase in the size of the award opportunity for Mr. Sturgell for the second and third tranches under the plan to provide an additional incentive for reaching the share price improvement targets for those tranches. The award size for each tranche was increased from a potential of 46,850 PSUs to a potential of 70,275 PSUs. The PSUs for the second and third tranches will not be earned unless the share price improvement targets specified in the Plan ($25.31 and $27.28, respectively) are achieved. As a result of Mr. Sturgell’s termination as CEO on August 29, 2006, all of his PSUs attributable to the second and third tranches of the Founder’s Plan were forfeited. | |
(2) | The share price improvement targets for the first tranche were satisfied in June 2005. As a result, Ms. Brooks and Messrs. Bark-Jones, Greenawalt and Godsell received the full amount of their performance unit tranche for the performance period from March 24, 2005 to March 23, 2008. Ms. Brooks and Messrs. Bark-Jones, Greenawalt and Godsell received cash payments for the payout of these awards in April 2006 in the amounts of $478,325, $145,008, $145,008 and $120,840, respectively, which will be reported as 2006 compensation. |
Years as Officer | ||||||||||||||
5 | 10 | 15 | 20 | |||||||||||
15% | 30% | 40% | 50% |
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Years of Service | ||||||||||||||||||||||
10 | 15 | 20 | 25 | 30 | 35 | |||||||||||||||||
17% | 25% | 34% | 42% | 51% | 59% |
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Years of Service | ||||||||||||||||||||||
10 | 15 | 20 | 25 | 30 | 35 | |||||||||||||||||
17% | 26% | 35% | 43% | 52% | 60% |
Projected Annual | Projected Benefit | |||||||||||
Pension Payable at | 2005 Service | Obligation as of | ||||||||||
Age 65 | Cost | December 31, 2005 | ||||||||||
Name | ($) | ($) | ($) | |||||||||
Brian W. Sturgell | 850,068 | 425,124 | 5,261,224 | |||||||||
Martha Finn Brooks | 306,821 | 109,686 | 396,400 | |||||||||
Christopher Bark-Jones | 396,084 | 194,751 | 4,739,233 | |||||||||
Kevin Greenawalt | 235,673 | 52,933 | 1,271,600 | |||||||||
David Godsell | 201,161 | 45,453 | 1,090,200 |
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Shares Beneficially | Percentage of | |||||||
Name and Address of Beneficial Owner | Owned | Class* | ||||||
FMR Corp.(i) | 11,405,602 | 15.4 | % | |||||
82 Devonshire Street Boston, MA 02109 | ||||||||
McLean Budden Ltd.(ii) | 7,270,318 | 9.8 | % | |||||
145 King Street West Suite 2525 Toronto, ON M5H 1J8 | ||||||||
Kensico Capital Management Corporation(iii) | 4,633,700 | 6.27 | % | |||||
55 Railroad Avenue, 2nd Floor Greenwich, Connecticut 06830 |
* | As of September 8, 2006, we had 74,005,649 shares outstanding. |
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(i) | The following information is based on the Schedule 13G, filed on February 14, 2006 with the SEC by FMR Corp. Fidelity Management & Research Company (Fidelity), 82 Devonshire Street, Boston, Massachusetts 02109, a wholly-owned subsidiary of FMR Corp., and an investment adviser registered under the Investment Advisers Act of 1940, is the beneficial owner of 10,830,102 shares as a result of acting as investment adviser to various investment companies. The ownership of one investment company, FA Mid Cap Stock Fund, 82 Devonshire Street, Boston, Massachusetts 02109, amounted to 6,553,560 shares. Edward C. Johnson 3d, FMR Corp., through its control of Fidelity, and the funds each has sole power to dispose of the 10,830,102 shares owned by the Funds. Neither FMR Corp., nor Edward C. Johnson 3d, Chairman of FMR Corp., has the sole power to vote or direct the voting of the shares owned directly by the Fidelity Funds, which power resides with the Funds’ Boards of Trustees. Fidelity carries out the voting of the shares under written guidelines established by the Funds’ Boards of Trustees. Fidelity Management Trust Company, 82 Devonshire Street, Boston, Massachusetts 02109, a wholly-owned subsidiary of FMR Corp., is the beneficial owner of 129,800 shares as a result of its serving as investment manager of the institutional account(s). Edward C. Johnson 3d and FMR Corp., through its control of Fidelity Management Trust Company, each has sole dispositive power over 129,800 shares and sole power to vote or to direct the voting of 129,800 shares owned by the institutional account(s). Members of the Edward C. Johnson 3d family are the predominant owners of Class B shares of common stock of FMR Corp., representing approximately 49% of the voting power of FMR Corp. The Johnson family group and all other Class B shareholders have entered into a shareholders’ voting agreement under which all Class B shares will be voted in accordance with the majority vote of Class B shares. Accordingly, through their ownership of voting common stock and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the United States Investment Company Act of 1940, to form a controlling group with respect to FMR Corp. Fidelity International (FIL), Pembroke Hall, 42 Crowlane, Hamilton, Bermuda, and various foreign-based subsidiaries provide investment advisory and management services to a number ofnon-U.S. investment companies and certain institutional investors. FIL is the beneficial owner of 445,700 shares and has the sole power to vote and dispose of such shares. FMR Corp. and FIL are of the view that they are not acting as a “group” for purposes of Section 13(d) under the Exchange Act and that they are not otherwise required to attribute to each other the “beneficial ownership” of securities “beneficially owned” by the other corporation within the meaning ofRule 13d-3 under the Exchange Act. The Schedule 13G states that FMR Corp. is making the filing on a voluntary basis as if all the shares are beneficially owned by FMR Corp. and FIL on a joint basis. | |
(ii) | The following information is based on the Form 13F filed on August 11, 2006 with the SEC by McLean Budden Ltd. (McLean Budden). The Form 13F indicates that McLean Budden is the beneficial owner of 7,270,318 shares. McLean Budden has sole voting power and sole dispositive power over 7,270,318 shares. | |
(iii) | The following information is based on the Form 13D filed on September 8, 2006 with the SEC by Kensico Capital Management Corporation (Kensico). The Form 13D indicates that Kensico is the beneficial owner of 4,633,700 shares. Kensico has sole voting power and sole dispositive power over 4,633,700 shares. |
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Shares | ||||||||
Beneficially | Percentage | |||||||
Name of Beneficial Owner | Owned | of Class ** | ||||||
William T. Monahan, Chairman of the Board and Interim Chief Executive Officer(i) | 8,622 | * | ||||||
Edward Blechschmidt, Director(ii) | 136 | * | ||||||
Jacques Bougie, O.C., Director(iii) | 10,459 | * | ||||||
Charles G. Cavell, Director(iv) | 5,404 | * | ||||||
Clarence J. Chandran, Director(v) | 11,259 | * | ||||||
C. Roberto Cordaro, Director(vi) | 5,230 | * | ||||||
Helmut Eschwey, Director(vii) | 5,230 | * | ||||||
David J. FitzPatrick, Director(viii) | 9,798 | * | ||||||
Suzanne Labarge, Director(ix) | 9,101 | * | ||||||
Rudolf Rupprecht, Director(x) | 5,404 | * | ||||||
Kevin M. Twomey, Director(xi) | 361 | * | ||||||
Edward V. Yang, Director(xii) | 5,404 | * | ||||||
Martha Finn Brooks, Chief Operating Officer(xiii) | 189,489 | * | ||||||
Chris Bark-Jones, Senior Vice President and President — Europe(xiv) | 1,177 | * | ||||||
Kevin Greenawalt, Senior Vice President and President — North America(xv) | 12,166 | * | ||||||
David Godsell, Vice President, Human Resources and Environment, Health and Safety(xvi) | 14,369 | * | ||||||
Directors and executive officers as a group (28 persons)(xvii) | 566,000 | * |
* | Indicates less than 1% of the common shares. | |
** | As of August 10, 2006, we had 74,005,649 common shares outstanding. | |
(i) | Includes 5,622 DDSUs. See “Directors’ Compensation.” | |
(ii) | Includes 136 DDSUs. See “Directors’ Compensation.” | |
(iii) | Includes 10,459 DDSUs. See “Directors’ Compensation.” | |
(iv) | Includes 5,404 DDSUs. See “Directors’ Compensation.” | |
(v) | Includes 10,459 DDSUs. See “Directors’ Compensation.” | |
(vi) | Includes 5,230 DDSUs. See “Directors’ Compensation.” | |
(vii) | Includes 5,230 DDSUs. See “Directors’ Compensation.” | |
(viii) | Includes 4,798 DDSUs. See “Directors’ Compensation.” | |
(ix) | Includes 6,101 DDSUs. See “Directors’ Compensation.” | |
(x) | Includes 5,404 DDSUs. See “Directors’ Compensation.” | |
(xi) | Includes 361 DDSUs. See “Directors’ Compensation.” | |
(xii) | Includes 5,404 DDSUs. See “Directors’ Compensation.” | |
(xiii) | Includes options to purchase 164,489 shares that are exercisable within 60 days. | |
(xiv) | Includes options to purchase 1,157 shares that are exercisable within 60 days. | |
(xv) | Includes options to purchase 12,137 shares that are exercisable within 60 days. | |
(xvi) | Includes options to purchase 14,369 shares that are exercisable within 60 days. | |
(xvii) | Our directors and executive officers as a group hold 566,000 of our shares. Our directors and executive officers as a group hold options to purchase 426,829 of our shares that are currently exercisable or are exercisable within 60 days. Our directors as a group hold 64,608 DDSUs. |
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• | if you are a broker dealer and you will receive Notes for your own account in exchange for old notes that you acquired as a result of market-making or other trading activities, you will deliver a prospectus in connection with any resale of the Notes, as more particularly described below; | |
• | you acquired the Notes in the ordinary course of your business; | |
• | you must have no arrangements or understandings with any person to participate in the distribution of the Notes within the meaning of the Securities Act; and | |
• | you must not be an affiliate of ours, as defined in Rule 405 under the Securities Act. |
• | you cannot rely on the position of the SEC set forth in the no-action letters referred to above; and | |
• | you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a resale of the Notes. |
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• | DTC has received an express acknowledgment from a participant in its Automated Tender Offer Program that is tendering old notes that are the subject of the book-entry confirmation; | |
• | The participant has received and agrees to be bound by the terms of the accompanying letter of transmittal, or, in the case of an agent’s message relating to guaranteed delivery, that the participant has received and agrees to be bound by the applicable notice of guaranteed delivery; and | |
• | The agreement may be enforced against that participant. |
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• | Identify the old notes to be withdrawn, including the certificate number or numbers, if applicable, and principal amount of old notes; | |
• | A statement that you are withdrawing your election to have us exchange such old notes; and | |
• | The person named in the letter of transmittal as tendering old notes you are withdrawing; | |
• | The certificate numbers of old notes you are withdrawing; | |
• | Specify the name in which any old notes are to be registered, if different from that of the registered holder of the old notes. |
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• | the Exchange Offer, or the making of any exchange by a holder of old notes, violates applicable law or any applicable interpretation of the staff of the SEC; or | |
• | any action or proceeding has been instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer that might materially impair our ability to proceed with the Exchange Offer or, in any such action or proceeding, any material adverse development has occurred with respect to us; or | |
• | we have not obtained any governmental approval that we deem necessary for the consummation of the Exchange Offer. |
• | terminate the Exchange Offer and return all tendered old notes to the tendering holders; | |
• | extend the Exchange Offer and retain all old notes tendered on or before the expiration date, subject to the holders’ right to withdraw the tender of the old notes; or | |
• | waive any unsatisfied conditions regarding the Exchange Offer and accept all properly tendered old notes that have not been withdrawn. If this waiver constitutes a material change to the Exchange Offer, we will promptly disclose the waiver, and we will extend the Exchange Offer for a period of time that we will determine, depending upon the significance of the waiver and the manner of disclosure to the registered holders, if the Exchange Offer would have otherwise expired. |
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Corporate Trust Operations
Reorganization Unit
101 Barclay Street 7 East
New York, NY 10286
(212) 815- 5098
(212) 298-1915
• | certificates representing old notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of old notes tendered; | |
• | tendered old notes are registered in the name of any person other than the person signing the letter of transmittal; or | |
• | a transfer tax is imposed for any reason other than the exchange of old notes under the Exchange Offer. |
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• | senior, unsecured obligations of the Company; | |
• | effectively junior in right of payment to all existing and future secured debt of the Company (including the Senior Credit Facility) to the extent of the value of the assets securing that debt; | |
• | equal in right of payment (pari passu) with all existing and future senior debt of the Company; | |
• | senior in right of payment to all future subordinated debt of the Company; and | |
• | guaranteed on a senior, unsecured basis by the Subsidiary Guarantors. |
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28% and 30%, respectively | of the Company’s total net sales are represented by net sales to third parties by subsidiaries that are not Subsidiary Guarantors for the nine months ended September 30, 2006 and the year ended December 31, 2005. | |
9% | of the Company’s income before provision for taxes on income, equity in net income of non-consolidated affiliates, minority interests’ share, and interest expense and amortization of debt issuance costs — net are represented by the subsidiaries that are not Subsidiary Guarantors of the Company for the year ended December 31, 2005. For the nine months ended September 30, 2006, the Company’s subsidiaries that are not Subsidiary Guarantors had a combined income before provision for taxes, equity in net income of affiliates, minority interests’ share, and interest expense and amortization debt issuance costs — net totaling $10 million compared to a loss (as defined) of $1 million. | |
33% and 34%, respectively | of the Company’s total assets are owned by subsidiaries that are not Subsidiary Guarantors as of September 30, 2006 and December 31, 2005. |
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Redemption | ||||
Year | Price | |||
2010 | 103.625% | |||
2011 | 102.417% | |||
2012 | 101.208% | |||
2013 and thereafter | 100.000% |
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• | the second paragraph under “— Limitation on Liens,” | |
• | the second paragraph under “— Limitation on Sale and Leaseback Transactions,” | |
• | ‘‘— Designation of Restricted and Unrestricted Subsidiaries” (other than clause (x) of the third paragraph (and such clause (x) as referred to in the first paragraph thereunder)),” and | |
• | ‘‘— Future Subsidiary Guarantors.” |
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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
• | a dealer in securities or currencies, | |
• | a trader in securities that elects to use amark-to-market method of accounting for your securities holdings, | |
• | a bank, | |
• | a life insurance company, | |
• | a tax-exempt organization, | |
• | a person that owns Notes that are a hedge or that are hedged against interest rate risks, | |
• | a person that owns Notes as part of a straddle or conversion transaction for tax purposes, | |
• | a United States holder (as defined below) or a person related to a United States holder, that actually or constructively owns 10% or more of our voting stock, or | |
• | a United States holder whose functional currency for tax purposes is not the U.S. dollar. |
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• | a citizen or resident of the United States, | |
• | a domestic corporation, | |
• | an estate whose income is subject to United States federal income tax regardless of its source, or | |
• | a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust. |
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• | a nonresident alien individual, | |
• | a foreign corporation, or | |
• | an estate or trust that in either case is not subject to United States federal income tax on a net income basis on income or gain from a note. |
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• | you are an insurance company carrying on a United States insurance business to which the interest is attributable, within the meaning of the Internal Revenue Code, or | |
• | you both | |
• | have an office or other fixed place of business in the United States to which the interest is attributable and | |
• | derive the interest in the active conduct of a banking, financing or similar business within the United States. |
• | the gain is effectively connected with your conduct of a trade or business in the United States or | |
• | you are an individual, you are present in the United States for 183 or more days during the taxable year in which the gain is realized, and certain other conditions exist. |
• | payments of principal and interest on a Note within the United States, including payments made by wire transfer from outside the United States to an account you maintain in the United States, and | |
• | the payment of the proceeds from the sale of a Note effected at a United States office of a broker. |
• | fails to provide an accurate taxpayer identification number, | |
• | is notified by the Internal Revenue Service that you have failed to report all interest and dividends required to be shown on your federal income tax returns, or | |
• | in certain circumstances, fails to comply with applicable certification requirements. |
• | payments of principal and interest made to you outside the United States by us or anothernon-United States payor and | |
• | other payments of principal and interest and the payment of the proceeds from the sale of a Note effected at a United States office of a broker, as long as the income associated with such payments is otherwise exempt from United States federal income tax, and: |
• | the payor or broker does not have actual knowledge or reason to know that you are a United States person and you have furnished to the payor or broker: |
• | an Internal Revenue ServiceForm W-8BEN or an acceptable substitute form upon which you certify, under penalties of perjury, that you are anon-United States person, or |
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• | other documentation upon which it may rely to treat the payments as made to anon-United States person in accordance with U.S. Treasury regulations, or | |
• | you otherwise establish an exemption. |
• | the proceeds are transferred to an account maintained by you in the United States, | |
• | the payment of proceeds or the confirmation of the sale is mailed to you at a United States address, or | |
• | the sale has some other specified connection with the United States as provided in U.S. Treasury regulations, unless the broker does not have actual knowledge or reason to know that you are a United States person and the documentation requirements described above are met or you otherwise establish an exemption. |
• | a United States person, | |
• | a controlled foreign corporation for United States tax purposes, | |
• | a foreign person 50% or more of whose gross income is effectively connected with the conduct of a United States trade or business for a specified three-year period, or | |
• | a foreign partnership, if at any time during its tax year: | |
• | one or more of its partners are “U.S. persons,” as defined in U.S. Treasury regulations, who in the aggregate hold more than 50% of the income or capital interest in the partnership, or | |
• | such foreign partnership is engaged in the conduct of a United States trade or business, |
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F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 |
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(In millions, except per share amounts)
Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
Net sales | $ | 7,377 | $ | 6,337 | ||||
Cost of goods sold (exclusive of depreciation and amortization shown below) | 6,931 | 5,678 | ||||||
Selling, general and administrative expenses | 293 | 260 | ||||||
Depreciation and amortization | 174 | 173 | ||||||
Research and development expenses | 29 | 29 | ||||||
Restructuring charges — net | 13 | 4 | ||||||
Impairment charges on long-lived assets | — | 5 | ||||||
Interest expense and amortization of debt issuance costs — net | 149 | 148 | ||||||
Equity in net income of non-consolidated affiliates | (12 | ) | (6 | ) | ||||
Other (income) expenses — net | (62 | ) | (72 | ) | ||||
7,515 | 6,219 | |||||||
Income (loss) before provision for taxes on income (loss) and minority interests’ share | (138 | ) | 118 | |||||
Provision for taxes on income (loss) | 30 | 67 | ||||||
Income (loss) before minority interests’ share | (168 | ) | 51 | |||||
Minority interests’ share | (2 | ) | (19 | ) | ||||
Net income (loss) | (170 | ) | 32 | |||||
Other comprehensive income (loss) — net of tax | ||||||||
Currency translation adjustment | 105 | (146 | ) | |||||
Change in fair value of effective portion of hedges — net | (30 | ) | — | |||||
Change in minimum pension liability | (4 | ) | (12 | ) | ||||
Other comprehensive income (loss) — net of tax | 71 | (158 | ) | |||||
Comprehensive loss | $ | (99 | ) | $ | (126 | ) | ||
Earnings (loss) per share: | ||||||||
Net income (loss) per share — basic | $ | (2.30 | ) | $ | 0.43 | |||
Net income (loss) per share — diluted | $ | (2.30 | ) | $ | 0.43 | |||
Dividends per common share | $ | 0.19 | $ | 0.27 | ||||
Supplemental information for 2005 only: | ||||||||
Net income attributable to the consolidated and combined results of Novelis from January 6 to September 30, 2005 — increase to Retained earnings | $ | 61 | ||||||
Net loss attributable to the combined results of Novelis from January 1 to January 5, 2005 — decrease to Owner’s net investment | (29 | ) | ||||||
Net income | $ | 32 | ||||||
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(In millions, except number of shares)
September 30, 2006 | ||||
ASSETS | ||||
Current assets | ||||
Cash and cash equivalents | $ | 71 | ||
Accounts receivable (net of allowance of $29) | ||||
— third parties | 1,241 | |||
— related parties | 22 | |||
Inventories | 1,309 | |||
Prepaid expenses and other current assets | 72 | |||
Current portion of fair value of derivative instruments | 107 | |||
Deferred income tax assets | 19 | |||
Total current assets | 2,841 | |||
Property, plant and equipment — net | 2,130 | |||
Goodwill | 228 | |||
Intangible assets — net | 20 | |||
Investment in and advances to non-consolidated affiliates | 155 | |||
