Exhibit 99.1
NOVELIS REPORTS REGIONAL INCOME INCREASED 14%
ROLLED PRODUCT SHIPMENTS UP 4% IN THE 1ST QUARTER
DEBT POSITION REDUCED BY $70 MILLION
ATLANTA, May 11 /PRNewswire-FirstCall/ -- Novelis Inc. (NYSE, TSX: NVL)
today reported first quarter 2005 net income on a stand alone basis of $59
million (EPS $0.78) compared to net income in the carve out statements as a part
of Alcan for the first quarter 2004 of $69 million (EPS $0.92).
The 2004 carve out statements included an allocation of interest expense and
corporate costs of Alcan. The after-tax increase between first quarter 2004 and
first quarter 2005 is $17 million for interest expense and $12 million for
corporate costs. FAS 133 mark-to-market income increased by $9 million
after-tax.
Rolled product shipments climbed by 4% to 712 thousand tonnes (kt) for the
first quarter of 2005 over the equivalent period in 2004. For 2005, the increase
in shipments is attributed to strong market demand, largely in North America and
Asia, and continued market share growth in South America.
Sales and operating revenues rose by 17% for the first quarter of 2005 over
the same quarter of 2004 while cost of sales and operating expenses experienced
a similar percentage increase. The major contributing factors to both sales and
operating revenues and cost of sales were an increase in London Metal Exchange
(LME) pricing, which was up 13% for the year ago quarter, and stronger shipment
levels.
Selling, general and administrative expenses (SG&A) were $76 million in the
first quarter, up $16 million from the year-ago quarter. Included in SG&A for
the quarter are additional corporate head office costs we incurred for the first
time as a stand-alone company, $6 million in one-time start-up costs and the
strengthening euro.
Interest expense at $44 million in first quarter 2005 was significantly
higher than the interest allocated from Alcan in the carve out statements in
first quarter 2004. A comparison to first quarter 2004 interest expense is not
meaningful as it did not reflect the level of debt, nor the associated interest
costs the Company would have incurred had it operated on a stand- alone basis at
that time.
Other expenses (income) - net was $59 million in the first quarter of 2005
and included Financial Accounting Standard No. 133 (FAS 133) mark-to-market
adjustments on derivatives of $59 million. We also incurred debt issue costs of
$13 million on undrawn facilities used to back-up the Alcan notes we received in
January 2005 as part of our separation from Alcan. Alcan funded the $13 million
of debt issuance costs by reimbursing Novelis and the Alcan notes were repaid
from the proceeds of our 7.25% unsecured senior notes due February 15, 2015. The
first quarter of 2004 included FAS 133 mark-to-market adjustments of $42 million
as well as a gain on asset sales of $7 million.
In the first quarter of 2005, the effective tax rate was 41% compared to a
composite statutory rate of 34%. In 2004, the effective tax rate for the first
quarter was 38%, compared to the composite statutory rates of 37%. The main
difference in the first quarter 2005 rate was a $6 million tax provision in
connection with our spin-off from Alcan, for which there was no related income.
"Our first quarter performance was an insight into the true abilities of
this company," said Brian Sturgell, President and CEO. "We ended our last year
as a part of Alcan on solid operational footing, and we are starting our first
year as Novelis in a global leadership position. The first quarter reflects the
capabilities of our people and technology and what can be accomplished in an
environment of high metal prices. We stepped out as an independent company and
performed well on all key points - cash flow therefore debt paydown, regional
income, and shipment growth. Our goal is to provide maximum value to the
shareholder and our efforts and strategy came together to do just that."
The historical 2004 unaudited combined financial statements are presented in
U.S. dollars using United States (U.S.) Generally Accepted Accounting Principles
(GAAP) and have been derived from the accounting records of Alcan using the
historical results of operations and historical basis of assets and liabilities
of the businesses comprising Novelis. However, the historical unaudited combined
financial statements included herein may not necessarily reflect the Group's
results of operations, financial position and cash flows in the future or what
its results of operations, financial position and cash flows would have been had
Novelis been a stand-alone company during the historical periods presented. As
these historical combined financial statements represent a portion of the
businesses of Alcan which did not at the time constitute a separate legal
entity, the net assets of Novelis have been presented as Alcan's net investment
in the businesses. Alcan's investment in the businesses includes the accumulated
earnings of the businesses as well as cash transfers related to cash management
functions performed by Alcan. Subsequent to the spin-off from Alcan, the
financial statements no longer reflect Alcan as a related party. For more
information on the basis of presentation of the historical combined financial
statements, see note 2 to the audited combined financial statements included in
the Company's recently filed annual report on Form 10-K for the year ended
December 31, 2004.