Fair value of derivative instruments — net of current portion | 55 | |||
Deferred income tax assets | 67 | |||
Other long-term assets | ||||
— third parties | 123 | |||
— related parties | 61 | |||
Total assets | $ | 5,680 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||
Current liabilities | ||||
Current portion of long-term debt | $ | 4 | ||
Short-term borrowings | 113 | |||
Accounts payable | ||||
— third parties | 1,188 | |||
— related parties | 38 | |||
Accrued expenses and other current liabilities | 702 | |||
Deferred income tax liabilities | 86 | |||
Total current liabilities | 2,131 | |||
Long-term debt — net of current portion | 2,329 | |||
Deferred income tax liabilities | 143 | |||
Accrued post-retirement benefits | 335 | |||
Other long-term liabilities | 264 | |||
5,202 | ||||
Commitments and contingencies | ||||
Minority interests in equity of consolidated affiliates | 156 | |||
Shareholders’ equity | ||||
Preferred stock, no par value; unlimited number of first preferred and second preferred shares authorized; none issued and outstanding | — | |||
Common stock, no par value; unlimited number of shares authorized; 74,006,375 shares issued and outstanding as of September 30, 2006 | — | |||
Additional paid-in capital | 427 | |||
Accumulated deficit | (92 | ) | ||
Accumulated other comprehensive loss | (13 | ) | ||
Total shareholders’ equity | 322 | |||
Total liabilities and shareholders’ equity | $ | 5,680 | ||
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(In millions)
Nine Months Ended September 30, | ||||||||
2006 | 2005 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income (loss) | $ | (170 | ) | $ | 32 | |||
Adjustments to determine net cash provided by operating activities: | ||||||||
Depreciation and amortization | 174 | 173 | ||||||
Net gain on change in fair value of derivative instruments | (58 | ) | (87 | ) | ||||
Deferred income taxes | (29 | ) | (6 | ) | ||||
Amortization of debt issuance costs | 7 | 16 | ||||||
Provision for uncollectible accounts receivable | 3 | 2 | ||||||
Equity in net income of non-consolidated affiliates | (12 | ) | (6 | ) | ||||
Dividends from non-consolidated affiliates | 4 | — | ||||||
Minority interests’ share | 2 | 19 | ||||||
Stock-based compensation | 2 | 2 | ||||||
(Gain) loss on sales of businesses, investments and assets — net | 16 | (11 | ) | |||||
Impairment charges on long-lived assets | — | 5 | ||||||
Changes in assets and liabilities (net of effects from acquisitions and divestitures): | ||||||||
Accounts receivable | ||||||||
— third parties | (112 | ) | (44 | ) | ||||
— related parties | 1 | — | ||||||
Inventories | (149 | ) | 118 | |||||
Prepaid expenses and other current assets | (2 | ) | (2 | ) | ||||
Other long-term assets | (13 | ) | (11 | ) | ||||
Accounts payable | ||||||||
— third parties | 287 | 39 | ||||||
— related parties | (2 | ) | (7 | ) | ||||
Accrued expenses and other current liabilities | 16 | 90 | ||||||
Accrued post-retirement benefits | 23 | 21 | ||||||
Other long-term liabilities | 18 | 23 | ||||||
Net cash provided by operating activities | 6 | 366 | ||||||
INVESTING ACTIVITIES | ||||||||
Capital expenditures | (77 | ) | (104 | ) | ||||
Disposal of business — net | (7 | ) | — | |||||
Cash advance received on pending transfer of rights | 15 | — | ||||||
Proceeds from sales of assets | 3 | 9 | ||||||
Proceeds from loans receivable — net | ||||||||
— third parties | — | 19 | ||||||
— related parties | 27 | 373 | ||||||
Changes in investment in and advances to non-consolidated affiliates | 4 | — | ||||||
Premiums paid to purchase derivative instruments | (2 | ) | (26 | ) | ||||
Net proceeds from settlement of derivative instruments | 227 | 96 | ||||||
Net cash provided by investing activities | 190 | 367 | ||||||
FINANCING ACTIVITIES | ||||||||
Proceeds from issuance of debt | $ | 20 | $ | 2,750 | ||||
Principal repayments | ||||||||
— third parties | (297 | ) | (1,742 | ) | ||||
— related parties | — | (1,180 | ) | |||||
Short-term borrowings — net | ||||||||
— third parties | 84 | (137 | ) | |||||
— related parties | — | (302 | ) | |||||
Dividends | ||||||||
— common shareholders | (14 | ) | (20 | ) | ||||
— minority interests | (14 | ) | (7 | ) | ||||
Net receipts from Alcan | — | 72 | ||||||
Debt issuance costs | (9 | ) | (71 | ) | ||||
Net cash used in financing activities | (230 | ) | (637 | ) | ||||
Net (decrease) increase in cash and cash equivalents | (34 | ) | 96 | |||||
Effect of exchange rate changes on cash balances held in foreign currencies | 5 | (3 | ) | |||||
Cash and cash equivalents — beginning of period | 100 | 31 | ||||||
Cash and cash equivalents — end of period | $ | 71 | $ | 124 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Interest paid | $ | 179 | $ | 119 | ||||
Income taxes paid | 24 | 35 | ||||||
Principal payments on capital lease obligations (included above in principal repayments — third parties) | 2 | 1 | ||||||
Supplemental schedule of non-cash investing and financing activities relating to the spin-off transaction and post-closing adjustments (2005 only): | ||||||||
Other receivables | $ | 433 | ||||||
Short-term borrowings — related parties | (57 | ) | ||||||
Long-term debt — related parties | 32 | |||||||
Capital lease obligation | 52 | |||||||
Additional paid-in capital | (98 | ) |
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(In millions, except number of common shares, which is in thousands)
Retained | Accumulated | |||||||||||||||||||||||
Additional | Earnings | Other | ||||||||||||||||||||||
Common Stock | Paid-in | (Accumulated | Comprehensive | |||||||||||||||||||||
Shares | Amount | Capital | Deficit) | Loss | Total | |||||||||||||||||||
Balance as of December 31, 2005 | 74,006 | $ | — | $ | 425 | $ | 92 | $ | (84 | ) | $ | 433 | ||||||||||||
Activity for the Nine Months Ended September 30, 2006: | ||||||||||||||||||||||||
Net loss | — | — | — | (170 | ) | — | (170 | ) | ||||||||||||||||
Stock-based compensation | — | — | 2 | — | — | 2 | ||||||||||||||||||
Currency translation adjustment — net of tax | — | — | — | — | 105 | 105 | ||||||||||||||||||
Change in fair value of effective portion of hedges — net | — | — | — | — | (30 | ) | (30 | ) | ||||||||||||||||
Change in minimum pension liability | — | — | — | — | (4 | ) | (4 | ) | ||||||||||||||||
Dividends on common shares ($0.19 per share) | — | — | — | (14 | ) | — | (14 | ) | ||||||||||||||||
Balance as of September 30, 2006 | 74,006 | $ | — | $ | 427 | $ | (92 | ) | $ | (13 | ) | $ | 322 | |||||||||||
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1. | BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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2. | RESTRUCTURING PROGRAMS |
Europe | North America | Total | ||||||||||||||||||||||
Other Exit | Other Exit | Other Exit | ||||||||||||||||||||||
Severance | Related | Severance | Related | Severance | Related | |||||||||||||||||||
Balance as of December 31, 2005 | $ | 9 | $ | 19 | $ | 1 | $ | — | $ | 10 | $ | 19 | ||||||||||||
Provisions — net | 10 | 3 | — | — | 10 | 3 | ||||||||||||||||||
Cash payments | (5 | ) | (6 | ) | (1 | ) | — | (6 | ) | (6 | ) | |||||||||||||
Adjustments — other | — | 1 | — | — | — | 1 | ||||||||||||||||||
Balance as of September 30, 2006 | $ | 14 | $ | 17 | $ | — | $ | — | $ | 14 | $ | 17 | ||||||||||||
3. | LOSS ON DISPOSAL OF BUSINESS |
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4. | INVENTORIES |
September 30, 2006 | ||||
Finished goods | $ | 393 | ||
Work in process | 314 | |||
Raw materials | 527 | |||
Supplies | 123 | |||
1,357 | ||||
Allowances | (48 | ) | ||
$ | 1,309 | |||
5. | PROPERTY, PLANT AND EQUIPMENT |
September 30, 2006 | ||||
Land and property rights | $ | 96 | ||
Buildings | 881 | |||
Machinery and equipment | 4,616 | |||
5,593 | ||||
Accumulated depreciation and amortization | (3,557 | ) | ||
2,036 | ||||
Construction in progress | 94 | |||
$ | 2,130 | |||
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6. | INVESTMENT IN AND ADVANCES TO NON-CONSOLIDATED AFFILIATES AND RELATED PARTY TRANSACTIONS |
Affiliate Name | Ownership Structure | Ownership Percentage | ||||
Aluminium Norf GmbH | Corporation | 50 | % | |||
Consorcio Candonga | Unincorporated Joint Venture | 50 | % | |||
Petrocoque S.A. Industria e Comercio | Corporation | 25 | % | |||
EuroNorca Partners | General Partnership | 50 | % | |||
Deutsche Aluminium Verpackung Recycling GmbH | Corporation | 30 | % | |||
France Aluminium Recyclage S.A. | Public Limited Company | 20 | % |
Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
Net sales | $ | 420 | $ | 361 | ||||
Costs, expenses and provisions for taxes on income | 392 | 346 | ||||||
Net income | $ | 28 | $ | 15 | ||||
Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
Purchases of tolling services, electricity and inventories | ||||||||
Aluminium Norf GmbH(A) | $ | 170 | $ | 154 | ||||
Consorcio Candonga(B) | 10 | 6 | ||||||
Petrocoque S.A. Industria e Comercio(C) | 2 | 2 | ||||||
Interest income | ||||||||
Aluminium Norf GmbH(D) | 1 | 1 |
(A) | We purchase tolling services (the conversion of customer-owned metal) from Aluminium Norf GmbH. | |
(B) | We purchase electricity from Consorcio Candonga for our operations in South America. | |
(C) | We purchase calcined-coke from Petrocoque S.A. Industria e Comercio for use in our smelting operations in South America. | |
(D) | We earn interest income on a loan due from Aluminium Norf GmbH. |
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September 30, 2006 | ||||
Accounts receivable(A) | $ | 22 | ||
Other long-term assets(A) | 61 | |||
Accounts payable(B) | 38 |
(A) | The balances represent current and non-current portions of a loan due from Aluminium Norf GmbH. | |
(B) | We purchase tolling services from Aluminium Norf GmbH and electricity from Consorcio Candonga. |
7. | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
September 30, 2006 | ||||
Accrued payroll | $ | 145 | ||
Accrued settlement of legal claim | 39 | |||
Accrued interest payable | 25 | |||
Accrued income taxes | 68 | |||
Current portion of fair value of derivative instruments | 41 | |||
Other current liabilities | 384 | |||
$ | 702 | |||
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8. | LONG-TERM DEBT |
Interest | September 30, | |||||||
Rates(A) | 2006 | |||||||
Novelis Inc. | ||||||||
Floating rate Term Loan B, due 2012 | 7.22 | %(B) | $ | 260 | ||||
7.25% Senior Notes, due 2015 | 7.25 | %(C) | 1,400 | |||||
Novelis Corporation | ||||||||
Floating rate Term Loan B, due 2012 | 7.22 | %(B) | 451 | |||||
Novelis Switzerland S.A. | ||||||||
Capital lease obligation, due 2020 (Swiss francs (CHF) 58 million) | 7.50 | % | 46 | |||||
Capital lease obligation, due 2011 (CHF 4 million) | 2.49 | % | 4 | |||||
Novelis Korea Limited | ||||||||
Bank loan, due 2008 | 5.30 | % | 30 | |||||
Bank loan, due 2008 (Korean won (KRW) 30 billion) | — | |||||||
Bank loan, due 2007 | 4.55 | % | 70 | |||||
Bank loan, due 2007 (KRW 40 billion) | 4.80 | % | 42 | |||||
Bank loan, due 2007 (KRW 25 billion) | 4.45 | % | 27 | |||||
Bank loans, due 2008 through 2011 (KRW 1 billion) | 4.07 | %(D) | 1 | |||||
Other | ||||||||
Other debt, due 2006 through 2012 | 2.55 | %(D) | 2 | |||||
Total debt | 2,333 | |||||||
Less: current portion | (4 | ) | ||||||
Long-term debt — net of current portion | $ | 2,329 | ||||||
(A) | Interest rates are as of September 30, 2006 and exclude the effects of any related interest rate swaps or amortization of debt issuance costs. | |
(B) | The interest rate for the Term Loans does not include any applicable margin discussed below. | |
(C) | The interest rate for the Senior Notes does not include additional special interest discussed below. | |
(D) | Weighted average interest rate. |
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9. | OTHER COMPREHENSIVE INCOME (LOSS) |
Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
Net change in foreign currency translation adjustments | $ | 109 | $ | (146 | ) | |||
Net change in fair value of effective portion of hedges | (30 | ) | — | |||||
Net change in minimum pension liability | (4 | ) | (5 | ) | ||||
Net other comprehensive income (loss) adjustments, before income tax effect | 75 | (151 | ) | |||||
Income tax effect | (4 | ) | (7 | ) | ||||
Other comprehensive income (loss) | $ | 71 | $ | (158 | ) | |||
September 30, 2006 | ||||
Foreign currency translation adjustments | $ | 70 | ||
Fair value of effective portion of hedges — net | (30 | ) | ||
Minimum pension liability | (53 | ) | ||
$ | (13 | ) | ||
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10. | STOCK-BASED COMPENSATION |
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Weighted | ||||||||||||||||
Average | ||||||||||||||||
Weighted | Remaining | |||||||||||||||
Average | Contractual | |||||||||||||||
Number | Exercise | Term | Aggregate Intrinsic | |||||||||||||
of Options | Price | (In Years) | Value | |||||||||||||
Options outstanding as of December 31, 2005 | 2,704,790 | $ | 21.60 | |||||||||||||
Granted | — | — | ||||||||||||||
Exercised | (4,298 | ) | $ | 18.31 | ||||||||||||
Forfeited | — | — | ||||||||||||||
Expired/Cancelled | (55,827 | ) | $ | 20.90 | ||||||||||||
Options outstanding as of September 30, 2006 | 2,644,665 | $ | 21.62 | 6.5 | $ | 10,497,443 | ||||||||||
Options exercisable as of September 30, 2006 | 871,246 | $ | 21.28 | 6.1 | $ | 3,752,931 | ||||||||||
September 30, 2006 | ||||
Dividend yield | 1.56% | |||
Expected volatility | 30.30% | |||
Risk-free interest rate | 3.73% | |||
Expected life | 5.47 years |
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Weighted Average | ||||||||||||||||
Remaining | ||||||||||||||||
Contractual | Aggregate | |||||||||||||||
Weighted Average | Term | Intrinsic | ||||||||||||||
Number of SPAUs | Exercise Price | (In Years) | Value | |||||||||||||
SPAUs outstanding as of December 31, 2005 | 418,777 | $ | 22.04 | |||||||||||||
Granted | — | — | ||||||||||||||
Exercised | — | — | ||||||||||||||
Forfeited | — | — | ||||||||||||||
Expired/Cancelled | — | — | ||||||||||||||
SPAUs outstanding as of September 30, 2006 | 418,777 | $ | 22.04 | 7.3 | $ | 1,488,315 | ||||||||||
SPAUs exercisable as of September 30, 2006 | 115,419 | $ | 21.53 | 7.2 | $ | 468,660 | ||||||||||
Range of | Weighted Average | |||
Assumptions | Assumptions | |||
Dividend yield | 0.16% | 0.16% | ||
Expected volatility | 38.10 to 42.40% | 41.34% | ||
Risk-free interest rate | 4.56 to 4.68% | 4.58% | ||
Expected life | 2.49 to 4.62 years | 4.13 years |
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Number of | Redemption | Aggregate Intrinsic | ||||||||||
RSUs | Price | Value | ||||||||||
RSUs outstanding as of December 31, 2005 | 119,842 | $ | 20.89 | |||||||||
Granted | 1,107 | |||||||||||
Exercised | — | |||||||||||
Forfeited | — | |||||||||||
Expired/Cancelled | — | |||||||||||
RSUs outstanding as of September 30, 2006 | 120,949 | $ | 23.68 | $ | 2,864,446 | |||||||
Number of | Redemption | Aggregate Intrinsic | ||||||||||
DDSUs | Price | Value | ||||||||||
DDSUs outstanding as of December 31, 2005 | 41,862 | $ | 20.94 | |||||||||
Granted | 45,726 | — | ||||||||||
Exercised | — | — | ||||||||||
Forfeited | — | — | ||||||||||
Expired/Cancelled | — | — | ||||||||||
DDSUs outstanding as of September 30, 2006 | 87,588 | $ | 23.68 | $ | 2,074,357 | |||||||
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Weighted average expected stock price volatility | 40.00 | % | ||
Annual expected dividend yield | 0.16 | % | ||
Risk-free interest rate | 4.72 | % |
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11. | POST-RETIREMENT BENEFIT PLANS |
Pension Benefits | Other Post-Retirement Benefits | |||||||||||||||
Nine Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Service cost | $ | 29 | $ | 14 | $ | 3 | $ | 3 | ||||||||
Interest cost | 32 | 22 | 6 | 5 | ||||||||||||
Expected return on assets | (28 | ) | (15 | ) | — | — | ||||||||||
Amortization | ||||||||||||||||
— actuarial losses | 4 | 4 | 1 | 1 | ||||||||||||
— prior service cost | 2 | 2 | — | — | ||||||||||||
Net periodic benefit cost | $ | 39 | $ | 27 | $ | 10 | $ | 9 | ||||||||
Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
Funded pension plans | $ | 22 | $ | 14 | ||||
Unfunded pension plans | 9 | 9 | ||||||
Savings and defined contribution pension plans | 8 | 7 |
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12. | CURRENCY GAINS (LOSSES) |
Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
Net gain (loss) on change in fair value of currency derivative instruments | $ | (18 | ) | $ | 76 | |||
Net gain on translation of monetary assets and liabilities | 15 | 43 | ||||||
$ | (3 | ) | $ | 119 | ||||
Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
Cumulative currency translation adjustment — beginning of period | $ | (35 | ) | $ | 120 | |||
Current period gain (loss) arising from changes in foreign currency exchange rates — net | 105 | (146 | ) | |||||
Cumulative currency translation adjustment — end of period | $ | 70 | $ | (26 | ) | |||
13. | FINANCIAL INSTRUMENTS AND COMMODITY CONTRACTS |
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As of September 30, 2006 | ||||||||||||||
Net Fair | ||||||||||||||
Maturity Dates | Assets | Liabilities | Value | |||||||||||
Forward foreign exchange contracts | 2006 through 2011 | $ | 12 | $ | (11 | ) | $ | 1 | ||||||
Interest rate swaps | 2007 through 2008 | 3 | — | 3 | ||||||||||
Cross-currency interest rate swaps | 2006 through 2015 | — | (76 | ) | (76 | ) | ||||||||
Aluminum forward contracts | 2006 through 2009 | 68 | (21 | ) | 47 | |||||||||
Aluminum options | 2006 | 25 | — | 25 | ||||||||||
Fixed price electricity contract | 2016 | 49 | — | 49 | ||||||||||
Embedded derivative instruments | 2007 | 5 | — | 5 | ||||||||||
162 | (108 | ) | 54 | |||||||||||
Less: current portion(A) | 107 | (41 | ) | 66 | ||||||||||
$ | 55 | $ | (67 | ) | $ | (12 | ) | |||||||
(A) | The amounts of the current and long-term portions of fair values under assets are each presented in the accompanying condensed consolidated balance sheet. The amounts of the current and long-term portions of fair values under liabilities are included inAccrued expenses and other current liabilitiesandOther long-term liabilities, respectively, in the accompanying condensed consolidated balance sheet. |
14. | OTHER (INCOME) EXPENSES — NET |
Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
Gain on change in fair value of derivative instruments — net | $ | (58 | ) | $ | (56 | ) | ||
Loss on disposal of business | 15 | — | ||||||
Exchange (gain) loss — net | (15 | ) | 1 | |||||
Loss (gain) on disposals of property, plant and equipment — net | 1 | (11 | ) | |||||
Other income — net | (5 | ) | (6 | ) | ||||
$ | (62 | ) | $ | (72 | ) | |||
15. | INCOME TAXES |
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Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
Pre-tax income (loss) before equity in net income of non-consolidated affiliates and minority interests’ share | $ | (150 | ) | $ | 112 | |||
Canadian statutory tax rate | 33 | % | 33 | % | ||||
Income taxes (benefit) at the Canadian statutory tax rate | $ | (50 | ) | $ | 37 | |||
Increase (decrease) in tax rate resulting from: | ||||||||
Exchange translation items | 36 | 24 | ||||||
Exchange remeasurement of deferred income taxes | 2 | 6 | ||||||
Change in valuation allowances | 42 | — | ||||||
Expense/income items with no tax effect — net | (5 | ) | (6 | ) | ||||
Tax rate differences on foreign earnings | 4 | 4 | ||||||
Out-of-period adjustments — net | — | (7 | ) | |||||
Other — net | 1 | 9 | ||||||
Provision for taxes on income (loss) | $ | 30 | $ | 67 | ||||
Effective tax rate | (20 | )% | 60 | % | ||||
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16. | EARNINGS PER SHARE |
Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
Numerator: | ||||||||
Net income (loss) | $ | (170 | ) | $ | 32 | |||
Denominators: | ||||||||
Weighted average number of outstanding shares — basic | 74.01 | 73.99 | ||||||
Effect of dilutive shares | — | 0.25 | ||||||
Weighted average number of outstanding shares — diluted | 74.01 | 74.24 | ||||||
Earnings (loss) per share: | ||||||||
Net income (loss) per share — basic | $ | (2.30 | ) | $ | 0.43 | |||
Net income (loss) per share — diluted | $ | (2.30 | ) | $ | 0.43 | |||
17. | COMMITMENTS AND CONTINGENCIES |
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• | wholly-owned or majority-owned subsidiaries; | |
• | variable interest entities consolidated under FASB Interpretation No. 46 (Revised),Consolidation of Variable Interest Entities; and | |
• | Aluminium Norf GmbH, which is a fifty percent (50%) owned joint venture that does not meet the consolidation tests under FASB Interpretation No. 46 (Revised). |
Liability | Assets | |||||||||||
Maximum Potential | Carrying | Held for | ||||||||||
Type of Entity | Future Payment | Value | Collateral | |||||||||
Wholly-owned subsidiaries | $ | 35 | $ | 21 | $ | — | ||||||
Majority-owned subsidiaries | 2 | — | — | |||||||||
Aluminium Norf GmbH | 13 | — | — |
18. | SEGMENT, GEOGRAPHICAL AREA AND MAJOR CUSTOMER INFORMATION |
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Adjustment to | ||||||||||||||||||||||||||||
Eliminate | ||||||||||||||||||||||||||||
As of and for the Nine Months | North | South | Proportional | Corporate | ||||||||||||||||||||||||
Ended September 30, 2006 | America | Europe | Asia | America | Consolidation | and Other | Total | |||||||||||||||||||||
Net sales (to third parties) | $ | 2,841 | $ | 2,688 | $ | 1,235 | $ | 626 | $ | (13 | ) | $ | — | $ | 7,377 | |||||||||||||
Intersegment sales | 1 | 2 | 12 | 39 | — | (54 | ) | — | ||||||||||||||||||||
Regional Income | 64 | 208 | 70 | 122 | — | — | 464 | |||||||||||||||||||||
Depreciation and amortization | 53 | 68 | 41 | 33 | (24 | ) | 3 | 174 | ||||||||||||||||||||
Capital expenditures | 24 | 26 | 15 | 17 | (8 | ) | 3 | 77 | ||||||||||||||||||||
Total assets | 1,487 | 2,392 | 1,021 | 814 | (98 | ) | 64 | 5,680 |
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Adjustment to | ||||||||||||||||||||||||||||
Eliminate | ||||||||||||||||||||||||||||
As of and for the Nine Months | North | South | Proportional | Corporate | ||||||||||||||||||||||||
Ended September 30, 2005 | America | Europe | Asia | America | Consolidation | and Other | Total | |||||||||||||||||||||
Net sales (to third parties) | $ | 2,500 | $ | 2,376 | $ | 1,025 | $ | 448 | $ | (12 | ) | $ | — | $ | 6,337 | |||||||||||||
Intersegment sales | 2 | 30 | 6 | 37 | — | (75 | ) | — | ||||||||||||||||||||
Regional Income | 141 | 161 | 80 | 86 | — | — | 468 | |||||||||||||||||||||
Depreciation and amortization | 54 | 74 | 37 | 33 | (25 | ) | — | 173 | ||||||||||||||||||||
Capital expenditures | 35 | 38 | 15 | 13 | (5 | ) | 8 | 104 | ||||||||||||||||||||
Total assets | 1,388 | 2,129 | 971 | 780 | (81 | ) | 77 | 5,264 |
Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
Total Regional Income | $ | 464 | $ | 468 | ||||
Interest expense and amortization of debt issuance costs | (160 | ) | (155 | ) | ||||
Gain on cash settlement of derivative instruments — net, included in Regional Income | (193 | ) | (10 | ) | ||||
Gain on change in fair value of derivative instruments — net | 58 | 56 | ||||||
Depreciation and amortization | (174 | ) | (173 | ) | ||||
Minority interests’ share | (2 | ) | (19 | ) | ||||
Adjustment to eliminate proportional consolidation(A) | (26 | ) | (27 | ) | ||||
Restructuring (charges) recoveries — net | (13 | ) | (4 | ) | ||||