Regional Results
See Attachment A for a description of Regional Income and a reconciliation
of Regional Income to Income Before Income Taxes and Other Items.
Total Regional Income
1st Qtr 1st Qtr % 4th Qtr %
($ in millions) 2005 2004 Chg 2004 Chg
- -------------------- ------- ------- ------- ------- -------
Sales 2,118 1,810 17.0% 2,016 5.1%
Regional Income 182 159 14.5% 116 56.9%
Rolled Product
Shipments (kt) 712 683 4.2% 671 6.1%
Regional Income
per Ton 256 233 9.8% 173 47.9%
Depreciation 58 61 -4.9% 68 -14.7%
Capital
Expenditures 23 20 15.0% 70 -67.1%
Total Assets 5,667 6,691 -15.3% 5,954 -4.8%
Regional Income increased $23 million or approximately 14% for the first
quarter 2005 versus the prior year period. Rolled product shipments climbed 4%
in the quarter over the same period in 2004. Volume was the largest driver
behind the increase in Regional Income in the first quarter 2005, with improved
pricing being an additional factor. The positive impact of the spreads between
used beverage cans (UBC) and primary metal along with our hedging program more
than offset the impact of our can price ceilings. These gains more than
compensated the negative effect of metal price timing differences and a mix
shift in Europe.
Novelis North America
North America 1st Qtr 1st Qtr % 4th Qtr %
($ in millions) 2005 2004 Chg 2004 Chg
- -------------------- ------- ------- ------- ------- -------
Sales 827 670 23.4% 735 12.5%
Regional Income 57 69 -17.4% 32 78.1%
Rolled Product
Shipments (kt) 283 274 3.3% 256 10.5%
Regional Income
per Ton 201 252 -20.2% 125 60.8%
Depreciation 18 17 5.9% 17 5.9%
Capital
Expenditures 8 11 -27.3% 21 -61.9%
Total Assets 1,480 2,688 -44.9% 1,406 5.3%
Regional Income declined 17% or $12 million from the first quarter 2004. The
reduction was mainly due to the adverse effect of metal price timing
differences, as well as higher freight and energy costs. These were partially
offset by an increase in rolled product shipments of 3% in the first quarter of
2005 versus the same period last year, pricing improvements in Industrial
Products and Light Gauge Products as well as a product portfolio improvement in
Can Products.
The positive impact of the spreads between UBC and primary metal along with
our hedging program more than offset the impact of our can price ceilings.
Novelis Europe
Europe 1st Qtr 1st Qtr % 4th Qtr %
($ in millions) 2005 2004 Chg 2004 Chg
- -------------------- ------- ------- ------- ------- -------
Sales 807 756 6.7% 792 1.9%
Regional Income 57 42 35.7% 38 50.0%
Rolled Product
Shipments (kt) 252 249 1.2% 228 10.5%
Regional Income
per Ton 226 169 34.1% 167 35.7%
Depreciation 26 28 -7.1% 36 -27.8%
Capital
Expenditures 8 10 -20.0% 33 -75.8%
Total Assets 2,469 2,363 4.5% 2,885 -14.4%
Regional Income for the first quarter of 2005 increased by 36% or $15
million over the first quarter of 2004 results due to effective management of
SG&A and positive timing of expenses. The first quarter 2005 saw gains from
higher shipments and the impact of the stronger euro on the translation of euro
profits into U.S. dollars. These improvements more than offset the shift in the
product mix as the softer economy in Europe led to lower sales in certain
high-end product lines.
Novelis Asia
Asia 1st Qtr 1st Qtr % 4th Qtr %
($ in millions) 2005 2004 Chg 2004 Chg
- -------------------- ------- ------- ------- ------- -------
Sales 338 268 26.1% 336 0.6%
Regional Income 30 20 50.0% 18 66.7%
Rolled Product
Shipments (kt) 114 108 5.6% 118 -3.4%
Regional Income
per Ton 263 185 42.2% 153 71.9%
Depreciation 12 12 0% 12 0%
Capital
Expenditures 3 4 -25.0% 14 -78.6%
Total Assets 987 922 7.0% 954 3.5%
Asia experienced a nearly 6% increase in volume over the first quarter 2004,
while regional income in the first quarter 2005 increased by 50% or $10 million
over the same period last year. In the first quarter 2005 we experienced better
pricing which more than offset the adverse impact from the strengthening Korean
currency on our costs. Productivity improvements provided a benefit to the
quarter as de-bottlenecking opportunities helped expand capacity and allowed us
to grow.