Impairment charges on long-lived assets | — | (5 | ) | |||||
Gain (loss) on disposals of property, plant and equipment and businesses — net | (16 | ) | 11 | |||||
Corporate selling, general and administrative expenses | (88 | ) | (49 | ) | ||||
Other corporate costs — net | 10 | 6 | ||||||
Provision for taxes on income (loss) | (30 | ) | (67 | ) | ||||
Net income (loss) | $ | (170 | ) | $ | 32 | |||
(A) | Our financial information for our segments (including Regional Income) includes the results of our non-consolidated affiliates on a proportionately consolidated basis, which is consistent with the way we manage our business segments. However, under GAAP, these non-consolidated affiliates are accounted for using the equity method of accounting. Therefore, in order to reconcile Total Regional Income to Net income, the proportional Regional Income of these non-consolidated affiliates is removed from Total Regional Income, net of our share of their net after-tax results, which is reported asEquity in net income of non-consolidated affiliateson our condensed consolidated and combined statements of operations. See Note 6 — Investment in and Advances to Non-consolidated Affiliates and Related Party Transactions to our condensed consolidated and combined financial statements for further information about these non-consolidated affiliates. |
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Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
Net sales to Rexam (in millions) | $ | 1,021 | $ | 792 | ||||
Percentage of total net sales | 13.8 | % | 12.5 | % | ||||
19. | SUPPLEMENTAL GUARANTOR INFORMATION |
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Nine Months Ended September 30, 2006 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Consolidated | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Net sales | $ | 1,204 | $ | 6,309 | $ | 2,086 | $ | (2,222 | ) | $ | 7,377 | |||||||||
Cost of goods sold (exclusive of depreciation and amortization shown below) | 1,164 | 6,017 | 1,969 | (2,219 | ) | 6,931 | ||||||||||||||
Selling, general and administrative expenses | 47 | 193 | 53 | — | 293 | |||||||||||||||
Depreciation and amortization | 11 | 114 | 49 | — | 174 | |||||||||||||||
Research and development expenses | 20 | 8 | 1 | — | 29 | |||||||||||||||
Restructuring charges — net | — | 11 | 2 | — | 13 | |||||||||||||||
Interest expense and amortization of debt issuance costs — net | 33 | 102 | 14 | — | 149 | |||||||||||||||
Equity in net income of affiliates | 75 | (12 | ) | — | (75 | ) | (12 | ) | ||||||||||||
Other (income) expenses — net | 13 | (77 | ) | 2 | — | (62 | ) | |||||||||||||
1,363 | 6,356 | 2,090 | (2,294 | ) | 7,515 | |||||||||||||||
Loss before provision for taxes on loss and minority interests’ share | (159 | ) | (47 | ) | (4 | ) | 72 | (138 | ) | |||||||||||
Provision for taxes on loss | 11 | 8 | 11 | — | 30 | |||||||||||||||
Loss before minority interests’ share | (170 | ) | (55 | ) | (15 | ) | 72 | (168 | ) | |||||||||||
Minority interests’ share | — | — | (2 | ) | — | (2 | ) | |||||||||||||
Net loss | $ | (170 | ) | $ | (55 | ) | $ | (17 | ) | $ | 72 | $ | (170 | ) | ||||||
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Nine Months Ended September 30, 2005 | ||||||||||||||||||||
Non- | Consolidated and | |||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Combined | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Net sales | $ | 960 | $ | 5,218 | $ | 1,835 | $ | (1,676 | ) | $ | 6,337 | |||||||||
Cost of goods sold (exclusive of depreciation and amortization shown below) | 933 | 4,718 | 1,703 | (1,676 | ) | 5,678 | ||||||||||||||
Selling, general and administrative expenses | 52 | 159 | 49 | — | 260 | |||||||||||||||
Depreciation and amortization | 8 | 119 | 46 | — | 173 | |||||||||||||||
Research and development expenses | 19 | 9 | 1 | — | 29 | |||||||||||||||
Restructuring charges (recoveries) — net | — | (4 | ) | 8 | — | 4 | ||||||||||||||
Impairment charges on long-lived assets | — | — | 5 | — | 5 | |||||||||||||||
Interest expense and amortization of debt issuance costs — net | 46 | 87 | 15 | — | 148 | |||||||||||||||
Equity in net income of affiliates | (89 | ) | (6 | ) | — | 89 | (6 | ) | ||||||||||||
Other income — net | (31 | ) | (37 | ) | (4 | ) | — | (72 | ) | |||||||||||
938 | 5,045 | 1,823 | (1,587 | ) | 6,219 | |||||||||||||||
Income before provision (benefit) for taxes on income and minority interests’ share | 22 | 173 | 12 | (89 | ) | 118 | ||||||||||||||
Provision (benefit) for taxes on income | (10 | ) | 83 | (6 | ) | — | 67 | |||||||||||||
Income before minority interests’ share | 32 | 90 | 18 | (89 | ) | 51 | ||||||||||||||
Minority interests’ share | — | — | (19 | ) | — | (19 | ) | |||||||||||||
Net income (loss) | $ | 32 | $ | 90 | $ | (1 | ) | $ | (89 | ) | $ | 32 | ||||||||
F-34
Table of Contents
As of September 30, 2006 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Consolidated | ||||||||||||||||
(In millions) | ||||||||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets | ||||||||||||||||||||
Cash and cash equivalents | $ | 2 | $ | 49 | $ | 20 | $ | — | $ | 71 | ||||||||||
Accounts receivable — net of allowances | ||||||||||||||||||||
— third parties | 64 | 846 | 331 | — | 1,241 | |||||||||||||||
— related parties | 376 | 409 | 21 | (784 | ) | 22 | ||||||||||||||
Inventories | 59 | 875 | 378 | (3 | ) | 1,309 | ||||||||||||||
Prepaid expenses and other current assets | 3 | 54 | 15 | — | 72 | |||||||||||||||
Current portion of fair value of derivative instruments | — | 104 | 3 | — | 107 | |||||||||||||||
Deferred income tax assets | 2 | 8 | 9 | — | 19 | |||||||||||||||
Total current assets | 506 | 2,345 | 777 | (787 | ) | 2,841 | ||||||||||||||
Property, plant and equipment — net | 115 | 1,256 | 759 | — | 2,130 | |||||||||||||||
Goodwill | — | 27 | 201 | — | 228 | |||||||||||||||
Intangible assets — net | — | 17 | 3 | — | 20 | |||||||||||||||
Investments | 539 | 155 | — | (539 | ) | 155 | ||||||||||||||
Fair value of derivative instruments — net of current portion | — | 55 | — | — | 55 | |||||||||||||||
Deferred income tax assets | 19 | 16 | 32 | — | 67 | |||||||||||||||
Other long-term assets | 1,185 | 175 | 130 | (1,306 | ) | 184 | ||||||||||||||
Total assets | $ | 2,364 | $ | 4,046 | $ | 1,902 | $ | (2,632 | ) | $ | 5,680 | |||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
Current liabilities | ||||||||||||||||||||
Current portion of long-term debt | $ | — | $ | 3 | $ | 1 | $ | — | $ | 4 | ||||||||||
Short-term borrowings | ||||||||||||||||||||
— third parties | 5 | 80 | 28 | — | 113 | |||||||||||||||
— related parties | — | 469 | 30 | (499 | ) | — | ||||||||||||||
Accounts payable | ||||||||||||||||||||
— third parties | 99 | 706 | 383 | — | 1,188 | |||||||||||||||
— related parties | 78 | 188 | 57 | (285 | ) | 38 | ||||||||||||||
Accrued expenses and other current liabilities | 102 | 479 | 121 | — | 702 | |||||||||||||||
Deferred income tax liabilities | — | 82 | 4 | — | 86 | |||||||||||||||
Total current liabilities | 284 | 2,007 | 624 | (784 | ) | 2,131 | ||||||||||||||
Long-term debt — net of current portion | ||||||||||||||||||||
— third parties | 1,660 | 498 | 171 | — | 2,329 | |||||||||||||||
— related parties | — | 1,069 | 237 | (1,306 | ) | — | ||||||||||||||
Deferred income tax liabilities | 19 | 108 | 16 | — | 143 | |||||||||||||||
Accrued post-retirement benefits | 12 | 236 | 87 | — | 335 | |||||||||||||||
Other long-term liabilities | 67 | 181 | 16 | — | 264 | |||||||||||||||
2,042 | 4,099 | 1,151 | (2,090 | ) | 5,202 | |||||||||||||||
Commitments and contingencies | ||||||||||||||||||||
Minority interests in equity of consolidated affiliates | — | — | 156 | — | 156 | |||||||||||||||
Shareholders’ equity | ||||||||||||||||||||
Preferred stock | — | — | — | — | — | |||||||||||||||
Common stock | — | — | — | — | — | |||||||||||||||
Additional paid-in capital | 427 | — | — | — | 427 | |||||||||||||||
(Accumulated deficit)/retained earnings/owner’s net investment | (92 | ) | (247 | ) | 580 | (333 | ) | (92 | ) | |||||||||||
Accumulated other comprehensive income (loss) | (13 | ) | 194 | 15 | (209 | ) | (13 | ) | ||||||||||||
Total shareholders’ equity | 322 | (53 | ) | 595 | (542 | ) | 322 | |||||||||||||
Total liabilities and shareholders’ equity | $ | 2,364 | $ | 4,046 | $ | 1,902 | $ | (2,632 | ) | $ | 5,680 | |||||||||
F-35
Table of Contents
Nine Months Ended September 30, 2006 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Consolidated | ||||||||||||||||
(In millions) | ||||||||||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||||||
Net cash provided by operating activities | $ | 152 | $ | 2 | $ | 35 | $ | (183 | ) | $ | 6 | |||||||||
INVESTING ACTIVITIES | ||||||||||||||||||||
Capital expenditures | (5 | ) | (49 | ) | (23 | ) | — | (77 | ) | |||||||||||
Disposal of business — net | (7 | ) | — | — | — | (7 | ) | |||||||||||||
Cash advance received on pending transfer of rights | — | 15 | — | — | 15 | |||||||||||||||
Proceeds from sales of assets | — | 3 | — | — | 3 | |||||||||||||||
Proceeds from loans receivable — net | — | — | — | — | ||||||||||||||||
— related parties | 53 | (29 | ) | (1 | ) | 4 | 27 | |||||||||||||
Changes in investment in and advances to non-consolidated affiliates | — | 4 | — | — | 4 | |||||||||||||||
Premiums paid to purchase derivative instruments | — | (2 | ) | — | — | (2 | ) | |||||||||||||
Net proceeds from settlement of derivative instruments | — | 232 | (5 | ) | — | 227 | ||||||||||||||
Net cash provided by (used in) investing activities | 41 | 174 | (29 | ) | 4 | 190 | ||||||||||||||
FINANCING ACTIVITIES | ||||||||||||||||||||
Proceeds from issuance of new debt | ||||||||||||||||||||
— third parties | — | — | 20 | — | 20 | |||||||||||||||
— related parties | — | 199 | — | (199 | ) | — | ||||||||||||||
Principal repayments | ||||||||||||||||||||
— third parties | (82 | ) | (143 | ) | (72 | ) | — | (297 | ) | |||||||||||
— related parties | (73 | ) | (119 | ) | (3 | ) | 195 | — | ||||||||||||
Short-term borrowings — net | ||||||||||||||||||||
— third parties | 5 | 55 | 24 | — | 84 | |||||||||||||||
— related parties | (20 | ) | 12 | 8 | — | — | ||||||||||||||
Dividends | ||||||||||||||||||||
— preference shares | — | (12 | ) | — | 12 | — | ||||||||||||||
— common shareholders | (14 | ) | (155 | ) | (16 | ) | 171 | (14 | ) | |||||||||||
— minority interests | — | — | (14 | ) | — | (14 | ) | |||||||||||||
Debt issuance costs | (9 | ) | — | — | — | (9 | ) | |||||||||||||
Net cash used in financing activities | (193 | ) | (163 | ) | (53 | ) | 179 | (230 | ) | |||||||||||
Net increase (decrease) in cash and cash equivalents | — | 13 | (47 | ) | — | (34 | ) | |||||||||||||
Effect of exchange rate changes on cash balances held in foreign currencies | — | 2 | 3 | — | 5 | |||||||||||||||
Cash and cash equivalents — beginning of period | 2 | 34 | 64 | — | 100 | |||||||||||||||
Cash and cash equivalents — end of period | $ | 2 | $ | 49 | $ | 20 | $ | — | $ | 71 | ||||||||||
F-36
Table of Contents
Nine Months Ended September 30, 2005 | ||||||||||||||||||||
Consolidated | ||||||||||||||||||||
Non- | and | |||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Combined | ||||||||||||||||
(In millions) | ||||||||||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | 116 | $ | 399 | $ | (14 | ) | $ | (135 | ) | $ | 366 | ||||||||
INVESTING ACTIVITIES | ||||||||||||||||||||
Capital expenditures | (12 | ) | (67 | ) | (25 | ) | — | (104 | ) | |||||||||||
Proceeds from sales of assets | — | 1 | 8 | — | 9 | |||||||||||||||
Proceeds from loans receivable — net | ||||||||||||||||||||
— third parties | — | 4 | 15 | — | 19 | |||||||||||||||
— related parties | (1,104 | ) | (157 | ) | (118 | ) | 1,752 | 373 | ||||||||||||
Share repurchase — intercompany | 400 | — | — | (400 | ) | — | ||||||||||||||
Premiums paid to purchase derivative instruments | — | (26 | ) | — | — | (26 | ) | |||||||||||||
Net proceeds from settlement of derivative instruments | — | 96 | — | — | 96 | |||||||||||||||
Net cash provided by (used in) investing activities | (716 | ) | (149 | ) | (120 | ) | 1,352 | 367 | ||||||||||||
FINANCING ACTIVITIES | ||||||||||||||||||||
Proceeds from issuance of debt | ||||||||||||||||||||
— third parties | 1,875 | 825 | 50 | — | 2,750 | |||||||||||||||
— related parties | 40 | 1,459 | 253 | (1,752 | ) | — | ||||||||||||||
Principal repayments | (1,316 | ) | (1,512 | ) | (94 | ) | — | (2,922 | ) | |||||||||||
Short-term borrowings — net | ||||||||||||||||||||
— third parties | 2 | (68 | ) | (71 | ) | — | (137 | ) | ||||||||||||
— related parties | (30 | ) | (281 | ) | 9 | — | (302 | ) | ||||||||||||
Share repurchase — intercompany | — | (400 | ) | — | 400 | — | ||||||||||||||
Issuance of preference shares | — | — | 32 | (32 | ) | — | ||||||||||||||
Dividends | ||||||||||||||||||||
— preference shares | — | — | (7 | ) | 7 | — | ||||||||||||||
— common shareholders | (20 | ) | (158 | ) | (2 | ) | 160 | (20 | ) | |||||||||||
— minority interests | — | — | (7 | ) | — | (7 | ) | |||||||||||||
Net receipts from (payments to) Alcan | 100 | (21 | ) | (7 | ) | — | 72 | |||||||||||||
Debt issuance costs | (49 | ) | (22 | ) | — | — | (71 | ) | ||||||||||||
Net cash provided by (used in) financing activities | 602 | (178 | ) | 156 | (1,217 | ) | (637 | ) | ||||||||||||
Net increase in cash and cash equivalents | 2 | 72 | 22 | — | 96 | |||||||||||||||
Effect of exchange rate changes on cash balances held in foreign currencies | — | (2 | ) | (1 | ) | — | (3 | ) | ||||||||||||
Cash and cash equivalents — beginning of period | — | 12 | 19 | — | 31 | |||||||||||||||
Cash and cash equivalents — end of period | $ | 2 | $ | 82 | $ | 40 | $ | — | $ | 124 | ||||||||||
F-37
Table of Contents
Report of Independent Registered Public Accounting Firm | F-39 | |||
F-40 | ||||
F-41 | ||||
F-42 | ||||
F-43 | ||||
F-45 | ||||
F-46 |
F-38
Table of Contents
F-39
Table of Contents
F-40
Table of Contents
Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Net sales | $ | 8,363 | $ | 7,755 | $ | 6,221 | ||||||
Cost of goods sold (exclusive of depreciation and amortization shown below) | 7,570 | 6,856 | 5,482 | |||||||||
Selling, general and administrative expenses | 352 | 289 | 255 | |||||||||
Litigation settlement — net of insurance recoveries | 40 | — | — | |||||||||
Provision for depreciation and amortization | 230 | 246 | 222 | |||||||||
Research and development expenses | 41 | 58 | 62 | |||||||||
Restructuring charges | 10 | 20 | 8 | |||||||||
Impairment charges on long-lived assets | 7 | 75 | 4 | |||||||||
Interest expense and amortization of debt issuance costs — net | 194 | 48 | 33 | |||||||||
Equity in net income of non-consolidated affiliates | (6 | ) | (6 | ) | (6 | ) | ||||||
Other income — net | (299 | ) | (62 | ) | (49 | ) | ||||||
8,139 | 7,524 | 6,011 | ||||||||||
Income before provision for taxes on income, minority interests’ share and cumulative effect of accounting change | 224 | 231 | 210 | |||||||||
Provision for taxes on income | 107 | 166 | 50 | |||||||||
Income before minority interests’ share and cumulative effect of accounting change | 117 | 65 | 160 | |||||||||
Minority interests’ share | (21 | ) | (10 | ) | (3 | ) | ||||||
Net income before cumulative effect of accounting change | 96 | 55 | 157 | |||||||||
Cumulative effect of accounting change — net of tax | (6 | ) | — | — | ||||||||
Net income | 90 | 55 | 157 | |||||||||
Other comprehensive income (loss) — net of tax | ||||||||||||
Currency translation adjustment | (155 | ) | 30 | 102 | ||||||||
Change in minimum pension liability | (17 | ) | (26 | ) | 1 | |||||||
Other comprehensive income (loss) — net of tax | (172 | ) | 4 | 103 | ||||||||
Comprehensive income (loss) | $ | (82 | ) | $ | 59 | $ | 260 | |||||
Earnings per share: | ||||||||||||
— Basic: | ||||||||||||
Net income before cumulative effect of accounting change | $ | 1.29 | $ | 0.74 | $ | 2.12 | ||||||
Cumulative effect of accounting change — net of tax | (0.08 | ) | — | — | ||||||||
Net income per share — basic | $ | 1.21 | $ | 0.74 | $ | 2.12 | ||||||
— Diluted: | ||||||||||||
Net income before cumulative effect of accounting change | $ | 1.29 | $ | 0.74 | $ | 2.11 | ||||||
Cumulative effect of accounting change — net of tax | (0.08 | ) | — | — | ||||||||
Net income per share — diluted | $ | 1.21 | $ | 0.74 | $ | 2.11 | ||||||
Dividends per common share | $ | 0.36 | $ | — | $ | — | ||||||
Supplemental information for 2005 only: | ||||||||||||
Net income attributable to the consolidated and combined results of Novelis from January 6 to December 31, 2005 — increase to Retained earnings | $ | 119 | ||||||||||
Net loss attributable to the combined results of Novelis from January 1 to January 5, 2005 — decrease to Owner’s net investment | (29 | ) | ||||||||||
Net income | $ | 90 | ||||||||||
F-41
Table of Contents
As of December 31, | ||||||||
2005 | 2004 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 100 | $ | 31 | ||||
Accounts receivable (net of allowances of $26 in 2005 and $33 in 2004) | ||||||||
— third parties | 1,098 | 770 | ||||||
— related parties | 33 | 798 | ||||||
Inventories | 1,128 | 1,226 | ||||||
Prepaid expenses and other current assets | 66 | 36 | ||||||
Current portion of fair value of derivative contracts | ||||||||
— third parties | 194 | 22 | ||||||
— related parties | — | 134 | ||||||
Deferred income tax assets | 8 | — | ||||||
Total current assets | 2,627 | 3,017 | ||||||
Property and equipment — net | 2,160 | 2,347 | ||||||
Goodwill | 211 | 256 | ||||||
Intangible assets — net | 21 | 27 | ||||||
Investment in and advances to non-consolidated affiliates | 144 | 122 | ||||||
Fair value of derivative contracts — net of current portion | 90 | 3 | ||||||
Deferred income tax assets | 21 | 12 | ||||||
Other long-term assets | ||||||||
— third parties | 131 | 66 | ||||||
— related parties | 71 | 104 | ||||||
Total assets | $ | 5,476 | $ | 5,954 | ||||
LIABILITIES AND SHAREHOLDERS’/INVESTED EQUITY | ||||||||
Current liabilities | ||||||||
Current portion of long-term debt | ||||||||
— third parties | $ | 3 | $ | 1 | ||||
— related parties | — | 290 | ||||||
Short-term borrowings | ||||||||
— third parties | 27 | 229 | ||||||
— related parties | — | 312 | ||||||
Accounts payable | ||||||||
— third parties | 866 | 492 | ||||||
— related parties | 38 | 342 | ||||||
Accrued expenses and other current liabilities | 641 | 425 | ||||||
Deferred income tax liabilities | 26 | 1 | ||||||
Total current liabilities | 1,601 | 2,092 | ||||||
Long-term debt — net of current portion | ||||||||
— third parties | 2,600 | 139 | ||||||
— related parties | — | 2,307 | ||||||
Deferred income tax liabilities | 186 | 249 | ||||||
Accrued post-retirement benefits | 305 | 284 | ||||||
Other long-term liabilities | 192 | 188 | ||||||
4,884 | 5,259 | |||||||
Commitments and contingencies | ||||||||
Minority interests in equity of consolidated affiliates | 159 | 140 | ||||||
Shareholders’/invested equity | ||||||||
Preferred stock, no par value; unlimited number of first preferred and second preferred shares authorized; none issued and outstanding | — | — | ||||||
Common stock, no par value; unlimited number of shares authorized; 74,005,649 shares issued and outstanding as of December 31, 2005 | — | — | ||||||
Additional paid-in capital | 425 | — | ||||||
Retained earnings | 92 | — | ||||||
Accumulated other comprehensive income (loss) | (84 | ) | 88 | |||||
Owner’s net investment | — | 467 | ||||||
Total shareholders’/invested equity | 433 | 555 | ||||||
Total liabilities and shareholders’/invested equity | $ | 5,476 | $ | 5,954 | ||||
F-42
Table of Contents
Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
OPERATING ACTIVITIES | ||||||||||||
Net income | $ | 90 | $ | 55 | $ | 157 | ||||||
Adjustments to determine net cash provided by operating activities: | ||||||||||||
Cumulative effect of accounting change — net of tax | 6 | — | — | |||||||||
Depreciation and amortization | 230 | 246 | 222 | |||||||||
Net (gains) losses on change in fair market value of derivatives | (269 | ) | (69 | ) | (20 | ) | ||||||
Litigation settlement — net of insurance recoveries | 40 | — | — | |||||||||
Deferred income taxes | 30 | 97 | (20 | ) | ||||||||
Amortization of debt issuance costs | 17 | — | — | |||||||||
Provision for uncollectible accounts | 3 | 6 | 4 | |||||||||
Equity in net income of non-consolidated affiliates | (6 | ) | (6 | ) | (6 | ) | ||||||
Minority interests’ share of net income | 21 | 10 | 3 | |||||||||
Impairment charges on long-lived assets | 7 | 75 | 4 | |||||||||
Stock-based compensation | 3 | 2 | 2 | |||||||||
Gain on sales of businesses and investments and assets — net | (17 | ) | (5 | ) | (28 | ) | ||||||
Changes in assets and liabilities (net of effects from acquisitions) | ||||||||||||
Accounts receivable | ||||||||||||
— third parties | (91 | ) | (94 | ) | 4 | |||||||
— related parties | (1 | ) | 72 | 190 | ||||||||
Inventories | 52 | (144 | ) | (18 | ) | |||||||
Prepaid expenses and other current assets | 18 | (4 | ) | (3 | ) | |||||||
Other long-term assets | (13 | ) | (7 | ) | (28 | ) | ||||||
Accounts payable | ||||||||||||
— third parties | 144 | (7 | ) | 34 | ||||||||
— related parties | 2 | 40 | (46 | ) | ||||||||
Accrued expenses and other current liabilities | 167 | (14 | ) | (63 | ) | |||||||
Accrued post-retirement benefits | 13 | (42 | ) | 43 | ||||||||
Other long-term liabilities | (1 | ) | 29 | 5 | ||||||||
Other — net | 4 | (32 | ) | 8 | ||||||||
Net cash provided by operating activities | 449 | 208 | 444 | |||||||||
INVESTING ACTIVITIES | ||||||||||||
Capital expenditures | (178 | ) | (165 | ) | (189 | ) | ||||||
Proceeds from sales of assets | 19 | 17 | 33 | |||||||||
Investment in and advances to non-consolidated affiliates | — | — | (11 | ) | ||||||||
Proceeds from (advances on) loans receivable — net | ||||||||||||
— third parties | 19 | — | — | |||||||||
— related parties | 374 | 874 | (1,210 | ) | ||||||||
Premiums paid to purchase derivative instruments | (57 | ) | — | — | ||||||||
Net proceeds from settlement of derivative instruments | 148 | — | — | |||||||||
Net cash provided by (used in) investing activities | 325 | 726 | (1,377 | ) | ||||||||
F-43
Table of Contents
Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
FINANCING ACTIVITIES | ||||||||||||
Proceeds from issuance of new debt | ||||||||||||
— third parties | 2,779 | 575 | 500 | |||||||||
— related parties | — | 1,561 | 471 | |||||||||
Principal repayments | ||||||||||||
— third parties | (1,822 | ) | (993 | ) | — | |||||||
— related parties | (1,180 | ) | (5 | ) | — | |||||||
Short-term borrowings — net | ||||||||||||
— third parties | (145 | ) | (774 | ) | 577 | |||||||
— related parties | (302 | ) | 221 | (29 | ) | |||||||
Dividends — common shareholders | (27 | ) | — | — | ||||||||
Dividends — minority interests | (7 | ) | (4 | ) | — | |||||||
Net receipts from (payments to) Alcan | 72 | (1,512 | ) | (592 | ) | |||||||
Debt issuance costs | (71 | ) | — | — | ||||||||
Net cash provided by (used in) financing activities | (703 | ) | (931 | ) | 927 | |||||||
Net increase (decrease) in cash and cash equivalents | 71 | 3 | (6 | ) | ||||||||
Effect of exchange rate changes on cash balances held in foreign currencies | (2 | ) | 1 | 2 | ||||||||
Cash and cash equivalents — beginning of year | 31 | 27 | 31 | |||||||||
Cash and cash equivalents — end of year | $ | 100 | $ | 31 | $ | 27 | ||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Interest paid | $ | 153 | $ | 76 | $ | 41 | ||||||
Income taxes paid | 39 | 70 | 19 | |||||||||
Principal payments on capital lease obligations (included in principal repayments — third parties) | 3 | — | — | |||||||||
Supplemental schedule of non-cash investing and financing activities relating to the spin-off transaction and post-closing adjustments (2005 only): | ||||||||||||
Other receivables | $ | 433 | ||||||||||
Short-term borrowings — related parties | (57 | ) | ||||||||||
Long-term debt — related parties | 32 | |||||||||||
Capital lease obligation | 52 | |||||||||||
Additional paid-in capital | (109 | ) | ||||||||||
Supplemental schedule of non-cash transaction (Pechiney acquisition): | ||||||||||||
Assets | $ | 8 | $ | (197 | ) | $ | (298 | ) | ||||
Liabilities | — | 28 | 170 | |||||||||
Net assets allocated to us from Alcan | $ | 8 | $ | (169 | ) | $ | (128 | ) | ||||
F-44
Table of Contents
Accumulated | ||||||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||||||
Common Stock | Paid-in | Retained | Comprehensive | Owner’s Net | ||||||||||||||||||||||||
Shares | Amount | Capital | Earnings | Income (Loss) | Investment | Total | ||||||||||||||||||||||
Balance as of December 31, 2002 | — | $ | — | $ | — | $ | — | $ | (19 | ) | $ | 2,200 | $ | 2,181 | ||||||||||||||
2003 Activity: | ||||||||||||||||||||||||||||
Net income | 157 | 157 | ||||||||||||||||||||||||||
Transfers (to)/from Alcan — net | (467 | ) | (467 | ) | ||||||||||||||||||||||||
Currency translation adjustment | 102 | 102 | ||||||||||||||||||||||||||
Change in minimum pension liability | 1 | 1 | ||||||||||||||||||||||||||
Balance as of December 31, 2003 | — | — | — | — | 84 | 1,890 | 1,974 | |||||||||||||||||||||
2004 Activity: | ||||||||||||||||||||||||||||
Net income | 55 | 55 | ||||||||||||||||||||||||||
Transfers (to) /from Alcan — net | (1,478 | ) | (1,478 | ) | ||||||||||||||||||||||||
Currency translation adjustment | 30 | 30 | ||||||||||||||||||||||||||
Change in minimum pension liability | (26 | ) | (26 | ) | ||||||||||||||||||||||||
Balance as of December 31, 2004 | — | — | — | — | 88 | 467 | 555 | |||||||||||||||||||||
2005 Activity: | ||||||||||||||||||||||||||||
January 1 to January 5, 2005 — Net loss | (29 | ) | (29 | ) | ||||||||||||||||||||||||
Adjusted Invested equity at spin-off date — January 6, 2005 | — | — | — | — | 88 | 438 | 526 | |||||||||||||||||||||
Issuance of common stock in connection with the spin-off | 73,989 | — | 438 | (438 | ) | — | ||||||||||||||||||||||
Spin-off settlement and post-closing adjustments | (6 | ) | (6 | ) | ||||||||||||||||||||||||
Issuance of common stock in connection with stock plans | 17 | — | — | |||||||||||||||||||||||||
January 6 to December 31, 2005 — Net income | 119 | 119 | ||||||||||||||||||||||||||
Currency translation adjustment | (155 | ) | (155 | ) | ||||||||||||||||||||||||
Change in minimum pension liability | (17 | ) | (17 | ) | ||||||||||||||||||||||||
Dividends on common shares ($0.36 per share) | (27 | ) | (27 | ) | ||||||||||||||||||||||||
Dividends on preferred shares of consolidated affiliates | (7 | ) | (7 | ) | ||||||||||||||||||||||||
Balance as of December 31, 2005 | 74,006 | $ | — | $ | 425 | $ | 92 | $ | (84 | ) | $ | — | $ | 433 | ||||||||||||||
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1. | BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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$ in millions | ||||||
(1) | Overstatement of tax expense related to improper asset indexation in South America | $ | 9.3 | |||
(2) | Improper deferral of gains from the settlement of certain derivative instruments primarily in Europe and South America | 6.5 | ||||
(3) | Understatement of option premium expense in North America | (5.7 | ) | |||
(4) | Understatement of various accruals primarily in North America and Europe | (4.1 | ) | |||
(5) | Improper calculation of certain tax expenses primarily in Europe and South America | (1.8 | ) | |||
(6) | Understatement of accruals for labor claims in South America | (3.5 | ) | |||
(7) | Other miscellaneous items | 0.7 | ||||
Net increase to 2005 Net income | $ | 1.4 | ||||
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Years | ||||
Buildings | 30 to 40 | |||
Leasehold improvements | 7 to 20 | |||
Machinery and equipment | 5 to 25 | |||
Furniture, fixtures and equipment | 3 to 7 | |||
Equipment under capital lease obligations | 6 to 15 |
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2. | BUSINESS COMBINATIONS |
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Final | Preliminary | |||||||
Purchase Price | Purchase Price | |||||||
Allocation | Allocation | |||||||
Accounts receivable | $ | 82 | $ | 82 | ||||
Inventories | 101 | 101 | ||||||
Property, plant and equipment | 80 | 70 | ||||||
Goodwill(A) | 220 | 45 | ||||||
Intangible assets(A) | 4 | — | ||||||
Total assets | 487 | 298 | ||||||
Accounts payable and accrued liabilities(B) | 158 | 139 | ||||||
Long-term debt | 4 | 4 | ||||||
Other long-term liabilities | 18 | 14 | ||||||
Deferred income taxes — non-current | 18 | 13 | ||||||
Total liabilities | 198 | 170 | ||||||
Fair value of net assets acquired — at date of acquisition (net of cash and cash equivalents acquired of $5 million) | $ | 289 | $ | 128 | ||||
(A) | See Note 7 — Goodwill and Intangible Assets. | |
(B) | Includes $23 million of accrued restructuring costs as described in Note 3 — Restructuring Programs. |
3. | RESTRUCTURING PROGRAMS |
Novelis | Novelis | |||||||||||||||||||||||
Europe | North America | Total | ||||||||||||||||||||||
Other Exit | Other Exit | Other Exit | ||||||||||||||||||||||
Severance | Related | Severance | Related | Severance | Related | |||||||||||||||||||
Balance as of December 31, 2003 | $ | 16 | $ | 15 | $ | 3 | $ | — | $ | 19 | $ | 15 | ||||||||||||
Provisions (recoveries) — net | 12 | 8 | — | — | 12 | 8 | ||||||||||||||||||
Cash payments | (12 | ) | (5 | ) | (1 | ) | — | (13 | ) | (5 | ) | |||||||||||||
Adjustments to Goodwill | 19 | 4 | — | — | 19 | 4 | ||||||||||||||||||
Adjustments — other | — | (2 | ) | — | — | — | (2 | ) | ||||||||||||||||
Balance as of December 31, 2004 | 35 | 20 | 2 | — | 37 | 20 | ||||||||||||||||||
Provisions (recoveries) — net | — | 10 | — | — | — | 10 | ||||||||||||||||||
Cash payments | (18 | ) | (8 | ) | (1 | ) | — | (19 | ) | (8 | ) | |||||||||||||
Adjustments to Goodwill | (5 | ) | — | — | — | (5 | ) | — | ||||||||||||||||
Adjustments — other | (3 | ) | (3 | ) | — | — | (3 | ) | (3 | ) | ||||||||||||||
Balance as of December 31, 2005 | $ | 9 | $ | 19 | $ | 1 | $ | — | $ | 10 | $ | 19 | ||||||||||||
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4. | ACCOUNTS RECEIVABLE |
As of December 31, | ||||||||
2005 | 2004 | |||||||
Customer accounts receivable | ||||||||
Third parties | $ | 993 | $ | 736 | ||||
Related parties | — | 87 | ||||||
993 | 823 | |||||||
Other accounts receivable | ||||||||
Third parties | 131 | 67 | ||||||
Related parties | 33 | 711 | ||||||
164 | 778 | |||||||
Total accounts receivable — gross | 1,157 | 1,601 | ||||||
Less: allowance for doubtful accounts — all third parties | (26 | ) | (33 | ) | ||||
$ | 1,131 | $ | 1,568 | |||||
Balance at | Additions | Accounts | Foreign | |||||||||||||||||
Beginning | Charged to | Recovered/ | Exchange | Balance at | ||||||||||||||||
Year Ended December 31, | of Year | Expense | Written-Off | and Other | End of Year | |||||||||||||||
2005 | $ | 33 | $ | 3 | $ | (8 | ) | $ | (2 | ) | $ | 26 | ||||||||
2004 | 30 | 6 | (3 | ) | — | 33 | ||||||||||||||
2003 | 25 | 4 | (1 | ) | 2 | 30 |
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Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Receivables forfaited | $ | 285 | $ | 190 | $ | 162 | ||||||
Receivables factored | $ | 94 | $ | 27 | $ | 8 | ||||||
As of December 31, | ||||||||
2005 | 2004 | |||||||
Forfaited receivables outstanding | $ | 59 | $ | 50 | ||||
Factored receivables outstanding | $ | 12 | $ | — | ||||
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5. | INVENTORIES |
As of December 31, | ||||||||
2005 | 2004 | |||||||
Finished goods | $ | 326 | $ | 309 | ||||
Work in process | 240 | 196 | ||||||
Raw materials | 509 | 658 | ||||||
Supplies | 122 | 124 | ||||||
1,197 | 1,287 | |||||||
Allowances | (69 | ) | (61 | ) | ||||
$ | 1,128 | $ | 1,226 | |||||
As of December 31, | ||||||||
2005 | 2004 | |||||||
Land and property rights | $ | 90 | $ | 93 | ||||
Buildings | 845 | 935 | ||||||
Machinery and equipment | 4,407 | 4,478 | ||||||
5,342 | 5,506 | |||||||
Accumulated depreciation and amortization | (3,319 | ) | (3,271 | ) | ||||
2,023 | 2,235 | |||||||
Construction in progress | 137 | 112 | ||||||
$ | 2,160 | $ | 2,347 | |||||
As of December 31, | ||||||||
2005 | 2004 | |||||||
Fully depreciated assets | $ | 1,250 | $ | 1,150 | ||||
Assets under capital lease obligations | ||||||||
Land | $ | 1 | $ | — | ||||
Buildings | 9 | — | ||||||
Machinery and equipment | 41 | 3 | ||||||
51 | 3 | |||||||
Accumulated amortization | (7 | ) | (3 | ) | ||||
$ | 44 | $ | — | |||||
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Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Depreciation expense | $ | 228 | $ | 244 | $ | 220 | ||||||
Amortization expense | $ | 2 | $ | 2 | $ | 2 | ||||||
Interest capitalized on construction projects | $ | — | $ | 1 | $ | 1 | ||||||
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Operating | Capital Lease | |||||||
Year Ending December 31, | Leases | Obligations | ||||||
2006 | $ | 14 | $ | 6 | ||||
2007 | 11 | 6 | ||||||
2008 | 9 | 6 | ||||||
2009 | 6 | 6 | ||||||
2010 | 5 | 6 | ||||||
Thereafter | 12 | 48 | ||||||
Total payments | $ | 57 | 78 | |||||
Less: interest portion on capital leases | (29 | ) | ||||||
Principal obligation on capital leases | $ | 49 | ||||||
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Amount | ||||
Asset retirement obligation as of January 1, 2005 | $ | — | ||
Liability accrued upon adoption | 11 | |||
Liability settled | — | |||
Accretion | — | |||
Asset retirement obligation as of December 31, 2005 | $ | 11 | ||
7. | GOODWILL AND INTANGIBLE ASSETS |
Total | ||||
Balance as of December 31, 2003 | $ | 69 | ||
Additions | — | |||
Cumulative translation adjustment | 4 | |||
Adjustments | 183 | |||
Impairment charges | — | |||
Balance as of December 31, 2004 | 256 | |||
Additions | — | |||
Cumulative translation adjustment | (32 | ) | ||
Adjustments | (13 | ) | ||
Impairment charges | — | |||
Balance as of December 31, 2005 | $ | 211 | ||
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Gross | Net | |||||||||||
Carrying | Accumulated | Carrying | ||||||||||
Amount | Amortization | Amount | ||||||||||
Trademarks | ||||||||||||
2005 | $ | 12 | $ | 4 | $ | 8 | ||||||
2004 | 14 | 4 | 10 | |||||||||
2003 | 11 | 2 | 9 | |||||||||
Patented and non-patented technology | ||||||||||||
2005 | $ | 19 | $ | 6 | $ | 13 | ||||||
2004 | 22 | 5 | 17 | |||||||||
2003 | 17 | 4 | 13 | |||||||||
Total intangible assets | ||||||||||||
2005 | $ | 31 | $ | 10 | $ | 21 | ||||||
2004 | 36 | 9 | 27 | |||||||||
2003 | 28 | 6 | 22 |
8. | INVESTMENT IN AND ADVANCES TO NON-CONSOLIDATED AFFILIATES |
Percentage | ||||||
Ownership Structure | Ownership | |||||
Aluminium Norf GmbH | Corporation | 50 | % | |||
Consorcio Candonga | Unincorporated Joint Venture | 50 | % | |||
Petrocoque S.A. — Industria e Comercio | Limited Liability Corporation | 25 | % | |||
EuroNorca Partners | General Partnership | 50 | % | |||
Deutsche Aluminium Verpackung Recycling GmbH | Corporation | 30 | % | |||
France Aluminum Recyclage SA | Public Limited Company | 20 | % |
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As of December 31, | ||||||||
2005 | 2004 | |||||||
Assets | ||||||||
Current | $ | 228 | $ | 253 | ||||
Non-current | 605 | 609 | ||||||
Total assets | $ | 833 | $ | 862 | ||||
Liabilities and Equity | ||||||||
Current liabilities | $ | 349 | $ | 457 | ||||
Non-current liabilities | 188 | 153 | ||||||
Total liabilities | 537 | 610 | ||||||
Partners’ capital and shareholders’/invested equity | ||||||||
Novelis | 144 | 122 | ||||||
Third parties | 152 | 130 | ||||||
Total liabilities and equity | $ | 833 | $ | 862 | ||||
Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Net sales | $ | 497 | $ | 451 | $ | 411 | ||||||
Costs, expenses and provision for taxes on income | 479 | 434 | 396 | |||||||||
Net income | $ | 18 | $ | 17 | $ | 15 | ||||||
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9. | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
As of December 31, | ||||||||
2005 | 2004 | |||||||
Accrued payroll | $ | 152 | $ | 150 | ||||
Accrued litigation settlement | 71 | — | ||||||
Accrued interest payable | 51 | 2 | ||||||
Accrued income taxes | 55 | 1 | ||||||
Current portion of fair value of derivative contracts | 22 | 91 | ||||||
Other current liabilities | 290 | 181 | ||||||
$ | 641 | $ | 425 | |||||
10. | LONG-TERM DEBT |
Interest | As of December 31, | |||||||||||
Rates(A) | 2005 | 2004 | ||||||||||
Due to related parties | ||||||||||||
Total related party debt | $ | — | $ | 2,597 | ||||||||
Less: current portion | — | (290 | ) | |||||||||
Long-term related party debt — net of current portion | $ | — | $ | 2,307 | ||||||||
Due to third parties | ||||||||||||
Novelis Inc. | ||||||||||||
Floating rate Term Loan B, due 2012 | 6.01 | % | $ | 342 | $ | — | ||||||
7.25% Senior Notes, due 2015 | 7.25 | %(B) | 1,400 | — | ||||||||
Novelis Corporation | ||||||||||||
Floating rate Term Loan B, due 2012 | 6.01 | % | 593 | — | ||||||||
Novelis Switzerland S.A. | ||||||||||||
Capital lease obligation, due 2020 (Swiss francs (CHF) 60 million) | 7.50 | % | 45 | — | ||||||||
Capital lease obligation, due 2011 (CHF 5 million) | 2.49 | % | 4 | — | ||||||||
Novelis Korea Limited | ||||||||||||
Bank loan, due 2008 | 5.30 | % | 50 | — | ||||||||
Bank loan, due 2008 (Korean won (KRW) 30 billion) | 5.75 | % | 30 | — | ||||||||
Bank loan, due 2007 | 4.55 | % | 70 | 70 | ||||||||
Bank loan, due 2007 (KRW 40 billion) | 4.80 | % | 40 | 39 | ||||||||
Bank loan, due 2007 (KRW 25 billion) | 4.45 | % | 25 | 24 | ||||||||
Bank loans, due 2008 through 2011 (KRW 1 billion) | 4.09 | %(C) | 1 | 2 | ||||||||
Other | ||||||||||||
Other debt, due 2006 through 2012 | 2.70 | %(C) | 3 | 5 | ||||||||
Total third party debt | 2,603 | 140 | ||||||||||
Less: current portion | (3 | ) | (1 | ) | ||||||||
Long-term third party debt — net of current portion | $ | 2,600 | $ | 139 | ||||||||
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(A) | Interest rates are as of December 31, 2005 and exclude the effects of any related interest swaps or amortization of debt issuance and other costs. | |
(B) | The interest rate for the Senior Notes does not include additional “special interest” discussed below. | |
(C) | Weighted average interest rate. |
Year Ending December 31, | Amount | |||
2006 | $ | 3 | ||
2007 | 139 | |||
2008 | 84 | |||
2009 | 4 | |||
2010 | 3 | |||
Thereafter | 2,370 | |||
Total | $ | 2,603 | ||
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11. | PREFERRED AND COMMON SHARES |
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12. | OTHER COMPREHENSIVE INCOME (LOSS) |
As of December 31, | ||||||||
2005 | 2004 | |||||||
Foreign currency translation adjustments | $ | (35 | ) | $ | 120 | |||
Minimum pension liability | (49 | ) | (32 | ) | ||||
$ | (84 | ) | $ | 88 | ||||
�� |
Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Net change in foreign currency translation adjustments | $ | (169 | ) | $ | 30 | $ | 102 | |||||
Net change in minimum pension liability | (14 | ) | (41 | ) | 4 | |||||||
Net other comprehensive income (loss) adjustments, before income tax (expense) benefit | (183 | ) | (11 | ) | 106 | |||||||
Income tax (expense) benefit | 11 | 15 | (3 | ) | ||||||||
Other comprehensive income (loss) | $ | (172 | ) | $ | 4 | $ | 103 | |||||
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13. | FAIR VALUE OF FINANCIAL INSTRUMENTS |
As of December 31, | ||||||||||||||||
2005 | 2004 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Value | Fair Value | Value | Fair Value | |||||||||||||
Assets | ||||||||||||||||
Long-term receivables from related parties | $ | 71 | $ | 71 | $ | 104 | $ | 104 | ||||||||
Liabilities | ||||||||||||||||
Long-term debt | ||||||||||||||||
Long-term related party debt — net of current portion | — | — | 2,307 | 2,307 | ||||||||||||
Novelis Inc. | ||||||||||||||||
Floating rate Term Loan B, due 2012 | 342 | 342 | — | — | ||||||||||||
7.25% Senior Notes, due 2015 | 1,400 | 1,306 | — | — | ||||||||||||
Novelis Corporation | ||||||||||||||||
Floating rate Term Loan B, due 2012 | 593 | 593 | — | — | ||||||||||||
Novelis Switzerland S.A. | ||||||||||||||||
Capital lease obligation, due 2020 (CHF 60 million) | 45 | 44 | — | — | ||||||||||||
Capital lease obligation, due 2011 (CHF 5 million) | 4 | 4 | — | — | ||||||||||||
Novelis Korea Limited | ||||||||||||||||
Bank loan, due 2008 | 50 | 45 | — | — | ||||||||||||
Bank loan, due 2008 (KRW 30 billion) | 30 | 25 | — | — | ||||||||||||
Bank loan, due 2007 | 70 | 64 | 70 | 65 | ||||||||||||
Bank loan, due 2007 (KRW 40 billion) | 40 | 36 | 39 | 37 | ||||||||||||
Bank loan, due 2007 (KRW 25 billion) | 25 | 22 | 24 | 23 | ||||||||||||
Bank loans, due 2008 through 2011 (KRW 1 billion) | 1 | 1 | 2 | 1 | ||||||||||||
Other | ||||||||||||||||
Other debt, due 2006 through 2012 | 3 | 2 | 5 | 4 | ||||||||||||
Financial commitments | ||||||||||||||||
Letters of credit | — | 2 | — | 1 |
14. | STOCK-BASED COMPENSATION |
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Weighted Average | ||||||||
Options | Exercise Price | |||||||
(In thousands) | ||||||||
Equivalent converted Novelis options outstanding as of December 31, 2004 | 2,724 | $ | 21.57 | |||||
Granted | — | — | ||||||
Exercised | 17 | $ | 17.48 | |||||
Forfeited | — | — | ||||||
Expired/Cancelled | 2 | $ | 16.71 | |||||
Options outstanding as of December 31, 2005 | 2,705 | $ | 21.60 | |||||
Options Outstanding | ||||||||||||||||||||
Weighted Average | Vested Options | |||||||||||||||||||
Remaining | Weighted | Weighted | ||||||||||||||||||
Contractual Life | Average | Average | ||||||||||||||||||
Range of Exercise Prices | Options | (Years) | Exercise Price | Options | Exercise Price | |||||||||||||||
(In thousands) | (In thousands) | |||||||||||||||||||
$14.17 through $19.74 | 761 | 6 | $ | 17.81 | 178 | $ | 17.60 | |||||||||||||
$21.49 through $28.17 | 1,944 | 9 | $ | 23.08 | 116 | $ | 24.05 | |||||||||||||
2,705 | 8 | $ | 21.60 | 294 | $ | 20.14 | ||||||||||||||
2005 | 2004 | 2003 | ||||||||||
Dividend yield (%) | 1.56 | 1.85 | 1.88 | |||||||||
Expected volatility (%) | 30.30 | 27.87 | 29.16 | |||||||||
Risk-free interest rate (%) | 3.73 | 4.56 | 3.39 | |||||||||
Expected life (years) | 5.47 | 6.00 | 6.00 |
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15. | POST-RETIREMENT BENEFIT PLANS |
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Allocation in | ||||||||||||
Target | Aggregate at | |||||||||||
Allocation | December 31, | |||||||||||
Category of Asset | Ranges | 2005 | 2004 | |||||||||
Equity securities | 40-75 | % | 54 | % | 55 | % | ||||||
Debt securities | 25-60 | % | 41 | % | 39 | % | ||||||
Real estate | — | 3 | % | — | ||||||||
Other | 0-25 | % | 2 | % | 6 | % |
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Pension Benefits | Other Benefits | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Change in benefit obligation | ||||||||||||||||
Benefit obligation measured as of January 1, | $ | 550 | $ | 256 | $ | 115 | $ | 79 | ||||||||
Service cost | 23 | 15 | 4 | 4 | ||||||||||||
Interest cost | 29 | 29 | 7 | 6 | ||||||||||||
Members’ contributions | 2 | 1 | — | — | ||||||||||||
Benefits paid | (26 | ) | (23 | ) | (7 | ) | (8 | ) | ||||||||
Amendments | 2 | — | (3 | ) | — | |||||||||||
Acquisitions/reorganization | (3 | ) | 251 | — | 22 | |||||||||||
Curtailments/settlements/termination benefits | — | (43 | ) | — | — | |||||||||||
Actuarial (gains) losses | 40 | 32 | 6 | 12 | ||||||||||||
Currency (gains) losses | (42 | ) | 32 | — | — | |||||||||||
Benefit obligation measured as of December 31, | $ | 575 | $ | 550 | $ | 122 | $ | 115 | ||||||||
Benefit obligation of funded plans | $ | 414 | $ | 398 | — | — | ||||||||||
Benefit obligation of unfunded plans | 161 | 152 | $ | 122 | $ | 115 | ||||||||||
Benefit obligation measured as of December 31, | $ | 575 | $ | 550 | $ | 122 | $ | 115 | ||||||||
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Pension Benefits | Other Benefits | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Change in market value of plan assets | ||||||||||||||||
Assets as of January 1, | $ | 290 | $ | 114 | ||||||||||||
Actual return on assets | 23 | 17 | ||||||||||||||
Members’ contributions | 2 | 1 | ||||||||||||||
Benefits paid | (26 | ) | (23 | ) | ||||||||||||
Company contributions | 28 | 32 | ||||||||||||||
Acquisitions/reorganization | — | 177 | ||||||||||||||
Curtailments/settlements/termination benefits | — | (39 | ) | |||||||||||||
Currency gains (losses) | (16 | ) | 11 | |||||||||||||
Assets as of December 31, | $ | 301 | $ | 290 | ||||||||||||
Assets less than benefit obligation of funded plans | $ | (113 | ) | $ | (108 | ) | ||||||||||
Benefit obligation of unfunded plans | (161 | ) | (152 | ) | $ | (122 | ) | $ | (115 | ) | ||||||
Assets less than benefit obligation | $ | (274 | ) | $ | (260 | ) | $ | (122 | ) | $ | (115 | ) | ||||
Unamortized | ||||||||||||||||
— actuarial (gains)/losses | $ | 92 | $ | 84 | $ | 23 | $ | 26 | ||||||||
— prior service cost | 15 | 15 | (1 | ) | (1 | ) | ||||||||||
Minimum pension liability | (62 | ) | (54 | ) | — | — | ||||||||||
Intangible assets | 11 | 9 | — | — | ||||||||||||
Accumulated other comprehensive income | 51 | 45 | — | — | ||||||||||||
Net amount recognized in balance sheet | $ | (167 | ) | $ | (161 | ) | $ | (100 | ) | $ | (90 | ) | ||||
Amount recognized for funded plans | $ | (44 | ) | $ | (44 | ) | — | — | ||||||||
Amount recognized for unfunded plans | (123 | ) | (117 | ) | $ | (100 | ) | $ | (90 | ) | ||||||
Net amount recognized in balance sheet | $ | (167 | ) | $ | (161 | ) | $ | (100 | ) | $ | (90 | ) | ||||
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Pension | Other | |||||||
Benefits | Benefits | |||||||
2006 | $ | 25 | $ | 7 | ||||
2007 | 27 | 7 | ||||||
2008 | 27 | 7 | ||||||
2009 | 29 | 7 | ||||||
2010 | 31 | 7 | ||||||
2011 through 2015 | 185 | 44 | ||||||
Total | $ | 324 | $ | 79 | ||||
Pension Benefits | Other Benefits | |||||||||||||||||||||||
2005 | 2004 | 2003 | 2005 | 2004 | 2003 | |||||||||||||||||||
Components of net periodic benefit cost | ||||||||||||||||||||||||
Service cost | $ | 23 | $ | 27 | $ | 21 | $ | 4 | $ | 4 | $ | 2 | ||||||||||||
Interest cost | 29 | 37 | 33 | 7 | 6 | 5 | ||||||||||||||||||
Expected return on assets | (20 | ) | (28 | ) | (28 | ) | — | — | — | |||||||||||||||
Amortization | ||||||||||||||||||||||||
— actuarial (gains) losses | 5 | 4 | 3 | 1 | 1 | — | ||||||||||||||||||
— prior service cost | 2 | 4 | 5 | — | — | — | ||||||||||||||||||
Curtailment/settlement losses | — | (19 | ) | 7 | — | — | — | |||||||||||||||||
Total | $ | 39 | $ | 25 | $ | 41 | $ | 12 | $ | 11 | $ | 7 | ||||||||||||
Weighted average assumptions used to determine benefit obligations as of December 31, | ||||||||||||||||||||||||
Discount rate | 5.1 | % | 5.4 | % | 5.8 | % | 5.7 | % | 5.8 | % | 6.2 | % | ||||||||||||
Average compensation growth | 4.0 | % | 3.6 | % | 3.3 | % | 3.9 | % | 4.0 | % | 3.7 | % | ||||||||||||
Weighted average assumptions used to determine net periodic benefit cost | ||||||||||||||||||||||||