Novelis South America
South America 1st Qtr 1st Qtr % 4th Qtr %
($ in millions) 2005 2004 Chg 2004 Chg
- -------------------- ------- ------- ------- ------- -------
Sales 149 118 26.3% 156 -4.5%
Regional Income 38 28 35.7% 28 35.7%
Rolled Product
Shipments (kt) 63 52 21.2% 69 -8.7%
Regional Income
per Ton 603 538 12.1% 406 48.5%
Depreciation 11 12 -8.3% 11 0.0%
Capital
Expenditures 2 3 -33.3% 11 -81.8%
Total Assets 766 812 -5.7% 779 -1.7%
South America had a strong quarter with regional income up $10 million or
almost 36% in the first quarter 2005 versus first quarter 2004. Shipments in the
first quarter 2005 were up over 21%, a significant increase from the same period
in 2004. Improved pricing, higher shipments and the positive impact from higher
ingot prices on the production from our smelters in Brazil accounted for the
improvement.
Cash from Operating Activities
Cash from operating activities was $112 million for the first quarter of
2005 with a change in working capital deferred items and other-net of $2
million. This represents a $26 million change in cash from operating activities
from the same quarter in 2004, or a 19% change. The change in working capital
deferred items and other-net for the same period in 2004 was $9 million. Free
cash flow for the first quarter of 2005 was $76 million, representing a 34%
change the first quarter of 2004, which was $116 million.
Cash Flow 1st Qtr 1st Qtr % 4th Qtr %
($ in millions) 2005 2004 Chg 2004 Chg
- -------------------- ------- ------- ------- ------- -------
Cash from
Operating
Activities 112 138 -18.8% -75 249%
Dividends -13 -2 550% 0 N/M
Capital
Expenditures -23 -20 15% -70 67%
Free Cash Flow (1) 76 116 -34.5% -145 152%
(1) "Free cash flow" consists of cash from operating activities less capital
expenditures and dividends. Management believes that free cash flow is
relevant to investors as it provides a measure of the cash generated
internally that is available for debt service and investment opportunities.
Financing and Investment Activities
In connection with the reorganization transactions described below in Note 1
- - Background and Basis of Presentation, the Company entered into senior secured
credit facilities providing for aggregate borrowings of up to $1.8 billion (as
described in Note 3 thereof). These facilities consist of a $1.3 billion
seven-year senior secured Term Loan B facility, bearing interest at LIBOR plus
1.75%, all of which was borrowed on January 10, 2005, and a $500 million
five-year multi-currency revolving credit facility. The Term Loan B facility
consists of an $825 million Term Loan B in the United States and a $475 million
Term Loan B in Canada. The proceeds of the Term Loan B facility were used in
connection with the reorganization transactions, Novelis' separation from Alcan
and to pay related fees and expenses.
On February 3 2005, Novelis sold $1.4 billion aggregate principal amount of
senior unsecured debt securities (Senior Notes). The Senior Notes, which were
priced at par, bear interest at 7.25% and will mature on February 15, 2015. The
net proceeds of the placement were used to repay Alcan notes that were issued in
connection with the reorganization transaction.
At the spin-off from Alcan, Novelis had $2,951 million of long term debt and
capital leases. With the strength of the cash flows in the first quarter 2005,
Novelis paid $77 million towards the reduction in their long term debt. The
current debt balance at quarter end was $2,881 million.
Capital expenditures totaled $23 million for the first quarter 2005 and $20
million in the prior year quarter representing re-investment rates of 40% and
33% of depreciation, respectively. The majority of Novelis' capital expenditures
for the quarter were spent on keeping our quality and technology advantage in
the market, increasing productivity, finding additional cost reductions and
undertaking small projects to increase capacity.
2005 Outlook
The guidance for 2005 is based on the fundamental drivers of the business
moving forward. Regional demand levels continue to be strong in all regions
except Europe, where economic activity continues to track sideways at best and
all four regions are performing well from an operational perspective. Our clear
focus over the next three years is to strengthen the balance sheet and de-lever
the company while maintaining our operating leadership. The ability to achieve
this goal is within our reach as we drive value through improvements in our
product portfolio and focused growth. The outlook for 2005 includes two key
components. First, capital expenditures will not exceed $175 million. Second,
regional income is expected to grow between 5% and 10%, excluding the impact of
FAS 133 mark-to-market gains or losses on derivatives but including the income
from joint ventures.
The original guidance figure for growth was based on a historical
calculation of Business Group Profit for the full year 2004 of $597 million.
However, in the future we will base the guidance on the Total Regional Income as
this is the measurement that is most relied on by management for allocating
resources and making regional decisions. Under this new measurement, that base
figure would have been $655 million for 2004. Therefore, for 2005 the regional
income guidance is a 5% to 10% increase from the 2004 base figure or a $33
million to $66 million increase.
Novelis faces challenges in our first year as an independent company.
Fluctuations in metal pricing and significant changes in currency, energy costs
and economies are uncertainties that are not under our control. The 2005 outlook
is based on information currently available to management.
Attachment A
The following table summarizes the reconciliation of Regional Income to
Income Before Income Taxes and Other Items.
Fourth
First Quarter Quarter
------------------- --------
($ in millions) 2005 2004 2004
- ----------------------------------- -------- -------- --------
Regional Income
Novelis North America 57 69 32
Novelis Europe 57 42 38
Novelis Asia 30 20 18
Novelis South America 38 28 28
Total Regional Income 182 159 116
Corporate Office (27) (10) (18)
Additional Items for Reconciliation
Equity accounted joint venture
eliminations (11) (11) (16)
Change in fair market value of
derivatives 64 49 40
Restructuring, rationalization
& impairment 1 7 (74)
Depreciation & amortization (58) (61) (68)
Interest (44) (19) (19)
Income before income taxes and
other items 107 114 (39)
Regional Income comprises earnings before interest, taxes, depreciation and
amortization excluding certain items, such as corporate office costs and asset
and goodwill impairments, restructuring, rationalization and the change in fair
market value of our derivatives, which are not under the control of the regional
groups. These items are managed by the company's head office, which focuses on
strategy development and oversees governance, policy, legal compliance, human
resources and finance.
Financial information for the regional groups includes the results of
certain joint ventures on a proportionately consolidated basis, which is
consistent with the way the business groups are managed. Under U.S. GAAP, these
joint ventures are accounted for under the equity method. Therefore, in order to
reconcile to income (loss) before income taxes and other items, the Regional
Income of these joint ventures is removed from Total Regional Income for the
company and the net after-tax results are reported as equity income.
The change in the fair market value of derivatives has been removed from
individual regional results and is shown on a separate line. This presentation
provides a more accurate portrayal of underlying business group results and is
in line with the company's portfolio approach to risk management.
Novelis Inc.
CONSOLIDATED STATEMENT OF INCOME (unaudited)
(in millions of US$, except per share amounts)
(COMBINED)
Three months ended March 31 2005 2004
- -------------------------------------------------------------- ------------ ------------
Sales and operating revenues
- third parties 2,118 1,718
- related parties -- 92
2,118 1,810
Costs and expenses
Cost of sales and operating expenses, excluding
depreciation and amortization noted below
- third parties 1,884 1,505
- related parties -- 80
Depreciation and amortization 58 61
Selling, general and administrative expenses 76 60
Research and development expenses 8 10
Interest
- third parties 44 11
- related parties -- 8
Other expenses (income) - net
- third parties (60) 4
- related parties 1 (43)
2,011 1,696
Income before income taxes and other items 107 114
Income taxes 44 43
Income before other items 63 71
Equity income 2 2
Minority interests (6) (4)
Net income 59 69
Earnings per share
Net income per share - basic 0.78 0.93
Net income per share - diluted 0.78 0.92
Dividends per common share 0.09 --
Novelis Inc.