Discount rate | 5.4 | % | 5.8 | % | 6.2 | % | 5.8 | % | 6.2 | % | 6.5 | % | ||||||||||||
Average compensation growth | 4.2 | % | 3.3 | % | 3.0 | % | 4.0 | % | 3.7 | % | 3.9 | % | ||||||||||||
Expected return on plan assets | 7.4 | % | 8.3 | % | 8.0 | % | — | — | — |
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Other Benefits | ||||||||
1% Increase | 1% Decrease | |||||||
Sensitivity Analysis | ||||||||
Effect on service and interest costs | $ | 1 | $ | (1 | ) | |||
Effect on benefit obligation | $ | 12 | $ | (11 | ) |
16. | CURRENCY GAINS AND LOSSES |
Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Net gains (losses) on change in fair market value of currency derivatives | $ | 96 | $ | (23 | ) | $ | (37 | ) | ||||
Realized currency gains | — | — | 1 | |||||||||
Net gains (losses) on translation of monetary assets and liabilities | 6 | (4 | ) | (7 | ) | |||||||
$ | 102 | $ | (27 | ) | $ | (43 | ) | |||||
Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Cumulative translation adjustment — beginning of year | $ | 120 | $ | 90 | $ | (12 | ) | |||||
Effect of changes in exchange rates | (155 | ) | 30 | 103 | ||||||||
Realized translation adjustment gains | — | — | (1 | ) | ||||||||
Cumulative translation adjustment — end of year | $ | (35 | ) | $ | 120 | $ | 90 | |||||
17. | FINANCIAL INSTRUMENTS AND COMMODITY CONTRACTS |
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• | During the first quarter of 2005, we entered into U.S. dollar interest rate swaps totaling $310 million with respect to the Term Loan B in the U.S. and $766 million of cross-currency interest rate swaps (Euro 475 million, GBP 62 million, CHF 35 million) with respect to intercompany loans to several European subsidiaries. | |
• | During the second quarter of 2005, we monetized the initial cross-currency interest rate swaps and replaced them with new cross-currency interest rate swaps maturing in 2015, totaling $712 million as of December 31, 2005 (Euro 475 million, GBP 62 million, CHF 35 million). We realized a gain of $45 million related to this transaction. | |
• | During the third quarter of 2005, we entered into cross-currency principal only swaps (Euro 89 million). The U.S. notional amount of these swaps was $108 million as of December 31, 2005. These swaps mature in 2006 and are designated as cash flow hedging instruments. |
Net Fair | ||||||||||||||
As of December 31, 2005 | Maturity Dates | Assets | Liabilities | Value | ||||||||||
Forward foreign exchange contracts | 2006 through 2011 | $ | 15 | $ | (9 | ) | $ | 6 | ||||||
Interest rate swaps | 2006 through 2008 | 5 | — | 5 | ||||||||||
Cross-currency interest swaps | 2006 through 2015 | — | (24 | ) | (24 | ) | ||||||||
Aluminum forward contracts | 2006 through 2009 | 87 | (7 | ) | 80 | |||||||||
Aluminum call options | Matures in 2006 | 109 | — | 109 | ||||||||||
Fixed price electricity contract | Matures in 2016 | 68 | — | 68 | ||||||||||
284 | (40 | ) | 244 | |||||||||||
Less: current portion(A) | 194 | (22 | ) | 172 | ||||||||||
$ | 90 | $ | (18 | ) | $ | 72 | ||||||||
(A) | Current portion as presented on our consolidated balance sheet. Remaining long-term portions of fair values are included inOther long-term assetsandOther long-term liabilitieson our consolidated balance sheet. |
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Net Fair | ||||||||||||||
As of December 31, 2004 | Maturity Dates | Assets | Liabilities | Value | ||||||||||
Forward foreign exchange contracts | 2005 through 2009 | $ | 3 | $ | (60 | ) | $ | (57 | ) | |||||
Interest rate swaps | Matures in 2007 | — | (1 | ) | (1 | ) | ||||||||
Cross-currency interest swaps | 2005 through 2007 | — | (8 | ) | (8 | ) | ||||||||
Aluminum forward contracts | 2005 through 2006 | 112 | (8 | ) | 104 | |||||||||
Aluminum call options | Matures in 2005 | 26 | — | 26 | ||||||||||
Embedded derivatives | Matures in 2005 | — | (13 | ) | (13 | ) | ||||||||
Natural gas futures | Matures in 2005 | — | (1 | ) | (1 | ) | ||||||||
Fixed price electricity contract | Matures in 2016 | 18 | — | 18 | ||||||||||
159 | (91 | ) | 68 | |||||||||||
Less: current portion(A) | 156 | (91 | ) | 65 | ||||||||||
$ | 3 | $ | — | $ | 3 | |||||||||
(A) | Current portion as presented on our combined balance sheet. Remaining long-term portions of fair values are included inOther long-term assetsandOther long-term liabilitieson our combined balance sheet. |
18. | INCOME TAXES |
Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Domestic (Canada) | $ | 28 | $ | (25 | ) | $ | (24 | ) | ||||
Foreign (all other countries) | 190 | 250 | 228 | |||||||||
$ | 218 | $ | 225 | $ | 204 | |||||||
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Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Current income taxes | ||||||||||||
Canada | $ | 11 | $ | (11 | ) | $ | (11 | ) | ||||
Foreign (all other countries) | 66 | 80 | 81 | |||||||||
Total current | 77 | 69 | 70 | |||||||||
Deferred income taxes | ||||||||||||
Canada | (15 | ) | 2 | 4 | ||||||||
Foreign (all other countries) | 45 | 95 | (24 | ) | ||||||||
Total deferred | 30 | 97 | (20 | ) | ||||||||
Total provision for taxes on income | $ | 107 | $ | 166 | $ | 50 | ||||||
Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Canadian Statutory tax rate | 33.0 | % | 33.0 | % | 32.0 | % | ||||||
Income taxes at the Canadian statutory rate | $ | 72 | $ | 74 | $ | 66 | ||||||
Increase (decrease) in tax rate resulting from: | ||||||||||||
Exchange translation items | 23 | 13 | 1 | |||||||||
Exchange revaluation of deferred income taxes | 1 | 2 | 4 | |||||||||
Change in valuation allowance | 5 | 42 | (14 | ) | ||||||||
Tax credits and other allowances | (2 | ) | (3 | ) | (3 | ) | ||||||
Expense/income items with no tax effect | 7 | (2 | ) | (4 | ) | |||||||
Tax rate differences on foreign earnings | 5 | 10 | 9 | |||||||||
Prior years’ tax adjustments | (10 | ) | 5 | (13 | ) | |||||||
Withholding tax in connection with the spin-off | — | 21 | �� | — | ||||||||
Other — net | 6 | 4 | 4 | |||||||||
Provision for taxes on income | $ | 107 | $ | 166 | $ | 50 | ||||||
Effective tax rate | 49.1 | % | 73.8 | % | 24.5 | % | ||||||
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As of December 31, | ||||||||
2005 | 2004 | |||||||
Deferred income tax assets: | ||||||||
Provisions not currently deductible for tax purposes | $ | 183 | $ | 100 | ||||
Tax losses/benefit carryforwards | 101 | 174 | ||||||
Other assets | 20 | 41 | ||||||
Total deferred income tax assets | 304 | 315 | ||||||
Less: valuation allowance | (73 | ) | (163 | ) | ||||
Net deferred income tax assets | $ | 231 | $ | 152 | ||||
Deferred income tax liabilities: | ||||||||
Property, plant and equipment | $ | 239 | $ | 255 | ||||
Inventory valuation | 48 | 42 | ||||||
Other liabilities | 127 | 93 | ||||||
Total deferred income tax liabilities | $ | 414 | $ | 390 | ||||
Total Deferred income tax liabilities | $ | 414 | 390 | |||||
Less: Net deferred income tax assets | 231 | 152 | ||||||
Net deferred income tax liabilities | $ | 183 | $ | 238 | ||||
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19. | EARNINGS PER SHARE |
Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Numerator: | ||||||||||||
Net income before cumulative effect of accounting change | $ | 96 | $ | 55 | $ | 157 | ||||||
Cumulative effect of accounting change — net of tax | (6 | ) | ��� | — | ||||||||
Net income | $ | 90 | $ | 55 | $ | 157 | ||||||
Denominator: | ||||||||||||
Weighted average number of outstanding shares | 73.99 | 73.99 | 73.99 | |||||||||
Effect of dilutive shares | .24 | .44 | .44 | |||||||||
Adjusted number of outstanding shares | 74.23 | 74.43 | 74.43 | |||||||||
Earnings per share: | ||||||||||||
Basic — | ||||||||||||
Net income before cumulative effect of accounting change | $ | 1.29 | $ | 0.74 | $ | 2.12 | ||||||
Cumulative effect of accounting change — net of tax | (0.08 | ) | — | — | ||||||||
Net income | $ | 1.21 | $ | 0.74 | $ | 2.12 | ||||||
Diluted — | ||||||||||||
Net income before cumulative effect of accounting change | $ | 1.29 | $ | 0.74 | $ | 2.11 | ||||||
Cumulative effect of accounting change — net of tax | (0.08 | ) | — | — | ||||||||
Net income | $ | 1.21 | $ | 0.74 | $ | 2.11 | ||||||
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20. | RELATED PARTY TRANSACTIONS |
Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Net sales | ||||||||||||
Alcan(A) | $ | — | $ | 450 | $ | 472 | ||||||
Cost of sales | ||||||||||||
Alcan(A) | $ | — | $ | 403 | $ | 436 | ||||||
Research and development expenses | ||||||||||||
Alcan(B) | $ | — | $ | 38 | $ | 44 | ||||||
Interest expense and amortization of debt issuance costs — net | ||||||||||||
Alcan(C) | $ | — | $ | 33 | $ | 19 | ||||||
Other (income) expense — net | ||||||||||||
Alcan: | ||||||||||||
Service fee income(D) | $ | — | $ | (42 | ) | $ | (39 | ) | ||||
Service fee expense(E) | — | 25 | 26 | |||||||||
Interest income(F) | — | (22 | ) | (4 | ) | |||||||
Net gains on change in fair market value of derivatives(G) | — | (23 | ) | (68 | ) | |||||||
Other | — | 8 | 2 | |||||||||
Total Other income — net, with Alcan | — | (54 | ) | (83 | ) | |||||||
Aluminium Norf GmbH: | ||||||||||||
Interest expense (income) | 1 | (2 | ) | (1 | ) | |||||||
Total Other income — net, with all related parties | $ | 1 | $ | (56 | ) | $ | (84 | ) | ||||
Purchases of inventory, tolling services and electricity | ||||||||||||
Aluminium Norf GmbH(H) | $ | 205 | $ | 203 | $ | 187 | ||||||
Alcan(I) | — | 1,739 | 1,732 | |||||||||
Consorcio Candonga(J) | 8 | 2 | — | |||||||||
Petrocoque S.A. Industria e Comercio(K) | 2 | 2 | 2 | |||||||||
Total purchases from related parties | $ | 215 | $ | 1,946 | $ | 1,921 | ||||||
(A) | We purchase from and sell materials to Alcan in the ordinary course of business. | |
(B) | These expenses represent an allocation of research and development expenses incurred by Alcan on behalf of Novelis. | |
(C) | As discussed further below and in Note 10 — Long-Term Debt, we had various short-term borrowings and long-term debt payable to Alcan where interest was charged on both a fixed and a floating rate basis. |
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(D) | Service fee income arose from sales of research and development and other corporate services to Alcan. | |
(E) | Service fee expense arose from the purchase of corporate services from Alcan. | |
(F) | Represents interest income earned on outstanding advances and loans to Alcan. | |
(G) | Alcan was the counterparty to most of our metal and currency derivatives. | |
(H) | Aluminium Norf GmbH provides tolling services to us. | |
(I) | Alcan is our primary third party supplier of prime and sheet ingot. Refer to Note 21 — Commitments and Contingencies. | |
(J) | Consorcio Candonga supplies approximately 25% of Novelis South America’s total electricity requirements. | |
(K) | Petrocoque S.A. Industria e Comercio supplies calcined-coke to our South America smelting operations. |
As of December 31, | ||||||||
2005 | 2004 | |||||||
Customer accounts receivable | ||||||||
Alcan(A) | $ | — | $ | 87 | ||||
Other receivables | ||||||||
Alcan(B) | $ | — | $ | 666 | ||||
Aluminium Norf GmbH(C) | 33 | 45 | ||||||
$ | 33 | $ | 711 | |||||
Long-term receivables | ||||||||
Alcan | $ | — | $ | 2 | ||||
Aluminium Norf GmbH(C) | 71 | 102 | ||||||
$ | 71 | $ | 104 | |||||
Current portion of long-term debt | ||||||||
Alcan(D) | $ | — | $ | 290 | ||||
Short-term borrowings | ||||||||
Alcan(E) | $ | — | $ | 312 | ||||
Accounts payable | ||||||||
Alcan(A) | $ | — | $ | 297 | ||||
Aluminium Norf GmbH(A) | 38 | 45 | ||||||
$ | 38 | $ | 342 | |||||
Long-term debt — net of current portion | ||||||||
Alcan(D) | $ | — | $ | 2,307 | ||||
(A) | We purchase from and sell materials to Alcan and we purchase services from an investee accounted for under the equity method, in the ordinary course of business. |
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(B) | The balance as of December 31, 2004 includes various short-term floating rate notes totaling Euro 266 million and $55 million maturing within one year that were settled by Alcan in 2005 as part of our spin-off. | |
(C) | The balances represent current and non-current portions of a loan to an investee accounted for under the equity method. | |
(D) | We had various loans payable to Alcan as of December 31, 2004 as described in Note 10 — Long-Term Debt that were repaid in the first quarter of 2005. | |
(E) | The balance as of December 31, 2004 is comprised of loans due to Alcan in various currencies including Euro 193 million and GBP 20 million that were repaid in 2005 as part of our spin-off. |
21. | COMMITMENTS AND CONTINGENCIES |
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• | wholly-owned subsidiaries; | |
• | variable interest entities consolidated under FASB Interpretation No. 46 (Revised); and | |
• | Aluminium Norf GmbH, which is a fifty percent (50%) owned joint venture which does not meet the consolidation tests under FASB Interpretation No. 46 (Revised). |
Maximum | ||||||||||||
Potential Future | Liability | Assets Held for | ||||||||||
Type of Entity | Payment | Carrying Value | Collateral | |||||||||
Wholly-Owned Subsidiaries | $ | 14 | $ | 2 | $ | — | ||||||
Aluminium Norf GmbH | 12 | — | — |
22. | OTHER INCOME — NET |
Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Net gains on change in fair market value of derivative instruments(A) | $ | (269 | ) | $ | (69 | ) | $ | (20 | ) | |||
Gain on disposals of fixed assets — net | (17 | ) | (5 | ) | (28 | ) | ||||||
Exchange (gains) losses — net | (6 | ) | 2 | 17 | ||||||||
Service fee income — net | — | (17 | ) | (13 | ) | |||||||
Other | (7 | ) | 27 | (5 | ) | |||||||
$ | (299 | ) | $ | (62 | ) | $ | (49 | ) | ||||
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(A) | Included in the year ended December 31, 2005 amount is $43 million in pre-tax unrealized losses ($29 million after-tax) on the change in market value of derivative contracts, primarily with Alcan, for the period from January 1 to January 5, 2005, as described in Note 1 — Business and Summary of Significant Accounting Policies —Basis of Combination: Pre-Spin-off. |
23. | SEGMENT, GEOGRAPHICAL AREA AND MAJOR CUSTOMER INFORMATION |
• | Novelis North America. Headquartered in Cleveland, Ohio, this segment manufactures aluminum sheet and light gauge products and operates 12 plants, including two recycling facilities, in two countries. | |
• | Novelis Europe. Headquartered in Zurich, Switzerland, this segment manufactures aluminum sheet and light gauge products and operates 16 plants, including two recycling facilities, in six countries. | |
• | Novelis Asia. Headquartered in Seoul, South Korea, this segment manufactures aluminum sheet and light gauge products and operates three plants in two countries. | |
• | Novelis South America. Headquartered in Sao Paulo, Brazil, this segment comprises bauxite mining, alumina refining, smelting operations, power generation, carbon products, aluminum sheet and light gauge products and operates five plants in Brazil. |
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Proportional | ||||||||||||||||||||||||||||
Share to | ||||||||||||||||||||||||||||
Novelis | Novelis | Equity | ||||||||||||||||||||||||||
North | Novelis | Novelis | South | Accounting | Corporate | |||||||||||||||||||||||
Year Ended December 31, 2005 | America | Europe | Asia | America | Adjustments | and Other | Total | |||||||||||||||||||||
Net sales (to third parties) | $ | 3,265 | $ | 3,093 | $ | 1,391 | $ | 630 | $ | (16 | ) | $ | — | $ | 8,363 | |||||||||||||
Intersegment sales | 2 | 31 | 8 | 41 | — | (82 | ) | — | ||||||||||||||||||||
Regional Income | 196 | 206 | 108 | 110 | — | — | 620 | |||||||||||||||||||||
Interest income | 1 | 3 | 1 | 1 | — | 3 | 9 | |||||||||||||||||||||
Interest expense and amortization of debt issuance costs | 44 | 10 | 11 | 3 | — | 135 | 203 | |||||||||||||||||||||
Depreciation and amortization | 72 | 96 | 51 | 44 | (34 | ) | 1 | 230 | ||||||||||||||||||||
Restructuring charges | — | 10 | — | — | — | — | 10 | |||||||||||||||||||||
Impairment charges on long-lived assets | — | 7 | — | — | — | — | 7 | |||||||||||||||||||||
Equity in net income of non-consolidated affiliates | — | 4 | — | 2 | — | — | 6 | |||||||||||||||||||||
Provision (benefit) for taxes on income | 33 | 59 | (8 | ) | 26 | (4 | ) | 1 | 107 | |||||||||||||||||||
Total assets | 1,547 | 2,139 | 1,002 | 790 | (85 | ) | 83 | 5,476 | ||||||||||||||||||||
Investment in and advances to Non-consolidated affiliates | 2 | 90 | — | 52 | — | — | 144 | |||||||||||||||||||||
Capital expenditures | 61 | 80 | 21 | 24 | (20 | ) | 12 | 178 |
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Proportional | ||||||||||||||||||||||||||||
Share to | ||||||||||||||||||||||||||||
Novelis | Novelis | Equity | ||||||||||||||||||||||||||
North | Novelis | Novelis | South | Accounting | Corporate | |||||||||||||||||||||||
Year Ended December 31, 2004 | America | Europe | Asia | America | Adjustments | and Other | Total | |||||||||||||||||||||
Net sales (to third parties) | $ | 2,964 | $ | 3,081 | $ | 1,194 | $ | 525 | $ | (9 | ) | $ | — | $ | 7,755 | |||||||||||||
Intersegment sales | 8 | 30 | 9 | 57 | — | (104 | ) | — | ||||||||||||||||||||
Regional Income | 240 | 200 | 80 | 134 | — | — | 654 | |||||||||||||||||||||
Interest income | — | 3 | 1 | — | — | 22 | 26 | |||||||||||||||||||||
Interest expense and amortization of debt issuance costs | — | 5 | 15 | — | — | 54 | 74 | |||||||||||||||||||||
Depreciation and amortization | 69 | 115 | 46 | 47 | (37 | ) | 6 | 246 | ||||||||||||||||||||
Restructuring charges | — | 20 | — | — | — | — | 20 | |||||||||||||||||||||
Impairment charges on long-lived assets | — | 75 | — | — | — | — | 75 | |||||||||||||||||||||
Equity in net income of non-consolidated affiliates | — | 4 | — | — | — | 2 | 6 | |||||||||||||||||||||
Provision for taxes on income | 75 | 43 | 1 | 40 | (4 | ) | 11 | 166 | ||||||||||||||||||||
Total assets | 1,406 | 2,885 | 954 | 779 | (60 | ) | (10 | ) | 5,954 | |||||||||||||||||||
Investment in and advances to non-consolidated affiliates | — | 117 | — | — | — | 5 | 122 | |||||||||||||||||||||
Capital expenditures | 41 | 84 | 31 | 23 | (16 | ) | 2 | 165 |
Proportional | ||||||||||||||||||||||||||||
Share to | ||||||||||||||||||||||||||||
Novelis | Novelis | Equity | ||||||||||||||||||||||||||
North | Novelis | Novelis | South | Accounting | Corporate | |||||||||||||||||||||||
Year Ended December 31, 2003 | America | Europe | Asia | America | Adjustments | and Other | Total | |||||||||||||||||||||
Net sales (to third parties) | $ | 2,385 | $ | 2,510 | $ | 918 | $ | 414 | $ | (6 | ) | $ | — | $ | 6,221 | |||||||||||||
Intersegment sales | 40 | 23 | 13 | 23 | — | (99 | ) | — | ||||||||||||||||||||
Regional Income | 176 | 175 | 69 | 88 | — | — | 508 | |||||||||||||||||||||
Interest income | — | 1 | 1 | — | — | 5 | 7 | |||||||||||||||||||||
Interest expense and amortization of debt issuance costs | — | 7 | 14 | — | — | 19 | 40 | |||||||||||||||||||||
Depreciation and amortization | 68 | 87 | 45 | 49 | (32 | ) | 5 | 222 | ||||||||||||||||||||
Restructuring charges | — | 3 | — | — | — | 5 | 8 | |||||||||||||||||||||
Impairment charges on long-lived assets | — | 1 | — | — | — | 3 | 4 | |||||||||||||||||||||
Equity in net income of non-consolidated affiliates | — | 3 | — | — | — | 3 | 6 | |||||||||||||||||||||
Provision for taxes on income | 17 | 36 | 1 | 1 | (4 | ) | (1 | ) | 50 | |||||||||||||||||||
Total assets | 2,392 | 2,364 | 904 | 808 | (135 | ) | (17 | ) | 6,316 | |||||||||||||||||||
Investment in and advances to non-consolidated affiliates | — | 105 | — | — | — | 5 | 110 | |||||||||||||||||||||
Capital expenditures | 38 | 97 | 25 | 41 | (14 | ) | 2 | 189 |
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Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
($ in millions) | ||||||||||||
Total Regional Income | $ | 620 | $ | 654 | $ | 508 | ||||||
Interest expense and amortization of debt discounts and fees | (203 | ) | (74 | ) | (40 | ) | ||||||
Unrealized gains due to changes in the fair market value of derivatives(A) | 140 | 77 | 20 | |||||||||
Depreciation and amortization | (230 | ) | (246 | ) | (222 | ) | ||||||
Impairment charges on long-lived assets | (7 | ) | (75 | ) | (4 | ) | ||||||
Minority interests’ share | (21 | ) | (10 | ) | (3 | ) | ||||||
Adjustment to eliminate proportional consolidation(B) | (36 | ) | (41 | ) | (36 | ) | ||||||
Restructuring charges | (10 | ) | (20 | ) | (8 | ) | ||||||
Gain on disposals of fixed assets and businesses | 17 | 5 | 28 | |||||||||
Corporate costs(C) | (72 | ) | (49 | ) | (36 | ) | ||||||
Litigation settlement — net of insurance recoveries | (40 | ) | — | — | ||||||||
Gains on the monetization of cross-currency interest rate swaps | 45 | — | — | |||||||||
Provision for taxes on income | (107 | ) | (166 | ) | (50 | ) | ||||||
Net income before cumulative effect of accounting change | 96 | 55 | 157 | |||||||||
Cumulative effect of accounting change — net of tax | (6 | ) | — | — | ||||||||
Net income | $ | 90 | $ | 55 | $ | 157 | ||||||
(A) | Except for Korean foreign exchange derivatives. | |
(B) | Our financial information for our segments (including Regional Income) includes the results of our non-consolidated affiliates on a proportionately consolidated basis, which is consistent with the way we manage our business segments. However, under GAAP, these non-consolidated affiliates are accounted for using the equity method of accounting. Therefore, in order to reconcile Total Regional Income to Net income, the proportional Regional Income of these non-consolidated affiliates is removed from Total Regional Income, net of our share of their net after-tax results, which is reported asEquity in net income of non-consolidated affiliateson our consolidated and combined statements of income. See Note 8 — Investment in and Advances to Non-Consolidated Affiliates to our consolidated and combined financial statements for further information about these non-consolidated affiliates. | |
(C) | These items are managed by our corporate head office, which focuses on strategy development and oversees governance, policy, legal compliance, human resources and finance matters. |
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Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Net sales: | ||||||||||||
United States | $ | 3,029 | $ | 2,795 | $ | 2,174 | ||||||
Asia and Other Pacific | 1,391 | 1,194 | 917 | |||||||||
Brazil | 616 | 515 | 408 | |||||||||
Canada | 234 | 182 | 212 | |||||||||
Germany | 1,850 | 1,865 | 1,705 | |||||||||
United Kingdom | 339 | 382 | 302 | |||||||||
Other Europe | 904 | 822 | 503 | |||||||||
Total Net sales | $ | 8,363 | $ | 7,755 | $ | 6,221 | ||||||
Year Ended December 31, | ||||||||
2005 | 2004 | |||||||
Long-lived assets: | ||||||||
United States | $ | 431 | $ | 437 | ||||
Asia and Other Pacific | 605 | 622 | ||||||
Brazil | 472 | 544 | ||||||
Canada | 121 | 111 | ||||||
Germany | 211 | 268 | ||||||
United Kingdom | 159 | 167 | ||||||
Other Europe | 393 | 481 | ||||||
Total Long-lived assets | $ | 2,392 | $ | 2,630 | ||||
Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Sales to Rexam (in millions) | $ | 1,045 | $ | 861 | $ | 628 | ||||||
Percentage of total Net sales | 12.5 | % | 11.1 | % | 10.1 | % | ||||||
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24. | QUARTERLY RESULTS (UNAUDITED) |
Year Ended December 31, 2005 | ||||||||||||||||||||
First | Second | Third | Fourth | Full | ||||||||||||||||
Quarter | Quarter | Quarter | Quarter | Year | ||||||||||||||||
(Restated) | (Restated) | |||||||||||||||||||
($ in millions, except per share data) | ||||||||||||||||||||
Net sales | $ | 2,112 | $ | 2,172 | $ | 2,053 | $ | 2,026 | $ | 8,363 | ||||||||||
Cost of goods sold (exclusive of depreciation and amortization shown below) | 1,884 | 1,960 | 1,834 | 1,892 | 7,570 | |||||||||||||||
Selling, general and administrative expenses | 88 | 82 | 90 | 92 | 352 | |||||||||||||||
Litigation settlement — net of insurance recoveries | — | — | — | 40 | 40 | |||||||||||||||
Provision for depreciation and amortization | 59 | 58 | 56 | 57 | 230 | |||||||||||||||
Research and development expenses | 8 | 11 | 10 | 12 | 41 | |||||||||||||||
Restructuring charges (recoveries) | (2 | ) | (1 | ) | 7 | 6 | 10 | |||||||||||||
Impairment charges on long-lived assets | — | 1 | 4 | 2 | 7 | |||||||||||||||
Interest expense and amortization of debt issuance costs — net | 54 | 48 | 46 | 46 | 194 | |||||||||||||||
Equity in net income of non-consolidated affiliates | (2 | ) | (2 | ) | (2 | ) | — | (6 | ) | |||||||||||
Other (income) expense — net | (34 | ) | 10 | (48 | ) | (227 | ) | (299 | ) | |||||||||||
Provision for taxes on income | 30 | — | 37 | 40 | 107 | |||||||||||||||
Minority interests’ share | 5 | 5 | 9 | 2 | 21 | |||||||||||||||
Net income before cumulative effect of accounting change | 22 | — | 10 | 64 | 96 | |||||||||||||||
Cumulative effect of accounting change — net of tax | — | — | — | (6 | ) | (6 | ) | |||||||||||||
Net income | $ | 22 | $ | — | $ | 10 | $ | 58 | $ | 90 | ||||||||||
Earnings per share: | ||||||||||||||||||||
Basic — | ||||||||||||||||||||
Net income before cumulative effect of accounting change | $ | 0.30 | $ | — | $ | 0.14 | $ | 0.86 | $ | 1.29 | ||||||||||
Cumulative effect of accounting change — net of tax | — | — | — | (0.08 | ) | (0.08 | ) | |||||||||||||
Net earnings per share — basic | $ | 0.30 | $ | — | $ | 0.14 | $ | 0.78 | $ | 1.21 | ||||||||||
Diluted — | ||||||||||||||||||||
Net income before cumulative effect of accounting change | $ | 0.30 | $ | — | $ | 0.14 | $ | 0.86 | $ | 1.29 | ||||||||||
Cumulative effect of accounting change — net of tax | — | — | — | (0.08 | ) | (0.08 | ) | |||||||||||||
Net earnings per share — diluted | $ | 0.30 | $ | — | $ | 0.14 | $ | 0.78 | $ | 1.21 | ||||||||||
Dividends per common share | $ | 0.09 | $ | 0.09 | $ | 0.09 | $ | 0.09 | $ | 0.36 | ||||||||||
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Year Ended December 31, 2004 | ||||||||||||||||||||
First | Second | Third | Fourth | Full | ||||||||||||||||
Quarter | Quarter | Quarter | Quarter | Year | ||||||||||||||||
($ in millions, except per share data) | ||||||||||||||||||||
Net sales | $ | 1,810 | $ | 1,929 | $ | 2,000 | $ | 2,016 | $ | 7,755 | ||||||||||
Cost of goods sold (exclusive of depreciation and amortization shown below) | 1,585 | 1,690 | 1,757 | 1,824 | 6,856 | |||||||||||||||
Selling, general and administrative expenses | 62 | 54 | 75 | 98 | 289 | |||||||||||||||
Litigation settlement — net of insurance recoveries | — | — | — | — | — | |||||||||||||||
Provision for depreciation and amortization | 61 | 57 | 60 | 68 | 246 | |||||||||||||||
Research and development expenses | 10 | 18 | 13 | 17 | 58 | |||||||||||||||
Restructuring charges | — | 2 | 10 | 8 | 20 | |||||||||||||||
Impairment charges on long-lived assets | — | — | 9 | 66 | 75 | |||||||||||||||
Interest expense and amortization of debt issuance costs — net | 13 | 12 | 11 | 12 | 48 | |||||||||||||||
Equity in net income of non-consolidated affiliates | (2 | ) | (1 | ) | (1 | ) | (2 | ) | (6 | ) | ||||||||||
Other (income) expense — net | (35 | ) | 26 | (15 | ) | (38 | ) | (62 | ) | |||||||||||
Provision for taxes on income | 43 | 23 | 45 | 55 | 166 | |||||||||||||||
Minority interests’ share | 4 | 3 | 2 | 1 | 10 | |||||||||||||||
Net income (loss) | $ | 69 | $ | 45 | $ | 34 | $ | (93 | ) | $ | 55 | |||||||||
Earnings (loss) per share: | ||||||||||||||||||||
Basic | $ | 0.93 | $ | 0.61 | $ | 0.47 | $ | (1.26 | ) | $ | 0.74 | |||||||||
Diluted | $ | 0.92 | $ | 0.61 | $ | 0.47 | $ | (1.26 | ) | $ | 0.74 | |||||||||
Dividends per common share | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
25. | SUPPLEMENTAL GUARANTOR INFORMATION |
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Year Ended December 31, 2005 | ||||||||||||||||||||
Consolidated | ||||||||||||||||||||
Non- | and | |||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Combined | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Net sales | $ | 1,284 | $ | 6,872 | $ | 2,479 | $ | (2,272 | ) | $ | 8,363 | |||||||||
Cost of goods sold (exclusive of depreciation and amortization shown below) | 1,245 | 6,283 | 2,314 | (2,272 | ) | 7,570 | ||||||||||||||
Selling, general and administrative expenses | 43 | 242 | 67 | — | 352 | |||||||||||||||
Litigation settlement — net of insurance recoveries | — | 40 | — | — | 40 | |||||||||||||||
Provision for depreciation and amortization | 11 | 158 | 61 | — | 230 | |||||||||||||||
Research and development expenses | 28 | 12 | 1 | — | 41 | |||||||||||||||
Restructuring charges | — | (1 | ) | 11 | — | 10 | ||||||||||||||
Impairment charges on long-lived assets | — | 1 | 6 | — | 7 | |||||||||||||||
Interest expense and amortization of debt issuance costs — net | 55 | 119 | 20 | — | 194 | |||||||||||||||
Equity in net income of non-consolidated affiliates | (133 | ) | (6 | ) | — | 133 | (6 | ) | ||||||||||||
Other income — net | (58 | ) | (222 | ) | (19 | ) | — | (299 | ) | |||||||||||
1,191 | 6,626 | 2,461 | (2,139 | ) | 8,139 | |||||||||||||||
Income before provision (benefit) for taxes on income, minority interests’ share and cumulative effect of accounting change | 93 | 246 | 18 | (133 | ) | 224 | ||||||||||||||
Provision (benefit) for taxes on income | 3 | 107 | (3 | ) | — | 107 | ||||||||||||||
Income before minority interests’ share and cumulative effect of accounting change | 90 | 139 | 21 | (133 | ) | 117 | ||||||||||||||
Minority interests’ share | — | — | (21 | ) | — | (21 | ) | |||||||||||||
Net income (loss) before cumulative effect of accounting change | 90 | 139 | — | (133 | ) | 96 | ||||||||||||||
Cumulative effect of accounting change — net of tax | — | (6 | ) | — | — | (6 | ) | |||||||||||||
Net income (loss) | $ | 90 | $ | 133 | $ | — | $ | (133 | ) | $ | 90 | |||||||||
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Year Ended December 31, 2004 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Combined | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Net sales | $ | 1,152 | $ | 6,428 | $ | 2,101 | $ | (1,926 | ) | $ | 7,755 | |||||||||
Cost of goods sold (exclusive of depreciation and amortization shown below) | 1,106 | 5,721 | 1,955 | (1,926 | ) | 6,856 | ||||||||||||||
Selling, general and administrative expenses | 44 | 178 | 67 | — | 289 | |||||||||||||||
Provision for depreciation and amortization | 10 | 165 | 71 | — | 246 | |||||||||||||||
Research and development expenses | — | 58 | — | — | 58 | |||||||||||||||
Restructuring charges | — | 20 | — | — | 20 | |||||||||||||||
Impairment charges on long-lived assets | — | 8 | 67 | — | 75 | |||||||||||||||
Interest expense and amortization of debt issuance costs — net | — | 30 | 18 | — | 48 | |||||||||||||||
Equity in net income of non-consolidated affiliates | (82 | ) | (6 | ) | — | 82 | (6 | ) | ||||||||||||
Other (income) expense — net | 8 | (63 | ) | (7 | ) | — | (62 | ) | ||||||||||||
1,086 | 6,111 | 2,171 | (1,844 | ) | 7,524 | |||||||||||||||
Income (loss) before provision for taxes on income and minority interests’ share | 66 | 317 | (70 | ) | (82 | ) | 231 | |||||||||||||
Provision for taxes on income | 11 | 153 | 2 | — | 166 | |||||||||||||||
Income (loss) before minority interests’ share | 55 | 164 | (72 | ) | (82 | ) | 65 | |||||||||||||
Minority interests’ share | — | — | (10 | ) | — | (10 | ) | |||||||||||||
Net income (loss) | $ | 55 | $ | 164 | $ | (82 | ) | $ | (82 | ) | $ | 55 | ||||||||
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Year Ended December 31, 2003 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Combined | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Net sales | $ | 919 | $ | 5,499 | $ | 1,253 | $ | (1,450 | ) | $ | 6,221 | |||||||||
Cost of goods sold (exclusive of depreciation and amortization shown below) | 878 | 4,899 | 1,155 | (1,450 | ) | 5,482 | ||||||||||||||
Selling, general and administrative expenses | 55 | 155 | 45 | — | 255 | |||||||||||||||
Provision for depreciation and amortization | 10 | 158 | 54 | — | 222 | |||||||||||||||
Research and development expenses | — | 62 | — | — | 62 | |||||||||||||||
Restructuring charges | — | 8 | — | — | 8 | |||||||||||||||
Impairment charges on long-lived assets | — | 4 | — | — | 4 | |||||||||||||||
Interest expense and amortization of debt issuance costs — net | — | 15 | 18 | — | 33 | |||||||||||||||
Equity in net income of non-consolidated affiliates | (165 | ) | (6 | ) | — | 165 | (6 | ) | ||||||||||||
Other (income) expense — net | (9 | ) | (1 | ) | (39 | ) | — | (49 | ) | |||||||||||
769 | 5,294 | 1,233 | (1,285 | ) | 6,011 | |||||||||||||||
Income before provision (benefit) for taxes on income and minority interests’ share | 150 | 205 | 20 | (165 | ) | 210 | ||||||||||||||
Provision (benefit) for taxes on income | (7 | ) | 66 | (9 | ) | — | 50 | |||||||||||||
Income before minority interests’ share | 157 | 139 | 29 | (165 | ) | 160 | ||||||||||||||
Minority interests’ share | — | — | (3 | ) | — | (3 | ) | |||||||||||||
Net income | $ | 157 | $ | 139 | $ | 26 | $ | (165 | ) | $ | 157 | |||||||||
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As of December 31, 2005 | ||||||||||||||||||||
Parent | Guarantors | Non-Guarantors | Eliminations | Consolidated | ||||||||||||||||
(In millions) | ||||||||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets | ||||||||||||||||||||
Cash and cash equivalents | $ | 2 | $ | 34 | $ | 64 | $ | — | $ | 100 | ||||||||||
Accounts receivable | ||||||||||||||||||||
— third parties | 67 | 689 | 342 | — | 1,098 | |||||||||||||||
— related parties | 381 | 318 | 22 | (688 | ) | 33 | ||||||||||||||
Inventories | 49 | 769 | 310 | — | 1,128 | |||||||||||||||
Prepaid expenses and other current assets | 2 | 55 | 9 | — | 66 | |||||||||||||||
Current portion of fair value of derivative contracts | — | 186 | 8 | — | 194 | |||||||||||||||
Deferred income tax assets | — | — | 8 | — | 8 | |||||||||||||||
Total current assets | 501 | 2,051 | 763 | (688 | ) | 2,627 | ||||||||||||||
Property and equipment — net | 121 | 1,297 | 742 | — | 2,160 | |||||||||||||||
Goodwill | — | 25 | 186 | — | 211 | |||||||||||||||
Intangible assets — net | — | 18 | 3 | — | 21 | |||||||||||||||
Investments in and advances to non-consolidated affiliates | 729 | 144 | — | (729 | ) | 144 | ||||||||||||||
Fair value of derivative contracts — net of current portion | — | 90 | — | — | 90 | |||||||||||||||
Deferred income tax assets | 8 | 5 | 8 | — | 21 | |||||||||||||||
Other long-term assets | 1,129 | 173 | 143 | (1,243 | ) | 202 | ||||||||||||||
Total assets | $ | 2,488 | $ | 3,803 | $ | 1,845 | $ | (2,660 | ) | $ | 5,476 | |||||||||
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As of December 31, 2005 | ||||||||||||||||||||
Parent | Guarantors | Non-Guarantors | Eliminations | Consolidated | ||||||||||||||||
(In millions) | ||||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
Current liabilities | ||||||||||||||||||||
Current portion of long-term debt | $ | — | $ | 2 | $ | 1 | $ | — | $ | 3 | ||||||||||
Short-term borrowings | ||||||||||||||||||||
— third parties | — | 23 | 4 | — | 27 | |||||||||||||||
— related parties | 45 | 409 | 17 | (471 | ) | — | ||||||||||||||
Accounts payable | ||||||||||||||||||||
— third parties | 76 | 442 | 348 | — | 866 | |||||||||||||||
— related parties | 62 | 152 | 41 | (217 | ) | 38 | ||||||||||||||
Accrued expenses and other current liabilities | 105 | 411 | 125 | — | 641 | |||||||||||||||
Deferred income tax liabilities | — | 26 | — | — | 26 | |||||||||||||||
Total current liabilities | 288 | 1,465 | 536 | (688 | ) | 1,601 | ||||||||||||||
Long-term debt — net of current portion | ||||||||||||||||||||
— third parties | 1,742 | 640 | 218 | — | 2,600 | |||||||||||||||
— related parties | — | 1,017 | 226 | (1,243 | ) | — | ||||||||||||||
Deferred income tax liabilities | — | 176 | 10 | — | 186 | |||||||||||||||
Accrued post-retirement benefits | 9 | 213 | 83 | — | 305 | |||||||||||||||
Other long-term liabilities | 16 | 163 | 13 | — | 192 | |||||||||||||||
Commitments and contingencies | ||||||||||||||||||||
Minority interests in equity of consolidated affiliates | — | — | 159 | — | 159 | |||||||||||||||
Shareholders’ equity | ||||||||||||||||||||
Preferred stock | — | — | — | — | — | |||||||||||||||
Common stock | — | — | — | — | — | |||||||||||||||
Additional paid-in capital | 425 | — | — | — | 425 | |||||||||||||||
Retained earnings | 92 | — | — | — | 92 | |||||||||||||||
Accumulated other comprehensive income (loss) | (84 | ) | 131 | (21 | ) | (110 | ) | (84 | ) | |||||||||||
Owner’s net investment | — | (2 | ) | 621 | (619 | ) | — | |||||||||||||
Total shareholders’ equity | 433 | 129 | 600 | (729 | ) | 433 | ||||||||||||||
Total liabilities and shareholders’ equity | $ | 2,488 | $ | 3,803 | $ | 1,845 | $ | (2,660 | ) | $ | 5,476 | |||||||||
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As of December 31, 2004 | ||||||||||||||||||||
Parent | Guarantors | Non-Guarantors | Eliminations | Combined | ||||||||||||||||
(In millions) | ||||||||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 12 | $ | 19 | $ | — | $ | 31 | ||||||||||
Accounts receivable | ||||||||||||||||||||
— third parties | 1 | 439 | 330 | — | 770 | |||||||||||||||
— related parties | 129 | 870 | 37 | (238 | ) | 798 | ||||||||||||||
Inventories | 50 | 801 | 375 | — | 1,226 | |||||||||||||||
Prepaid expenses and other current assets | 2 | 10 | 24 | — | 36 | |||||||||||||||
Current portion of fair value of derivative contracts | ||||||||||||||||||||
— third parties | — | 20 | 2 | — | 22 | |||||||||||||||
— related parties | — | 134 | — | — | 134 | |||||||||||||||
Total current assets | 182 | 2,286 | 787 | (238 | ) | 3,017 | ||||||||||||||
Property and equipment — net | 112 | 1,404 | 831 | — | 2,347 | |||||||||||||||
Goodwill | — | 28 | 228 | — | 256 | |||||||||||||||
Intangible assets — net | — | 23 | 4 | — | 27 | |||||||||||||||
Investments in and advances to non-consolidated affiliates | 1,242 | 168 | — | (1,288 | ) | 122 | ||||||||||||||
Fair value of derivative contracts — net of current portion | — | 1 | 2 | — | 3 | |||||||||||||||
Deferred income tax assets | — | 12 | — | — | 12 | |||||||||||||||
Other long-term assets | 210 | 133 | 37 | (210 | ) | 170 | ||||||||||||||
Total assets | $ | 1,746 | $ | 4,055 | $ | 1,889 | $ | (1,736 | ) | $ | 5,954 | |||||||||
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As of December 31, 2004 | ||||||||||||||||||||
Parent | Guarantors | Non-Guarantors | Eliminations | Combined | ||||||||||||||||
(In millions) | ||||||||||||||||||||
LIABILITIES AND INVESTED EQUITY | ||||||||||||||||||||
Current liabilities | ||||||||||||||||||||
Current portion of long-term debt | ||||||||||||||||||||
— third parties | $ | — | $ | — | $ | 1 | $ | — | $ | 1 | ||||||||||
— related parties | 290 | — | — | — | 290 | |||||||||||||||
Short-term borrowings | ||||||||||||||||||||
— third parties | — | 122 | 107 | — | 229 | |||||||||||||||
— related parties | — | 231 | 152 | (71 | ) | 312 | ||||||||||||||
Accounts payable | ||||||||||||||||||||
— third parties | 6 | 156 | 330 | — | 492 | |||||||||||||||
— related parties | 79 | 370 | 60 | (167 | ) | 342 | ||||||||||||||
Accrued expenses and other current liabilities | 16 | 281 | 128 | — | 425 | |||||||||||||||
Deferred income tax liabilities | — | — | 1 | — | 1 | |||||||||||||||
Total current liabilities | 391 | 1,160 | 779 | (238 | ) | 2,092 | ||||||||||||||
Long-term debt — net of current portion | ||||||||||||||||||||
— third parties | — | — | 139 | — | 139 | |||||||||||||||
— related parties | 749 | 1,751 | 17 | (210 | ) | 2,307 | ||||||||||||||
Deferred income tax liabilities | 43 | 183 | 23 | — | 249 | |||||||||||||||
Accrued post-retirement benefits | — | 199 | 85 | — | 284 | |||||||||||||||
Other long-term liabilities | 8 | 174 | 6 | — | 188 | |||||||||||||||
Commitments and contingencies | ||||||||||||||||||||
Minority interests in equity of consolidated affiliates | — | — | 140 | — | 140 | |||||||||||||||
Invested equity | ||||||||||||||||||||
Accumulated other comprehensive income | 88 | 59 | 29 | (88 | ) | 88 | ||||||||||||||
Owner’s net investment | 467 | 529 | 671 | (1,200 | ) | 467 | ||||||||||||||
Total invested equity | 555 | 588 | 700 | (1,288 | ) | 555 | ||||||||||||||
Total liabilities and invested equity | $ | 1,746 | $ | 4,055 | $ | 1,889 | $ | (1,736 | ) | $ | 5,954 | |||||||||
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Year Ended December 31, 2005 | ||||||||||||||||||||
Consolidated | ||||||||||||||||||||
Non- | and | |||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Combined | ||||||||||||||||
(In millions) | ||||||||||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | 181 | $ | 407 | $ | 39 | $ | (178 | ) | $ | 449 | |||||||||
INVESTING ACTIVITIES | ||||||||||||||||||||
Capital expenditures | (19 | ) | (120 | ) | (39 | ) | — | (178 | ) | |||||||||||
Proceeds from sales of assets | — | 10 | 9 | — | 19 | |||||||||||||||
Proceeds from (advances on) loans receivable — net | ||||||||||||||||||||
— third parties | — | 4 | 15 | — | 19 | |||||||||||||||
— related parties | (1,171 | ) | (156 | ) | (118 | ) | 1,819 | 374 | ||||||||||||
Share repurchase — intercompany | 400 | — | — | (400 | ) | — | ||||||||||||||
Premiums paid to purchase derivative instruments | — | (57 | ) | — | — | (57 | ) | |||||||||||||
Net proceeds from settlement of derivative instruments | 45 | 94 | 9 | — | 148 | |||||||||||||||
Net cash provided by (used in) investing activities | (745 | ) | (225 | ) | (124 | ) | 1,419 | 325 | ||||||||||||
FINANCING ACTIVITIES | ||||||||||||||||||||
Proceeds from issuance of new debt | ||||||||||||||||||||
— third parties | 1,875 | 825 | 79 | — | 2,779 | |||||||||||||||
— related parties | 40 | 1,526 | 253 | (1,819 | ) | — | ||||||||||||||
Principal repayments | ||||||||||||||||||||
— third parties | (1,153 | ) | (574 | ) | (95 | ) | — | (1,822 | ) | |||||||||||
— related parties | (192 | ) | (988 | ) | — | — | (1,180 | ) | ||||||||||||
Short-term borrowings — net | ||||||||||||||||||||
— third parties | 2 | (47 | ) | (100 | ) | — | (145 | ) | ||||||||||||
— related parties | (30 | ) | (281 | ) | 9 | — | (302 | ) | ||||||||||||
Share repurchase — intercompany | — | (400 | ) | — | 400 | — | ||||||||||||||
Dividends — common shareholders | (27 | ) | (176 | ) | (2 | ) | 178 | (27 | ) | |||||||||||
Dividends — minority interests | — | — | (7 | ) | — | (7 | ) | |||||||||||||
Net receipts from (payments to) Alcan | 100 | (21 | ) | (7 | ) | — | 72 | |||||||||||||
Debt issuance costs | (49 | ) | (22 | ) | — | — | (71 | ) | ||||||||||||
Net cash provided by (used in) financing activities | 566 | (158 | ) | 130 | (1,241 | ) | (703 | ) | ||||||||||||
Net increase in cash and cash equivalents | 2 | 24 | 45 | — | 71 | |||||||||||||||
Effect of exchange rate changes on cash balances held in foreign currencies | — | (2 | ) | — | — | (2 | ) | |||||||||||||
Cash and cash equivalents — beginning of year | — | 12 | 19 | — | 31 | |||||||||||||||
Cash and cash equivalents — end of year | $ | 2 | $ | 34 | $ | 64 | $ | — | $ | 100 | ||||||||||
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Year Ended December 31, 2004 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Combined | ||||||||||||||||
(In millions) | ||||||||||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | (60 | ) | $ | 255 | $ | 19 | $ | (6 | ) | $ | 208 | ||||||||
INVESTING ACTIVITIES | ||||||||||||||||||||
Capital expenditures | (6 | ) | (93 | ) | (66 | ) | — | (165 | ) | |||||||||||
Proceeds from sales of assets | — | 15 | 2 | — | 17 | |||||||||||||||
Business acquisitions — net of cash and cash | ||||||||||||||||||||
equivalents acquired | — | 1 | (1 | ) | — | — | ||||||||||||||
Proceeds from (advances on) loans receivable — net | (259 | ) | 895 | 5 | 233 | 874 | ||||||||||||||
Net cash provided by (used in) investing activities | (265 | ) | 818 | (60 | ) | 233 | 726 | |||||||||||||
FINANCING ACTIVITIES | ||||||||||||||||||||
Proceeds from issuance of new debt | 1,039 | 1,173 | 134 | (210 | ) | 2,136 | ||||||||||||||
Principal repayments | — | (935 | ) | (63 | ) | — | (998 | ) | ||||||||||||
Short-term borrowings — net | ||||||||||||||||||||
— third parties | — | (614 | ) | (160 | ) | — | (774 | ) | ||||||||||||
— related parties | — | 166 | 78 | (23 | ) | 221 | ||||||||||||||
Issuance of preference shares | — | (32 | ) | 32 | — | — | ||||||||||||||
Dividends — minority interests | — | — | (10 | ) | 6 | (4 | ) | |||||||||||||
Net receipts from (payments to) Alcan | (714 | ) | (828 | ) | 30 | — | (1,512 | ) | ||||||||||||
Net cash provided by (used in) financing activities | 325 | (1,070 | ) | 41 | (227 | ) | (931 | ) | ||||||||||||
Net increase in cash and cash equivalents | — | 3 | — | — | 3 | |||||||||||||||
Effect of exchange rate changes on cash balances held in foreign currencies | — | 1 | — | — | 1 | |||||||||||||||
Cash and cash equivalents — beginning of year | — | 8 | 19 | — | 27 | |||||||||||||||
Cash and cash equivalents — end of year | $ | — | $ | 12 | $ | 19 | $ | — | $ | 31 | ||||||||||
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Year Ended December 31, 2003 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Combined | ||||||||||||||||
(In millions) | ||||||||||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||||||
Net cash provided by operating activities | $ | 107 | $ | 65 | $ | 213 | $ | 59 | $ | 444 | ||||||||||
INVESTING ACTIVITIES | ||||||||||||||||||||
Capital expenditures | (7 | ) | (147 | ) | (35 | ) | — | (189 | ) | |||||||||||
Proceeds from sales of assets | — | 8 | 25 | — | 33 | |||||||||||||||
Business acquisitions — net of cash and cash | ||||||||||||||||||||
equivalents acquired | — | 8 | (9 | ) | (10 | ) | (11 | ) | ||||||||||||
Proceeds from (advances on) loans receivable — net | 35 | (1,229 | ) | (28 | ) | 12 | (1,210 | ) | ||||||||||||
Net cash provided by (used in) investing activities | 28 | (1,360 | ) | (47 | ) | 2 | (1,377 | ) | ||||||||||||
FINANCING ACTIVITIES | ||||||||||||||||||||
Proceeds from issuance of new debt | — | 971 | — | — | 971 | |||||||||||||||
Short-term borrowings — net | ||||||||||||||||||||
— third parties | — | 621 | (44 | ) | — | 577 | ||||||||||||||
— related parties | (77 | ) | 52 | 8 | (12 | ) | (29 | ) | ||||||||||||
Net receipts from (payments to) Alcan | (58 | ) | (359 | ) | (126 | ) | (49 | ) | (592 | ) | ||||||||||
Net cash provided by (used in) financing activities | (135 | ) | 1,285 | (162 | ) | (61 | ) | 927 | ||||||||||||
Net increase (decrease) in cash and cash equivalents | — | (10 | ) | 4 | — | (6 | ) | |||||||||||||
Effect of exchange rate changes on cash balances held in foreign currencies | — | 2 | — | — | 2 | |||||||||||||||
Cash and cash equivalents — beginning of year | — | 16 | 15 | — | 31 | |||||||||||||||
Cash and cash equivalents — end of year | $ | — | $ | 8 | $ | 19 | $ | — | $ | 27 | ||||||||||
F-119
Table of Contents
71/4% Senior Notes due 2015.