CONSOLIDATED BALANCE SHEET (unaudited)
(in millions of US$)
(COMBINED)
March 31, December 31,
As at 2005 2004
- -------------------------------------------------------------- ------------ ------------
ASSETS
Current assets
Cash and time deposits 78 31
Trade receivables (net of allowances of $33
in 2005 and $33 in 2004)
- third parties 1,078 710
- related parties -- 87
Other receivables
- third parties 308 118
- related parties 38 846
Inventories
Aluminum 1,085 1,081
Raw materials 18 20
Other supplies 146 125
1,249 1,226
Total current assets 2,751 3,018
Deferred charges and other assets 277 193
Long-term receivables from related parties 93 104
Property, plant and equipment
Cost (excluding Construction work in progress) 5,365 5,506
Construction work in progress 116 112
Accumulated depreciation (3,231) (3,270)
2,250 2,348
Intangible assets (net of accumulated amortization
of $10 in 2005 and $9 in 2004) 33 35
Goodwill 263 256
Total assets 5,667 5,954
LIABILITIES AND SHAREHOLDERS'/INVESTED EQUITY
Current liabilities
Payables and accrued liabilities
- third parties 1,443 859
- related parties 36 401
Short-term borrowings
- third parties 26 229
- related parties -- 312
Debt maturing within one year
- third parties 4 1
- related parties -- 290
Total current liabilities 1,509 2,092
Debt not maturing within one year
- third parties 2,851 139
- related parties -- 2,307
Deferred credits and other liabilities 460 472
Deferred income taxes 179 249
Minority interests 141 140
Shareholders'/Invested equity
Common shares, no par value - unlimited number of
shares authorized; issued and outstanding:
73,988,932 shares -- --
Additional paid-in capital 460 --
Retained earnings 52 --
Accumulated other comprehensive income 15 88
Owner's net investment -- 467
527 555
Commitments and contingencies
Total liabilities and shareholders'/invested equity 5,667 5,954
Novelis Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
(in millions of US$)
(COMBINED)
Three months ended March 31 2005 2004
- -------------------------------------------------------------- ------------ ------------
OPERATING ACTIVITIES
Net income 59 69
Adjustments to determine cash from operating
activities:
Depreciation and amortization 58 61
Deferred income taxes (6) 19
Equity income (2) (2)
Stock option compensation 1 --
Change in operating working capital, deferred items
and other - net 2 (9)
Cash from operating activities 112 138
FINANCING ACTIVITIES
Proceeds from issuance of new debt
- third parties 2,748 317
- related parties -- --
Debt repayments
- third parties (2,720) --
- related parties -- --
Short-term borrowings - net
- third parties (517) (152)
- related parties -- 8
Dividends (7) --
Dividends - minority interest (6) (2)
Net receipts from (payments to) Alcan 82 (81)
Cash from (used for) financing activities (420) 90
INVESTMENT ACTIVITIES
Purchase of property, plant and equipment (23) (20)
Change in loans receivable - third parties 370 --
Change in loans receivable - related parties 8 (212)
Cash from (used for) investment activities 355 (232)
Effect of exchange rate changes on cash and time
deposits -- --
Increase (Decrease) in cash and time deposits 47 (4)
Cash and time deposits - beginning of period 31 27
Cash and time deposits - end of period 78 23
Novelis Inc.
CONSOLIDATED STATEMENT OF SHAREHOLDERS'/INVESTED EQUITY (unaudited)
(in millions of US$, except number of shares which is in thousands)
Accumulated
Other
Common Shares Additional Compre Owner's
------------------------- Paid-in Retained -hensive Net
Shares Amount Capital Earnings Income Investment Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at
December 31, 2004 -- -- -- -- 88 467 555
Net income
- Q1 2005 -- -- -- 59 -- -- 59
Comprehensive loss -- -- -- -- (73) -- (73)
Mark to market
losses on derivative
contracts with Alcan
from January
1 to 5, 2005
(note 1) -- -- -- -- -- (30) (30)
Dividends -- -- -- (7) -- (7) (14)
Transfer (to)/from
Alcan - net -- -- -- -- -- 30 30
Issuance of
common stock
in connection
with the
distribution 73,989 -- 460(a) -- -- (460) --
Balance at
March 31, 2005 73,989 -- 460 52 15 -- 527
a. Represents the amount of Owner's net investment after transfers
(to)/from Alcan - net.
1. BACKGROUND AND BASIS OF PRESENTATION
Background
On May 18, 2004, Alcan Inc. (Alcan) announced its intention to separate its
rolled products business into a separate company and to pursue a spin-off of
that business to its shareholders. The rolled products businesses were managed
under two separate operating segments within Alcan, Rolled Products Americas and
Asia and Rolled Products Europe. Alcan and its subsidiaries contributed and on
January 6, 2005, transferred to a new public company, Novelis Inc. (the Company
or Novelis), substantially all of the aluminum rolled products businesses
operated by Alcan prior to its 2003 acquisition of Pechiney, together with some
of Alcan's alumina and primary metal-related businesses in Brazil, which are
fully integrated with the rolled products operations there, as well as four
former Pechiney rolling facilities in Europe, as their end-use markets and
customers are more similar to those of Novelis. Novelis, which was formed in
Canada on September 21, 2004, acquired the abovementioned businesses on January
6, 2005, through the reorganization transactions described above.