To Confirm by Telephone: | Facsimile Transmissions (eligible institutions only): | |
(212)815-5098 | (212) 298-1915 |
Table of Contents
ITEM 20. | Indemnification of Directors and Officers |
II-1
Table of Contents
ITEM 21. | Exhibits and Financial Statement Schedules |
Exhibit | ||||
No. | Description | |||
3 | .1 | Restated Certificate and Articles of Incorporation of Novelis Inc. † | ||
3 | .2 | By-law No. 1 of Novelis Inc. † | ||
3 | .3 | Articles of Amendment to the Articles of Incorporation of Novelis Corporation (formerly Alcan Aluminum Corporation) † | ||
3 | .4 | Articles of Amendment to the Articles of Incorporation of Novelis Corporation † | ||
3 | .5 | Articles of Incorporation of Novelis Corporation † | ||
3 | .6 | Bylaws of Novelis Corporation † | ||
3 | .7 | Certificate of Amendment of Certificate of Incorporation of Novelis PAE Corporation (formerly Pechiney Aluminum Engineering, Inc.) † | ||
3 | .8 | Certificate of Incorporation of Novelis PAE Corporation † | ||
3 | .9 | By-laws of Novelis PAE Corporation † | ||
3 | .10 | Certificate of Incorporation of Eurofoil Inc. (USA) † | ||
3 | .11 | By-laws of Eurofoil Inc. (USA) † | ||
3 | .12 | Articles of Association of Novelis do Brasil Ltda. † | ||
3 | .13 | Certificate and Articles of Incorporation of 4260848 Canada Inc. † | ||
3 | .14 | By-law No. 1 of 4260848 Canada Inc. † | ||
3 | .15 | Certificate and Articles of Incorporation of 4260856 Canada Inc. † | ||
3 | .16 | By-law No. 1 of 4260856 Canada Inc. † | ||
3 | .17 | Amendment of Articles of Incorporation of Novelis Cast House Technology Ltd. † | ||
3 | .18 | Certificate and Articles of Incorporation of Novelis Cast House Technology Ltd. † | ||
3 | .19 | By-law No. 2 of Novelis Cast House Technology Ltd. † | ||
3 | .20 | By-law No. 1 of Novelis Cast House Technology Ltd. † | ||
3 | .21 | Bylaws of Novelis Deutschland GmbH † | ||
3 | .22 | Certificate of Incorporation on Change of Name of Novelis Aluminium Holding Company † | ||
3 | .23 | Memorandum and Articles of Association of Novelis Aluminium Holding Company † | ||
3 | .24 | Articles of Association of Novelis AG † |
II-2
Table of Contents
Exhibit | ||||
No. | Description | |||
3 | .25 | Articles of Association of Novelis Technology AG † | ||
3 | .26 | Articles of Association for Novelis Switzerland S.A. † | ||
3 | .27 | Memorandum of Association of Novelis UK Ltd. † | ||
3 | .28 | Articles of Association of Novelis UK Ltd. † | ||
3 | .29 | Memorandum of Association of Novelis Europe Holdings Ltd. † | ||
3 | .30 | Articles of Association of Novelis Europe Holdings Ltd. † | ||
3 | .31 | Certificate of Formation of Novelis Finances USA LLC | ||
3 | .32 | Limited Liability Company Agreement of Novelis Finances USA LLC | ||
3 | .33 | Certificate of Formation of Novelis South America Holdings LLC | ||
3 | .34 | Limited Liability Company Agreement of Novelis South America Holdings LLC | ||
3 | .35 | Certificate of Formation of Aluminum Upstream Holdings LLC | ||
3 | .36 | Limited Liability Company Agreement of Aluminum Upstream Holdings LLC | ||
4 | .1 | Shareholder Rights Agreement between Novelis and CIBC Mellon Trust Company (incorporated by reference to Exhibit 4.1 to theForm 10-K filed by Novelis Inc. on March 30, 2005 (FileNo. 001-32312)) | ||
4 | .2 | Specimen Certificate of Novelis Inc. Common Shares (incorporated by reference to Exhibit 4.2 to the Form 10 filed by Novelis Inc. on December 27, 2004 (FileNo. 001-32312)) | ||
4 | .3 | Indenture, relating to the Notes, dated as of February 3, 2005, between the Company, the guarantors named on the signature pages thereto and The Bank of New York Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 to theForm 8-K filed by Novelis Inc. on February 3, 2005 (FileNo. 001-32312)) | ||
4 | .4 | Registration Rights Agreement, dated as of February 3, 2005, among the Company, the guarantors named on the signature pages thereto, Citigroup Global Markets Inc., Morgan Stanley & Co. Incorporated and UBS Securities LLC, as Representatives of the Initial Purchasers (incorporated by reference to Exhibit 4.2 to theForm 8-K filed by Novelis Inc. on February 3, 2005 (FileNo. 001-32312)) | ||
4 | .5 | Form of Note for 71/4% Senior Notes due 2015 (incorporated by reference to Exhibit 4.1 to theForm S-4 filed by Novelis Inc. on August 3, 2005 (FileNo. 331-127139)) | ||
4 | .6 | Supplemental Indenture, between the Company, Novelis Finances USA LLC, Novelis South America Holdings LLC, Aluminum Upstream Holdings LLC and the Bank of New York Trust Company, N.A. | ||
5 | .1 | Opinion of Ogilvy Renault LLP † | ||
5 | .2 | Opinion of Jones Day † | ||
5 | .3 | Opinion of MacFarlanes † | ||
5 | .4 | Opinion of Internal Counsel of Novelis Inc. † | ||
5 | .5 | Opinion of Internal Counsel of Novelis Inc. † | ||
5 | .6 | Opinion of A&L Goodbody † | ||
5 | .7 | Opinion of Levy & Salomão Advogados † | ||
5 | .8 | Opinion of King & Spalding LLP | ||
5 | .9 | Opinion of Sullivan & Cromwell LLP † | ||
10 | .1 | Separation Agreement between Alcan Inc. and Novelis Inc. (incorporated by reference to Exhibit 10.1 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .2 | Metal Supply Agreement between Novelis Inc., as Purchaser, and Alcan Inc., as Supplier, for the supply of remelt aluminum ingot (incorporated by reference to Exhibit 10.2 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .3 | Molten Metal Supply Agreement between Novelis Inc., as Purchaser, and Alcan Inc., as Supplier, for the supply of molten metal to Purchaser’s Saguenay Works facility (incorporated by reference to Exhibit 10.3 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) |
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Table of Contents
Exhibit | ||||
No. | Description | |||
10 | .4 | Metal Supply Agreement between Novelis Inc., as Purchaser, and Alcan Inc., as Supplier, for the supply of sheet ingot in North America (incorporated by reference to Exhibit 10.4 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .5 | Metal Supply Agreement between Novelis Inc., as Purchaser, and Alcan Inc., as Supplier, for the supply of sheet ingot in Europe (incorporated by reference to Exhibit 10.5 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .6 | Tax Sharing and Disaffiliation Agreement between Alcan Inc., Novelis Inc., Arcustarget Inc., Alcan Corporation and Novelis Corporation (incorporated by reference to Exhibit 10.6 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .7 | Transitional Services Agreement between Alcan Inc. and Novelis Inc. (incorporated by reference to Exhibit 10.7 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .8 | Principal Intellectual Property Agreement between Alcan International Limited and Novelis Inc. (incorporated by reference to Exhibit 10.8 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .9 | Secondary Intellectual Property Agreement between Novelis Inc. and Alcan International Limited (incorporated by reference to Exhibit 10.9 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312) | ||
10 | .10 | Master Metal Hedging Agreement between Alcan Inc. and Novelis Inc. (incorporated by reference to Exhibit 10.10 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .10.1 | Credit Agreement, dated as of January 7, 2005, among Novelis Inc., Novelis Corporation, Novelis Deutschland GmbH, Novelis UK Ltd. and Novelis AG, as Borrowers, the Lenders and Issuers Party (as defined in the agreement), Citigroup North America, Inc., as Administrative Agent and Collateral Agent, Morgan Stanley Senior Funding, Inc. and UBS Securities LLC, as Co-Syndication Agents, and Citigroup Global Markets Inc., Morgan Stanley Senior Funding, Inc. and UBS Securities LLC, as Joint Lead Arrangers and Joint Book-Running Managers. (incorporated by reference to Exhibit 10.11 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .10.2 | Amendment No. 1 to Credit Agreement dated as of September 19, 2005 (incorporated by reference to Exhibit 10.1 to our Current Report onForm 8-K filed on September 20, 2005 (FileNo. 001-32312)) | ||
10 | .10.3 | Waiver and Consent to Credit Agreement dated as of November 11, 2005 (incorporated by reference to Exhibit 99.1 to our Current Report onForm 8-K filed on November 14, 2005 (FileNo. 001-32312)) | ||
10 | .10.4 | Waiver and Consent to Credit Agreement dated as of February 9, 2006 (incorporated by reference to Exhibit 10.1 to our Current Report onForm 8-K filed on February 14, 2006 (FileNo. 001-32312)) | ||
10 | .10.5 | Employee Matters Agreement between Alcan Inc. and Novelis Inc. (incorporated by reference to Exhibit 10.12 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .10.6 | Employment Agreement of Brian W. Sturgell (incorporated by reference to Exhibit 10.32 to the Form 10 filed by Novelis Inc. on December 22, 2004 (FileNo. 001-32312)) | ||
10 | .10.7 | Employment Agreement of Martha Finn Brooks (incorporated by reference to Exhibit 10.33 to the Form 10 filed by Novelis Inc. on December 22, 2004 (FileNo. 001-32312)) | ||
10 | .10.8 | Employment Agreement of Christopher Bark-Jones (incorporated by reference to Exhibit 10.34 to the Form 10 filed by Novelis Inc. on December 27, 2004 (FileNo. 001-32312)) | ||
10 | .10.9 | Employment Agreement of Pierre Arseneault (incorporated by reference to Exhibit 10.35 to the Form 10 filed by Novelis Inc. on December 22, 2004 (FileNo. 001-32312)) | ||
10 | .10.10 | Employment Agreement of Geoffrey P. Batt (incorporated by reference to Exhibit 10.36 to the Form 10 filed by Novelis Inc. on December 22, 2004 (FileNo. 001-32312)) | ||
10 | .11* | Employment Agreement of Jack Morrison (incorporated by reference to Exhibit 10.27 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .12* | Form of Change of Control Agreement between Alcan Inc. and executive officers of Novelis Inc. (incorporated by reference to Exhibit 10.37 to the Form 10 filed by Novelis Inc. on December 22, 2004 (FileNo. 001-32312)) |
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Table of Contents
Exhibit | ||||
No. | Description | |||
10 | .18* | Change of Control Agreement dated as of December 22, 2004 between Alcan Inc. and Martha Finn Brooks (incorporated by reference to Exhibit 10.2 to theForm 8-K filed by Novelis Inc. on January 7, 2005 (FileNo. 001-32312)) | ||
10 | .19* | Change of Control Agreement dated as of December 23, 2004 between Alcan Inc. and Christopher Bark-Jones (incorporated by reference to Exhibit 10.3 to theForm 8-K filed by Novelis Inc. on January 7, 2005 (FileNo. 001-32312)) | ||
10 | .20* | Change of Control Agreement dated as of November 12, 2004 between Alcan Inc. and Pierre Arseneault (incorporated by reference to Exhibit 10.4 to theForm 8-K filed by Novelis Inc. on January 7, 2005 (FileNo. 001-32312)) | ||
10 | .21* | Change of Control Agreement dated as of November 8, 2004 between Alcan Inc. and Geoffrey P. Batt (incorporated by reference to Exhibit 10.5 to theForm 8-K filed by Novelis Inc. on January 7, 2005 (FileNo. 001-32312)) | ||
10 | .22* | Change of Control Agreement dated as of December 5, 2005 between Novelis Inc. and Brian W. Sturgell (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis Inc. on December 9, 2005 (FileNo. 001-32312)) | ||
10 | .23* | Novelis Conversion Plan of 2005 (incorporated by reference to Exhibit 10.6 to theForm 8-K filed by Novelis Inc. on January 7, 2005 (FileNo. 001-32312)) | ||
10 | .24* | Written description of Novelis Short-term Incentive Plan — 2005 Performance Measures (incorporated by reference to Exhibit 10.25 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .25* | Novelis Inc. Deferred Share Unit Plan for Non-Executive Directors (incorporated by reference to Exhibit 10.26 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .26* | Form of Offer Letter with certain Novelis executive officers (incorporated by reference to Exhibit 10.28 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .27* | Written description of Novelis Pension Plan for Officers (incorporated by reference to Exhibit 10.29 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .28* | Written description of Novelis Founders Performance Award Plan (incorporated by reference to Exhibit 10.30 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .29* | Deferred Share Agreement, dated as of July 1, 2002, between Alcan Corporation and Martha Finn Brooks (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis Inc. on August 1, 2005 (FileNo. 001-32312)) | ||
10 | .30* | Amendment to Deferred Share Agreement, dated as of July 27, 2005, between Novelis Inc. and Martha Finn Brooks (incorporated by reference to Exhibit 10.2 to theForm 8-K filed by Novelis Inc. on August 1, 2005 (FileNo. 001-32312)) | ||
10 | .31 | Waiver, dated as of November 11, 2005, under the Credit Agreement dated January 7, 2005 among Novelis Inc., Novelis Corporation, Novelis Deutschland GmbH, Novelis UK Ltd., Novelis AG, Citigroup North America, Inc. and the issuers and lenders a party thereto (incorporated by reference to Exhibit 99.1 to theForm 8-K filed by Novelis Inc. on November 7, 2005 (FileNo. 001-32312)) | ||
10 | .32 | Second Waiver, dated as of February 9, 2006, under the Credit Agreement dated January 7, 2005 among Novelis Inc., Novelis Corporation, Novelis Deutschland GmbH, Novelis UK Ltd., Novelis AG, Citigroup North America, Inc. and the issuers and lenders a party thereto (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis Inc. on February 14, 2006 (FileNo. 001-32312)) | ||
10 | .33 | Novelis Founders Performance Award Notification for Brian Sturgell dated March 31, 2005, as amended and restated as of March 14, 2006 (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis Inc. on March 20, 2006 (FileNo. 001-32312)) | ||
10 | .34 | Novelis Founders Performance Award Notification for Martha Brooks dated March 31, 2005 (incorporated by reference to Exhibit 10.2 to theForm 8-K filed by Novelis Inc. on March 20, 2006 (FileNo. 001-32312)) | ||
10 | .35 | Novelis Founders Performance Award Notification for Chris Bark-Jones dated March 31, 2005(incorporated by reference to Exhibit 10.3 to theForm 8-K filed by Novelis Inc. on March 20, 2006 (FileNo. 001-32312)) |
II-5
Table of Contents
Exhibit | ||||
No. | Description | |||
10 | .36 | Novelis Founders Performance Award Notification for Jack Morrison dated March 31, 2005(incorporated by reference to Exhibit 10.4 to theForm 8-K filed by Novelis Inc. on March 20, 2006 (FileNo. 001-32312)) | ||
10 | .37 | Novelis Founders Performance Award Notification for Pierre Arseneault dated March 31, 2005(incorporated by reference to Exhibit 10.5 to theForm 8-K filed by Novelis Inc. on March 20, 2006 (FileNo. 001-32312)) | ||
10 | .38 | Novelis Founders Performance Award Notification for Geoff Batt dated March 31, 2005(incorporated by reference to Exhibit 10.6 to theForm 8-K filed by Novelis Inc. on March 20, 2006 (FileNo. 001-32312)) | ||
10 | .39 | Novelis Founders Performance Awards Plan, as amended and restated as of March 14, 2006(incorporated by reference to Exhibit 10.7 to theForm 8-K filed by Novelis Inc. on March 20, 2006 (FileNo. 001-32312)) | ||
10 | .40* | Description of Retention Payment for Geoff Batt (incorporated by reference to Exhibit 10.8 to theForm 8-K filed by Novelis Inc. on March 20, 2006 (FileNo. 001-32312)) | ||
10 | .41* | Employment Agreement of Arnaud de Weert (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis Inc. on April 3, 2006 (FileNo. 001-32312)) | ||
10 | .42* | Agreement Concerning Transition from Employment between Novelis and Geoff Batt dated March 31, 2006 (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis on April 6, 2006 (FileNo. 001-32312)) | ||
10 | .43 | Third Waiver, dated as of April 12, 2006, under the Credit Agreement dated January 7, 2005 among Novelis Inc., Novelis Corporation, Novelis Deutschland GmbH, Novelis UK Ltd., Novelis AG, Citigroup North America, Inc. and the issuers and lenders a party thereto (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis Inc. on April 18, 2006 (FileNo. 001-32312)) | ||
10 | .44 | Fourth Waiver, dated as of May 10, 2006, under the Credit Agreement dated January 7, 2005 among Novelis Inc., Novelis Corporation, Novelis Deutschland GmbH, Novelis UK Ltd., Novelis AG, Citigroup North America, Inc. and the issuers and lenders a party thereto (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis Inc. on May 16, 2006 (FileNo. 001-32312)) | ||
10 | .45* | Transition Agreement, dated June 15, 2006, by and between Jo-Ann Longworth and Novelis Inc. (incorporated by reference to Exhibit 10.45 to theForm 10-K filed by Novelis Inc. on August 25, 2006 (FileNo. 001-32312)) | ||
10 | .46* | Separation and Release Agreement, dated June 15, 2006, by and between Jo-Ann Longworth and Novelis Corp. (incorporated by reference to Exhibit 10.46 to theForm 10-K filed by Novelis Inc. on August 25, 2006 (FileNo. 001-32312)) | ||
10 | .47* | Transition Agreement, dated June 27, 2006, by and between Geoff Batt and Novelis Inc. (incorporated by reference to Exhibit 10.47 to theForm 10-K filed by Novelis Inc. on August 25, 2006 (FileNo. 001-32312)) | ||
10 | .48* | Separation and Release Agreement, dated June 27, 2006, by and between Geoff Batt and Novelis Corp. (incorporated by reference to Exhibit 10.48 to theForm 10-K filed by Novelis Inc. on August 25, 2006 (FileNo. 001-32312)) | ||
10 | .49* | Offer Letter, dated February 24, 2006, by and between Robert M. Patterson and Novelis Inc. (incorporated by reference to Exhibit 10.49 to theForm 10-K filed by Novelis Inc. on August 25, 2006 (FileNo. 001-32312)) | ||
10 | .50* | Offer Letter, dated June 20, 2006, by and between Rick Dobson and Novelis Inc. (incorporated by reference to Exhibit 10.50 to theForm 10-K filed by Novelis Inc. on August 25, 2006 (FileNo. 001-32312)) | ||
10 | .51* | Addendum to Rick Dobson Offer Letter, dated June 20, 2006, by and between Rick Dobson and Novelis Inc. (incorporated by reference to Exhibit 10.51 to theForm 10-K filed by Novelis Inc. on August 25, 2006 (FileNo. 001-32312)) |
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Table of Contents
Exhibit | ||||
No. | Description | |||
10 | .52 | Fifth Waiver, dated as of August 11, 2006, under the Credit Agreement dated January 7, 2005 among Novelis Inc., Novelis Corporation, Novelis Deutschland GmbH, Novelis UK Ltd., Novelis AG, Citigroup North America, Inc. and the issuers and lenders a party thereto (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis Inc. on August 17, 2006 (FileNo. 001-32312)) | ||
10 | .53* | Form of Change in Control Agreement between Novelis Inc. and certain executive officers (incorporated by reference to Exhibit 99.1 to theForm 8-K filed by Novelis on September 27, 2006 (FileNo. 001-32312)) | ||
10 | .54* | Form of Change in Control Agreement between Novelis Inc. and certain executive officers and key employees (incorporated by reference to Exhibit 99.2 to theForm 8-K filed by Novelis on September 27, 2006 (FileNo. 001-32312)) | ||
10 | .55* | Form of Recognition Agreement between Novelis Inc. and certain executive officers and key employees (incorporated by reference to Exhibit 99.3 to theForm 8-K filed by Novelis on September 27, 2006 (FileNo. 001-32312)) | ||
10 | .56* | Letter Agreement between Novelis Inc. and William T. Monahan dated as of October 11, 2006 (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis on October 17, 2006 (FileNo. 001-32312)) | ||
10 | .57 | Amendment No. 2 to Credit Agreement, dated October 16, 2006 (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis on October 19, 2006 (FileNo. 001-32312)) | ||
10 | .58* | Novelis Conversion Plan of 2005, as amended on October 19, 2006 (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis on October 25, 2006 (FileNo. 001-32312)) | ||
10 | .59* | Letter Agreement between Novelis Inc. and David Godsell dated as of November 10, 2004 (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis on October 26, 2006 (FileNo. 001-32312)) | ||
10 | .60* | Letter Agreement, dated October 20, 2006, by and between Novelis Inc. and Thomas Walpole (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis on October 26, 2006 (FileNo. 001-32312)) | ||
10 | .60.1 | Separation and Release Agreement between Novelis Inc. and Brian Sturgell dated October 26, 2006 | ||
10 | .61* | Novelis Inc. 2006 Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis on November 1, 2006 (FileNo. 001-32312)) | ||
10 | .62* | Form of Non-Qualified Stock Option Award (incorporated by reference to Exhibit 10.2 to theForm 8-K filed by Novelis on November 1, 2006 (FileNo. 001-32312)) | ||
10 | .63* | Form of SAR Award (incorporated by reference to Exhibit 10.3 to theForm 8-K filed by Novelis on November 1, 2006 (FileNo. 001-32312)) | ||
11 | .1 | Statement regarding computation of per share earnings (incorporated by reference to Item 8. Financial Statements and Supplementary Data — Note 19 — Earnings Per Share to the Consolidated and Combined Financial Statements) | ||
12 | .1 | Statement regarding computation of ratio of earnings to fixed charges | ||
21 | .1 | List of subsidiaries of Novelis Inc. (incorporated by reference to Exhibit 21.1 to the Form 10-K filed by Novelis Inc. on August 25, 2006 (File No. 001-32312)) | ||
23 | .1 | Consent of PricewaterhouseCoopers LLP | ||
23 | .1.1 | Consent of PricewaterhouseCoopers LLP | ||
23 | .2 | Consent of King & Spalding LLP (included as part of Exhibit 5.8) | ||
23 | .3 | Consent of Ogilvy Renault LLP (included as part of Exhibit 5.1) | ||
23 | .4 | Consent of Jones Day (included as part of Exhibit 5.2) | ||
23 | .5 | Consent of MacFarlanes (included as part of Exhibit 5.3) | ||
23 | .6 | Consent of Internal Counsel of Novelis Inc. (included as part of Exhibit 5.4) | ||
23 | .7 | Consent of Internal Counsel of Novelis Inc. (included as part of Exhibit 5.5) | ||
23 | .8 | Consent of A&L Goodbody (included as part of Exhibit 5.6) | ||
23 | .9 | Consent of Levy & Salomão Advogados (included as part of Exhibit 5.7) |
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Table of Contents
Exhibit | ||||
No. | Description | |||
23 | .10 | Consent of Sullivan & Cromwell LLP (included as part of Exhibit 5.9) | ||
24 | .1 | Powers of Attorney (included in the signature pages to this Registration Statement) | ||
25 | .1 | Statement of Eligibility onForm T-1 under the Trust Indenture Act of 1939 of The Bank of New York Trust Company, N.A., as trustee of the Indenture † | ||
99 | .1 | Form of Letter of Transmittal † | ||
99 | .2 | Form of Notice of Guaranteed Delivery † | ||
99 | .3 | Exchange Agent Agreement between Novelis Inc. and The Bank of New York Trust Company, N.A. † |
* | Indicates a management contract or compensatory plan or arrangement. | |
† | Previously Filed |
ITEM 22. | Undertakings |
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By: | /s/ William T. Monahan |
Title: | Interim Chief Executive Officer |
Signature | Title | Date | ||||
/s/ William T. Monahan William T. Monahan | Director, Interim Chief Executive Officer (Principal Executive Officer) | December 1, 2006 | ||||
/s/ Rick Dobson Rick Dobson | (Principal Financial Officer) | December 1, 2006 | ||||
/s/ Robert M. Patterson Robert M. Patterson | (Principal Accounting Officer) | December 1, 2006 | ||||
Edward A. Blechschmidt | Director | December 1, 2006 | ||||
* Charles G. Cavell | Director | December 1, 2006 | ||||
Clarence J. Chandran | Director | December 1, 2006 | ||||
* C. Roberto Cordaro | Director | December 1, 2006 | ||||
* Helmut Eschwey | Director | December 1, 2006 | ||||
* David J. FitzPatrick | Director | December 1, 2006 | ||||
* Suzanne Labarge | Director | December 1, 2006 | ||||
* Rudolph Rupprecht | Director | December 1, 2006 |
II-10
Table of Contents
Signature | Title | Date | ||||
Kevin Twomey | Director | December 1, 2006 | ||||
* Edward Yang | Director | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. Leslie J. Parrette, Jr. | Authorized Representative in the United States of America | December 1, 2006 |
II-11
Table of Contents
By: | /s/ Charles R. Aley |
Title: | Secretary |
Signature | Title | Date | ||||
* Kevin Greenawalt | Director, President (Principal Executive Officer) | December 1, 2006 | ||||
* Glen Guman | Director, Vice President and Treasurer (Principal Financial Officer) | December 1, 2006 | ||||
* Robert Sabelli | Assistant Treasurer (Principal Accounting Officer) | December 1, 2006 | ||||
* Charles R. Aley | Director | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. Leslie J. Parrette, Jr. | Authorized Representative in the United States of America | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. *Leslie J. Parrette, Jr. Attorney-in-Fact | December 1, 2006 |
II-12
Table of Contents
By: | /s/ Charles R. Aley |
Title: | Secretary |
Signature | Title | Date | ||||
* Glen Guman | Vice President and Treasurer (Principal Executive Officer) (Principal Financial Officer) | December 1, 2006 | ||||
* Robert Sabelli | Assistant Treasurer (Principal Accounting Officer) | December 1, 2006 | ||||
* Charles R. Aley | Director | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. Leslie J. Parrette, Jr. | Authorized Representative in the United States of America | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. *Leslie J. Parrette, Jr. Attorney-in-Fact | December 1, 2006 |
Signature | Title | Date | ||||
/s/ Glen Guman Glen Guman | Vice President and Treasurer (Principal Executive Officer) (Principal Financial Officer) | December 1, 2006 |
II-13
Table of Contents
By: | /s/ Charles R. Aley |
Title: | Secretary |
Signature | Title | Date | ||||
* Glen Guman | Vice President and Treasurer (Principal Executive Officer) (Principal Financial Officer) | December 1, 2006 | ||||
* Robert Sabelli | Assistant Treasurer (Principal Accounting Officer) | December 1, 2006 | ||||
* Charles R. Aley | Director | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. Leslie J. Parrette, Jr. | Authorized Representative in the United States of America | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. *Leslie J. Parrette, Jr. Attorney-in-Fact | December 1, 2006 |
Signature | Title | Date | ||||
/s/ Glen Guman Glen Guman | Vice President and Treasurer (Principal Executive Officer) (Principal Financial Officer) | December 1, 2006 |
II-14
Table of Contents
By: | /s/ David Kennedy |
Title: | President |
Signature | Title | Date | ||||
* David Kennedy | Director, President (Principal Executive Officer) (Principal Financial Officer) (Principal Accounting Officer) | December 1, 2006 |
II-15
Table of Contents
By: | /s/ David Kennedy |
Title: | President |
Signature | Title | Date | ||||
* David Kennedy | Director, President (Principal Executive Officer) (Principal Financial Officer) (Principal Accounting Officer) | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. Leslie J. Parrette, Jr. | Authorized Representative in the United States of America | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. *Leslie J. Parrette, Jr. Attorney-in-Fact | December 1, 2006 |
II-16
Table of Contents
By: | /s/ David Kennedy |
Title: | President |
Signature | Title | Date | ||||
* David Kennedy | Director, President (Principal Executive Officer) (Principal Financial Officer) (Principal Accounting Officer) | December 1, 2006 |
II-17
Table of Contents
By: | /s/ Arnaud de Weert |
Title: | Director |
Signature | Title | Date | ||||
* Arnaud de Weert | Director, (Principal Executive Officer) | December 1, 2006 | ||||
* Erwin Faust | Director, (Principal Financial Officer,) (Principal Accounting Officer) | December 1, 2006 | ||||
* Jim Wilkie | Director | December 1, 2006 | ||||
* David Sneddon | Director | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. Leslie J. Parrette, Jr. | Authorized Representative in the United States of America | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. *Leslie J. Parrette, Jr. Attorney-in-Fact | December 1, 2006 |
II-18
Table of Contents
Signature | Title | Date | ||||
/s/ Arnaud de Weert Arnaud de Weert | Director, (Principal Executive Officer) | December 1, 2006 | ||||
/s/ David Sneddon David Sneddon | Director | December 1, 2006 |
II-19
Table of Contents
By: | /s/ Arnaud de Weert |
Title: | Director |
Signature | Title | Date | ||||
* Arnaud de Weert | Director, (Principal Executive Officer) | December 1, 2006 | ||||
* Erwin Faust | Director, (Principal Financial Officer,) (Principal Accounting Officer) | December 1, 2006 | ||||
* David Sneddon | Director | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. Leslie J. Parrette, Jr. | Authorized Representative in the United States of America | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. *Leslie J. Parrette, Jr. Attorney-in-Fact | December 1, 2006 |
Signature | Title | Date | ||||
/s/ Arnaud de Weert Arnaud de Weert | Director, (Principal Executive Officer) | December 1, 2006 | ||||
/s/ David Sneddon David Sneddon | Director | December 1, 2006 |
II-20
Table of Contents
By: | /s/ Antonio Tadeu Coelho Nardocci |
Title: | President |
Signature | Title | Date | ||||
* Antonio Tadeu Coelho Nardocci | Director, President (Principal Executive Officer) | December 1, 2006 | ||||
* Alexandre Almeida | Finance Director (Principal Financial Officer) (Principal Accounting Officer) | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. Leslie J. Parrette, Jr. | Authorized Representative in the United States of America | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. *Leslie J. Parrette, Jr. Attorney-in-Fact | December 1, 2006 |
II-21
Table of Contents
By: | /s/ Arnaud de Weert |
Title: | Chairman |
Signature | Title | Date | ||||
* Arnaud de Weert | Director, (Principal Executive Officer) | December 1, 2006 | ||||
* Erwin Faust | (Director, Principal Financial Officer,) (Principal Accounting Officer) | December 1, 2006 | ||||
* Erwin Mayr | Director | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. Leslie J. Parrette, Jr. | Authorized Representative in the United States of America | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. *Leslie J. Parrette, Jr. Attorney-in-Fact | December 1, 2006 |
Signature | Title | Date | ||||
/s/ Arnaud de Weert Arnaud de Weert | Director, (Principal Executive Officer) | December 1, 2006 | ||||
/s/ Erwin Mayr Erwin Mayr | Director | December 1, 2006 |
II-22
Table of Contents
By: | /s/ Arnaud de Weert |
Title: | Chairman |
Signature | Title | Date | ||||
* Arnaud de Weert | Director, (Principal Executive Officer) | December 1, 2006 | ||||
* Erwin Faust | Director, (Principal Financial Officer,) (Principal Accounting Officer) | December 1, 2006 | ||||
* Erwin Mayr | Director | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. Leslie J. Parrette, Jr. | Authorized Representative in the United States of America | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. *Leslie J. Parrette, Jr. Attorney-in-Fact | December 1, 2006 |
Signature | Title | Date | ||||
/s/ Arnaud de Weert Arnaud de Weert | Director, (Principal Executive Officer) | December 1, 2006 | ||||
/s/ Erwin Mayr Erwin Mayr | Director | December 1, 2006 |
II-23
Table of Contents
By: | /s/ Arnaud de Weert |
Title: | Chairman |
Signature | Title | Date | ||||
* Arnaud de Weert | Director, (Principal Executive Officer) | December 1, 2006 | ||||
* Erwin Faust | Director, (Principal Financial Officer,) (Principal Accounting Officer) | December 1, 2006 | ||||
* Erwin Mayr | Director | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. Leslie J. Parrette, Jr. | Authorized Representative in the United States of America | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. *Leslie J. Parrette, Jr. Attorney-in-Fact | December 1, 2006 |
Signature | Title | Date | ||||
/s/ Arnaud de Weert Arnaud de Weert | Director, (Principal Executive Officer) | December 1, 2006 | ||||
/s/ Erwin Mayr Erwin Mayr | Director | December 1, 2006 |
II-24
Table of Contents
By: | /s/ Erwin Faust |
Title: | Managing Director |
Signature | Title | Date | ||||
* Nikolaus von Verschuer | Managing Director, Principal Executive Officer | December 1, 2006 | ||||
* Erwin Faust | Managing Director, Principal Financial Officer Principal Accounting Officer | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. Leslie J. Parrette, Jr. | Authorized Representative in the United States of America | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr *Leslie J. Parrette, Jr. Attorney-in-Fact | December 1, 2006 |
II-25
Table of Contents
By: | /s/ Erwin Faust |
Title: | Managing Director |
Signature | Title | Date | ||||
* Nikolaus vonVerschner | Managing Director (Principal Executive Officer) | December 1, 2006 | ||||
* Erwin Faust | Managing Director (Principal Financial Officer) (Principal Accounting Officer) | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. Leslie J. Parrette, Jr. | Authorized Representative in the United States of America | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. *Leslie J. Parrette, Jr. Attorney-in-Fact | December 1, 2006 |
II-26
Table of Contents
By: | /s/ David Kennedy |
Title: | Director |
Signature | Title | Date | ||||
/s/ David Kennedy David Kennedy | Director, President and Secretary | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. Leslie J. Parrette, Jr. | Authorized Representative in the United States of America | December 1, 2006 |
Signature | Title | Date | ||||
/s/ David Kennedy David Kennedy | Director, President and Secretary | December 1, 2006 |
II-27
Table of Contents
By: | /s/ Nichole Robinson |
Title: | Secretary |
Signature | Title | Date | ||||
/s/ Leslie J. Parrette, Jr. Leslie J. Parrette, Jr. | President (Principal Executive Officer) | December 1, 2006 | ||||
/s/ Orville Lunking Orville Lunking | Vice President and Treasurer (Principal Financial Officer) (Principal Accounting Officer) | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. Leslie J. Parrette, Jr. | Authorized Representative in the United States of America | December 1, 2006 |
Signature | Title | Date | ||||
/s/ Nichole Robinson Nichole Robinson | Secretary | December 1, 2006 | ||||
/s/ Orville Lunking Orville Lunking | Vice President and Treasurer (Principal Financial Officer) (Principal Accounting Officer) | December 1, 2006 |
II-28
Table of Contents
By: | /s/ Nichole Robinson |
Title: | Secretary |
Signature | Title | Date | ||||
/s/ Leslie J. Parrette, Jr. Leslie J. Parrette, Jr. | President (Principal Executive Officer) | December 1, 2006 | ||||
/s/ Orville Lunking Orville Lunking | Vice President and Treasurer (Principal Financial Officer) (Principal Accounting Officer) | December 1, 2006 | ||||
/s/ Leslie J. Parrette, Jr. Leslie J. Parrette, Jr. | Authorized Representative in the United States of America | December 1, 2006 |
Signature | Title | Date | ||||
/s/ Nichole Robinson Nichole Robinson | Secretary | December 1, 2006 | ||||
/s/ Orville Lunking Orville Lunking | Vice President and Treasurer (Principal Financial Officer) (Principal Accounting Officer) | December 1, 2006 |
II-29
Table of Contents
Exhibit | ||||
No. | Description | |||
3 | .1 | Restated Certificate and Articles of Incorporation of Novelis Inc. † | ||
3 | .2 | By-law No. 1 of Novelis Inc. † | ||
3 | .3 | Articles of Amendment to the Articles of Incorporation of Novelis Corporation (formerly Alcan Aluminum Corporation) † | ||
3 | .4 | Articles of Amendment to the Articles of Incorporation of Novelis Corporation † | ||
3 | .5 | Articles of Incorporation of Novelis Corporation † | ||
3 | .6 | Bylaws of Novelis Corporation † | ||
3 | .7 | Certificate of Amendment of Certificate of Incorporation of Novelis PAE Corporation (formerly Pechiney Aluminum Engineering, Inc.) † | ||
3 | .8 | Certificate of Incorporation of Novelis PAE Corporation † | ||
3 | .9 | By-laws of Novelis PAE Corporation † | ||
3 | .10 | Certificate of Incorporation of Eurofoil Inc. (USA) † | ||
3 | .11 | By-laws of Eurofoil Inc. (USA) † | ||
3 | .12 | Articles of Association of Novelis do Brasil Ltda. † | ||
3 | .13 | Certificate and Articles of Incorporation of 4260848 Canada Inc. † | ||
3 | .14 | By-law No. 1 of 4260848 Canada Inc. † | ||
3 | .15 | Certificate and Articles of Incorporation of 4260856 Canada Inc. † | ||
3 | .16 | By-law No. 1 of 4260856 Canada Inc. † | ||
3 | .17 | Amendment of Articles of Incorporation of Novelis Cast House Technology Ltd. † | ||
3 | .18 | Certificate and Articles of Incorporation of Novelis Cast House Technology Ltd. † | ||
3 | .19 | By-law No. 2 of Novelis Cast House Technology Ltd. † | ||
3 | .20 | By-law No. 1 of Novelis Cast House Technology Ltd. † | ||
3 | .21 | Bylaws of Novelis Deutschland GmbH † | ||
3 | .22 | Certificate of Incorporation on Change of Name of Novelis Aluminium Holding Company † | ||
3 | .23 | Memorandum and Articles of Association of Novelis Aluminium Holding Company † | ||
3 | .24 | Articles of Association of Novelis AG † | ||
3 | .25 | Articles of Association of Novelis Technology AG † | ||
3 | .26 | Articles of Association for Novelis Switzerland S.A. † | ||
3 | .27 | Memorandum of Association of Novelis UK Ltd. † | ||
3 | .28 | Articles of Association of Novelis UK Ltd. † | ||
3 | .29 | Memorandum of Association of Novelis Europe Holdings Ltd. † | ||
3 | .30 | Articles of Association of Novelis Europe Holdings Ltd. † | ||
3 | .31 | Certificate of Formation of Novelis Finances USA LLC | ||
3 | .32 | Limited Liability Company Agreement of Novelis Finances USA LLC | ||
3 | .33 | Certificate of Formation of Novelis South America Holdings LLC | ||
3 | .34 | Limited Liability Company Agreement of Novelis South America Holdings LLC | ||
3 | .35 | Certificate of Formation of Aluminum Upstream Holdings LLC | ||
3 | .36 | Limited Liability Company Agreement of Aluminum Upstream Holdings LLC | ||
4 | .1 | Shareholder Rights Agreement between Novelis and CIBC Mellon Trust Company (incorporated by reference to Exhibit 4.1 to theForm 10-K filed by Novelis Inc. on March 30, 2005 (FileNo. 001-32312)) | ||
4 | .2 | Specimen Certificate of Novelis Inc. Common Shares (incorporated by reference to Exhibit 4.2 to the Form 10 filed by Novelis Inc. on December 27, 2004 (FileNo. 001-32312)) | ||
4 | .3 | Indenture, relating to the Notes, dated as of February 3, 2005, between the Company, the guarantors named on the signature pages thereto and The Bank of New York Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 to theForm 8-K filed by Novelis Inc. on February 3, 2005 (FileNo. 001-32312)) |
Table of Contents
Exhibit | ||||
No. | Description | |||
4 | .4 | Registration Rights Agreement, dated as of February 3, 2005, among the Company, the guarantors named on the signature pages thereto, Citigroup Global Markets Inc., Morgan Stanley & Co. Incorporated and UBS Securities LLC, as Representatives of the Initial Purchasers (incorporated by reference to Exhibit 4.2 to theForm 8-K filed by Novelis Inc. on February 3, 2005 (FileNo. 001-32312)) | ||
4 | .5 | Form of Note for 71/4% Senior Notes due 2015 (incorporated by reference to Exhibit 4.1 to theForm S-4 filed by Novelis Inc. on August 3, 2005 (FileNo. 331-127139)) | ||
4 | .6 | Supplemental Indenture, between the Company, Novelis Finances USA LLC, Novelis South America Holdings LLC, Aluminum Upstream Holdings LLC and the Bank of New York Trust Company, N.A. | ||
5 | .1 | Opinion of Ogilvy Renault LLP † | ||
5 | .2 | Opinion of Jones Day † | ||
5 | .3 | Opinion of MacFarlanes † | ||
5 | .4 | Opinion of Internal Counsel of Novelis Inc. † | ||
5 | .5 | Opinion of Internal Counsel of Novelis Inc. † | ||
5 | .6 | Opinion of A&L Goodbody † | ||
5 | .7 | Opinion of Levy & Salomão Advogados † | ||
5 | .8 | Opinion of King & Spalding LLP | ||
5 | .9 | Opinion of Sullivan & Cromwell LLP † | ||
10 | .1 | Separation Agreement between Alcan Inc. and Novelis Inc. (incorporated by reference to Exhibit 10.1 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .2 | Metal Supply Agreement between Novelis Inc., as Purchaser, and Alcan Inc., as Supplier, for the supply of remelt aluminum ingot (incorporated by reference to Exhibit 10.2 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .3 | Molten Metal Supply Agreement between Novelis Inc., as Purchaser, and Alcan Inc., as Supplier, for the supply of molten metal to Purchaser’s Saguenay Works facility (incorporated by reference to Exhibit 10.3 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .4 | Metal Supply Agreement between Novelis Inc., as Purchaser, and Alcan Inc., as Supplier, for the supply of sheet ingot in North America (incorporated by reference to Exhibit 10.4 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .5 | Metal Supply Agreement between Novelis Inc., as Purchaser, and Alcan Inc., as Supplier, for the supply of sheet ingot in Europe (incorporated by reference to Exhibit 10.5 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .6 | Tax Sharing and Disaffiliation Agreement between Alcan Inc., Novelis Inc., Arcustarget Inc., Alcan Corporation and Novelis Corporation (incorporated by reference to Exhibit 10.6 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .7 | Transitional Services Agreement between Alcan Inc. and Novelis Inc. (incorporated by reference to Exhibit 10.7 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .8 | Principal Intellectual Property Agreement between Alcan International Limited and Novelis Inc. (incorporated by reference to Exhibit 10.8 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .9 | Secondary Intellectual Property Agreement between Novelis Inc. and Alcan International Limited (incorporated by reference to Exhibit 10.9 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312) | ||
10 | .10 | Master Metal Hedging Agreement between Alcan Inc. and Novelis Inc. (incorporated by reference to Exhibit 10.10 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .10.1 | Credit Agreement, dated as of January 7, 2005, among Novelis Inc., Novelis Corporation, Novelis Deutschland GmbH, Novelis UK Ltd. and Novelis AG, as Borrowers, the Lenders and Issuers Party (as defined in the agreement), Citigroup North America, Inc., as Administrative Agent and Collateral Agent, Morgan Stanley Senior Funding, Inc. and UBS Securities LLC, as Co-Syndication Agents, and Citigroup Global Markets Inc., Morgan Stanley Senior Funding, Inc. and UBS Securities LLC, as Joint Lead Arrangers and Joint Book-Running Managers. (incorporated by reference to Exhibit 10.11 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) |
Table of Contents
Exhibit | ||||
No. | Description | |||
10 | .10.2 | Amendment No. 1 to Credit Agreement dated as of September 19, 2005 (incorporated by reference to Exhibit 10.1 to our Current Report onForm 8-K filed on September 20, 2005 (FileNo. 001-32312)) | ||
10 | .10.3 | Waiver and Consent to Credit Agreement dated as of November 11, 2005 (incorporated by reference to Exhibit 99.1 to our Current Report onForm 8-K filed on November 14, 2005 (FileNo. 001-32312)) | ||
10 | .10.4 | Waiver and Consent to Credit Agreement dated as of February 9, 2006 (incorporated by reference to Exhibit 10.1 to our Current Report onForm 8-K filed on February 14, 2006 (FileNo. 001-32312)) | ||
10 | .10.5 | Employee Matters Agreement between Alcan Inc. and Novelis Inc. (incorporated by reference to Exhibit 10.12 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .10.6 | Employment Agreement of Brian W. Sturgell (incorporated by reference to Exhibit 10.32 to the Form 10 filed by Novelis Inc. on December 22, 2004 (FileNo. 001-32312)) | ||
10 | .10.7 | Employment Agreement of Martha Finn Brooks (incorporated by reference to Exhibit 10.33 to the Form 10 filed by Novelis Inc. on December 22, 2004 (FileNo. 001-32312)) | ||
10 | .10.8 | Employment Agreement of Christopher Bark-Jones (incorporated by reference to Exhibit 10.34 to the Form 10 filed by Novelis Inc. on December 27, 2004 (FileNo. 001-32312)) | ||
10 | .10.9 | Employment Agreement of Pierre Arseneault (incorporated by reference to Exhibit 10.35 to the Form 10 filed by Novelis Inc. on December 22, 2004 (FileNo. 001-32312)) | ||
10 | .10.10 | Employment Agreement of Geoffrey P. Batt (incorporated by reference to Exhibit 10.36 to the Form 10 filed by Novelis Inc. on December 22, 2004 (FileNo. 001-32312)) | ||
10 | .11* | Employment Agreement of Jack Morrison (incorporated by reference to Exhibit 10.27 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .12* | Form of Change of Control Agreement between Alcan Inc. and executive officers of Novelis Inc. (incorporated by reference to Exhibit 10.37 to the Form 10 filed by Novelis Inc. on December 22, 2004 (FileNo. 001-32312)) | ||
10 | .18* | Change of Control Agreement dated as of December 22, 2004 between Alcan Inc. and Martha Finn Brooks (incorporated by reference to Exhibit 10.2 to theForm 8-K filed by Novelis Inc. on January 7, 2005 (FileNo. 001-32312)) | ||
10 | .19* | Change of Control Agreement dated as of December 23, 2004 between Alcan Inc. and Christopher Bark-Jones (incorporated by reference to Exhibit 10.3 to theForm 8-K filed by Novelis Inc. on January 7, 2005 (FileNo. 001-32312)) | ||
10 | .20* | Change of Control Agreement dated as of November 12, 2004 between Alcan Inc. and Pierre Arseneault (incorporated by reference to Exhibit 10.4 to theForm 8-K filed by Novelis Inc. on January 7, 2005 (FileNo. 001-32312)) | ||
10 | .21* | Change of Control Agreement dated as of November 8, 2004 between Alcan Inc. and Geoffrey P. Batt (incorporated by reference to Exhibit 10.5 to theForm 8-K filed by Novelis Inc. on January 7, 2005 (FileNo. 001-32312)) | ||
10 | .22* | Change of Control Agreement dated as of December 5, 2005 between Novelis Inc. and Brian W. Sturgell (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis Inc. on December 9, 2005 (FileNo. 001-32312)) | ||
10 | .23* | Novelis Conversion Plan of 2005 (incorporated by reference to Exhibit 10.6 to theForm 8-K filed by Novelis Inc. on January 7, 2005 (FileNo. 001-32312)) | ||
10 | .24* | Written description of Novelis Short-term Incentive Plan — 2005 Performance Measures (incorporated by reference to Exhibit 10.25 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .25* | Novelis Inc. Deferred Share Unit Plan for Non-Executive Directors (incorporated by reference to Exhibit 10.26 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .26* | Form of Offer Letter with certain Novelis executive officers (incorporated by reference to Exhibit 10.28 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .27* | Written description of Novelis Pension Plan for Officers (incorporated by reference to Exhibit 10.29 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) | ||
10 | .28* | Written description of Novelis Founders Performance Award Plan (incorporated by reference to Exhibit 10.30 to our Annual Report onForm 10-K filed on March 30, 2005 (FileNo. 001-32312)) |
Table of Contents
Exhibit | ||||
No. | Description | |||
10 | .29* | Deferred Share Agreement, dated as of July 1, 2002, between Alcan Corporation and Martha Finn Brooks (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis Inc. on August 1, 2005 (FileNo. 001-32312)) | ||
10 | .30* | Amendment to Deferred Share Agreement, dated as of July 27, 2005, between Novelis Inc. and Martha Finn Brooks (incorporated by reference to Exhibit 10.2 to theForm 8-K filed by Novelis Inc. on August 1, 2005 (FileNo. 001-32312)) | ||
10 | .31 | Waiver, dated as of November 11, 2005, under the Credit Agreement dated January 7, 2005 among Novelis Inc., Novelis Corporation, Novelis Deutschland GmbH, Novelis UK Ltd., Novelis AG, Citigroup North America, Inc. and the issuers and lenders a party thereto (incorporated by reference to Exhibit 99.1 to theForm 8-K filed by Novelis Inc. on November 7, 2005 (FileNo. 001-32312)) | ||
10 | .32 | Second Waiver, dated as of February 9, 2006, under the Credit Agreement dated January 7, 2005 among Novelis Inc., Novelis Corporation, Novelis Deutschland GmbH, Novelis UK Ltd., Novelis AG, Citigroup North America, Inc. and the issuers and lenders a party thereto (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis Inc. on February 14, 2006 (FileNo. 001-32312)) | ||
10 | .33 | Novelis Founders Performance Award Notification for Brian Sturgell dated March 31, 2005, as amended and restated as of March 14, 2006 (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis Inc. on March 20, 2006 (FileNo. 001-32312)) | ||
10 | .34 | Novelis Founders Performance Award Notification for Martha Brooks dated March 31, 2005 (incorporated by reference to Exhibit 10.2 to theForm 8-K filed by Novelis Inc. on March 20, 2006 (FileNo. 001-32312)) | ||
10 | .35 | Novelis Founders Performance Award Notification for Chris Bark-Jones dated March 31, 2005(incorporated by reference to Exhibit 10.3 to theForm 8-K filed by Novelis Inc. on March 20, 2006 (FileNo. 001-32312)) | ||
10 | .36 | Novelis Founders Performance Award Notification for Jack Morrison dated March 31, 2005(incorporated by reference to Exhibit 10.4 to theForm 8-K filed by Novelis Inc. on March 20, 2006 (FileNo. 001-32312)) | ||
10 | .37 | Novelis Founders Performance Award Notification for Pierre Arseneault dated March 31, 2005(incorporated by reference to Exhibit 10.5 to theForm 8-K filed by Novelis Inc. on March 20, 2006 (FileNo. 001-32312)) | ||
10 | .38 | Novelis Founders Performance Award Notification for Geoff Batt dated March 31, 2005(incorporated by reference to Exhibit 10.6 to theForm 8-K filed by Novelis Inc. on March 20, 2006 (FileNo. 001-32312)) | ||
10 | .39 | Novelis Founders Performance Awards Plan, as amended and restated as of March 14, 2006(incorporated by reference to Exhibit 10.7 to theForm 8-K filed by Novelis Inc. on March 20, 2006 (FileNo. 001-32312)) | ||
10 | .40* | Description of Retention Payment for Geoff Batt (incorporated by reference to Exhibit 10.8 to theForm 8-K filed by Novelis Inc. on March 20, 2006 (FileNo. 001-32312)) | ||
10 | .41* | Employment Agreement of Arnaud de Weert (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis Inc. on April 3, 2006 (FileNo. 001-32312)) | ||
10 | .42* | Agreement Concerning Transition from Employment between Novelis and Geoff Batt dated March 31, 2006 (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis on April 6, 2006 (FileNo. 001-32312)) | ||
10 | .43 | Third Waiver, dated as of April 12, 2006, under the Credit Agreement dated January 7, 2005 among Novelis Inc., Novelis Corporation, Novelis Deutschland GmbH, Novelis UK Ltd., Novelis AG, Citigroup North America, Inc. and the issuers and lenders a party thereto (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis Inc. on April 18, 2006 (FileNo. 001-32312)) | ||
10 | .44 | Fourth Waiver, dated as of May 10, 2006, under the Credit Agreement dated January 7, 2005 among Novelis Inc., Novelis Corporation, Novelis Deutschland GmbH, Novelis UK Ltd., Novelis AG, Citigroup North America, Inc. and the issuers and lenders a party thereto (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis Inc. on May 16, 2006 (FileNo. 001-32312)) | ||
10 | .45* | Transition Agreement, dated June 15, 2006, by and between Jo-Ann Longworth and Novelis Inc. (incorporated by reference to Exhibit 10.45 to theForm 10-K filed by Novelis Inc. on August 25, 2006 (FileNo. 001-32312)) |
Table of Contents
Exhibit | ||||
No. | Description | |||
10 | .46* | Separation and Release Agreement, dated June 15, 2006, by and between Jo-Ann Longworth and Novelis Corp. (incorporated by reference to Exhibit 10.46 to theForm 10-K filed by Novelis Inc. on August 25, 2006 (FileNo. 001-32312)) | ||
10 | .47* | Transition Agreement, dated June 27, 2006, by and between Geoff Batt and Novelis Inc. (incorporated by reference to Exhibit 10.47 to theForm 10-K filed by Novelis Inc. on August 25, 2006 (FileNo. 001-32312)) | ||
10 | .48* | Separation and Release Agreement, dated June 27, 2006, by and between Geoff Batt and Novelis Corp. (incorporated by reference to Exhibit 10.48 to theForm 10-K filed by Novelis Inc. on August 25, 2006 (FileNo. 001-32312)) | ||
10 | .49* | Offer Letter, dated February 24, 2006, by and between Robert M. Patterson and Novelis Inc. (incorporated by reference to Exhibit 10.49 to theForm 10-K filed by Novelis Inc. on August 25, 2006 (FileNo. 001-32312)) | ||
10 | .50* | Offer Letter, dated June 20, 2006, by and between Rick Dobson and Novelis Inc. (incorporated by reference to Exhibit 10.50 to theForm 10-K filed by Novelis Inc. on August 25, 2006 (FileNo. 001-32312)) | ||
10 | .51* | Addendum to Rick Dobson Offer Letter, dated June 20, 2006, by and between Rick Dobson and Novelis Inc. (incorporated by reference to Exhibit 10.51 to theForm 10-K filed by Novelis Inc. on August 25, 2006 (FileNo. 001-32312)) | ||
10 | .52 | Fifth Waiver, dated as of August 11, 2006, under the Credit Agreement dated January 7, 2005 among Novelis Inc., Novelis Corporation, Novelis Deutschland GmbH, Novelis UK Ltd., Novelis AG, Citigroup North America, Inc. and the issuers and lenders a party thereto (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis Inc. on August 17, 2006 (FileNo. 001-32312)) | ||
10 | .53* | Form of Change in Control Agreement between Novelis Inc. and certain executive officers (incorporated by reference to Exhibit 99.1 to theForm 8-K filed by Novelis on September 27, 2006 (FileNo. 001-32312)) | ||
10 | .54* | Form of Change in Control Agreement between Novelis Inc. and certain executive officers and key employees (incorporated by reference to Exhibit 99.2 to theForm 8-K filed by Novelis on September 27, 2006 (FileNo. 001-32312)) | ||
10 | .55* | Form of Recognition Agreement between Novelis Inc. and certain executive officers and key employees (incorporated by reference to Exhibit 99.3 to theForm 8-K filed by Novelis on September 27, 2006 (FileNo. 001-32312)) | ||
10 | .56* | Letter Agreement between Novelis Inc. and William T. Monahan dated as of October 11, 2006 (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis on October 17, 2006 (FileNo. 001-32312)) | ||
10 | .57 | Amendment No. 2 to Credit Agreement, dated October 16, 2006 (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis on October 19, 2006 (FileNo. 001-32312)) | ||
10 | .58* | Novelis Conversion Plan of 2005, as amended on October 19, 2006 (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis on October 25, 2006 (FileNo. 001-32312)) | ||
10 | .59* | Letter Agreement between Novelis Inc. and David Godsell dated as of November 10, 2004 (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis on October 26, 2006 (FileNo. 001-32312)) | ||
10 | .60* | Letter Agreement, dated October 20, 2006, by and between Novelis Inc. and Thomas Walpole (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis on October 26, 2006 (FileNo. 001-32312)) | ||
10 | .60.1 | Separation and Release Agreement between Novelis Inc. and Brian Sturgell dated October 26, 2006 | ||
10 | .61* | Novelis Inc. 2006 Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 to theForm 8-K filed by Novelis on November 1, 2006 (FileNo. 001-32312)) | ||
10 | .62* | Form of Non-Qualified Stock Option Award (incorporated by reference to Exhibit 10.2 to theForm 8-K filed by Novelis on November 1, 2006 (FileNo. 001-32312)) | ||
10 | .63* | Form of SAR Award (incorporated by reference to Exhibit 10.3 to theForm 8-K filed by Novelis on November 1, 2006 (FileNo. 001-32312)) |
Table of Contents
Exhibit | ||||
No. | Description | |||
11 | .1 | Statement regarding computation of per share earnings (incorporated by reference to Item 8. Financial Statements and Supplementary Data — Note 19 — Earnings Per Share to the Consolidated and Combined Financial Statements) | ||
12 | .1 | Statement regarding computation of ratio of earnings to fixed charges | ||
21 | .1 | List of subsidiaries of Novelis Inc. (incorporated by reference to Exhibit 21.1 to the Form 10-K filed by Novelis Inc. on August 25, 2006 (File No. 001-32312)) | ||
23 | .1 | Consent of PricewaterhouseCoopers LLP | ||
23 | .1.1 | Consent of PricewaterhouseCoopers LLP | ||
23 | .2 | Consent of King & Spalding LLP (included as part of Exhibit 5.8) | ||
23 | .3 | Consent of Ogilvy Renault LLP (included as part of Exhibit 5.1) | ||
23 | .4 | Consent of Jones Day (included as part of Exhibit 5.2) | ||
23 | .5 | Consent of MacFarlanes (included as part of Exhibit 5.3) | ||
23 | .6 | Consent of Internal Counsel of Novelis Inc. (included as part of Exhibit 5.4) | ||
23 | .7 | Consent of Internal Counsel of Novelis Inc. (included as part of Exhibit 5.5) | ||
23 | .8 | Consent of A&L Goodbody (included as part of Exhibit 5.6) | ||
23 | .9 | Consent of Levy & Salomão Advogados (included as part of Exhibit 5.7) | ||
23 | .10 | Consent of Sullivan & Cromwell LLP (included as part of Exhibit 5.9) | ||
24 | .1 | Powers of Attorney (included in the signature pages to this Registration Statement) | ||
25 | .1 | Statement of Eligibility onForm T-1 under the Trust Indenture Act of 1939 of The Bank of New York Trust Company, N.A., as trustee of the Indenture † | ||
99 | .1 | Form of Letter of Transmittal † | ||
99 | .2 | Form of Notice of Guaranteed Delivery † | ||
99 | .3 | Exchange Agent Agreement between Novelis Inc. and The Bank of New York Trust Company, N.A. † |
* | Indicates a management contract or compensatory plan or arrangement. | |
† | Previously Filed |