On January 6, 2005, the spin-off occurred following the approval by Alcan's
Board of Directors and shareholders, and the receipt of other required legal and
regulatory approvals. Alcan shareholders received one Novelis common share for
every five Alcan common shares held. Common shares of Novelis began trading on a
"when issued" basis on the Toronto (TSX) and New York (NYSE) stock exchanges on
January 6, 2005, with a distribution record date of January 11, 2005. "Regular
Way" trading began on the TSX on January 7, 2005, and on the NYSE on January 19,
2005.
The Company together with its subsidiaries produces aluminum sheet and light
gauge products where the end-use destination of the products includes the
construction and industrial, beverage and food cans, foil products and
transportation markets. The Company operates in four continents, North America,
South America, Asia and Europe through 37 operating plants and three research
facilities in 12 countries. In addition to aluminum rolled products plants, the
Company's South American businesses include bauxite mining, aluminum refining
and smelting facilities that are integrated with the rolling plants in Brazil.
In certain instances, amounts presented in the unaudited historical combined
financial statements have been adjusted prospectively in the unaudited
consolidated financial statements as at and for the quarter ended March 31,
2005. Significant adjustments of this nature have been disclosed in the
accompanying notes as appropriate.
Post-transaction adjustments
The agreements giving effect to the spin-off provide for various post-
transaction adjustments and the resolution of outstanding matters, which are
expected to be carried out by the parties to the end of 2005. These adjustments,
for the most part, will be reflected as changes to equity.
Agreements between Novelis and Alcan
Novelis has entered into various agreements with Alcan for the use of
transitional and technical services, the supply of Alcan's metal and alumina,
the licensing of certain of Alcan's patents, trademarks and other intellectual
property rights, and the use of certain buildings, machinery and equipment,
technology and employees at certain facilities retained by Alcan, but required
in Novelis' business.
Basis of presentation
The unaudited consolidated financial statements as at and for the quarter
ended March 31, 2005 represent the operations, cash flows and financial position
of the Company as a stand-alone entity. All income earned and cash flows
generated by the Novelis entities as well as the risks and rewards of these
businesses from January 1 to 5, 2005 were primarily attributed to Novelis and
are included in the accompanying consolidated financial statements, with the
exception of $45 of pre-tax net gains on derivative contracts that were
attributed to Alcan and were therefore recorded as an adjustment to the Owner's
net investment account.
The historical combined financial statements as at December 31, 2004 and for
the quarter ended March 31, 2004 (the historical combined financial statements)
have been derived from the accounting records of Alcan using the historical
results of operations and historical basis of assets and liabilities of the
businesses subsequently transferred to Novelis. Management believes the
assumptions underlying the combined financial statements are reasonable.
However, the historical combined financial statements included herein may not
necessarily reflect the Company's results of operations, financial position and
cash flows or what its results of operations, financial position and cash flows
would have been had Novelis been a stand-alone company during the periods
presented. Alcan's investment in the Novelis businesses, presented as Owner's
net investment in the historical combined financial statements, includes the
accumulated earnings of the businesses as well as cash transfers related to cash
management functions performed by Alcan.
2. RELATED PARTY TRANSACTIONS
The Company enters into transactions with related parties in the ordinary
course of business. Alcan is the primary supplier of prime and sheet ingot to
the Company as well as the counterparty to all of the Company's metal
derivatives and most of the currency derivatives. The Company also sells
inventory to Alcan and certain equity-accounted investees. In 2004 and prior
years, Alcan was considered a related party to Novelis. However, subsequent to
the spin-off, Alcan is no longer a related party, as defined in SFAS No. 57,
Related Party Disclosures.
In 2004, all related parties balances on the statement of income represent
principally transactions between Alcan and Novelis. Subsequent to the spin- off,
Novelis repaid its net obligation to Alcan at December 31, 2004 through third
party financing (see note 3). At March 31, 2005, balances due to and from
related parties comprise balances between Novelis and its equity- accounted
investees.
3. DEBT NOT MATURING WITHIN ONE YEAR
All of the Company's related party debt of $2,597 as at December 31, 2004
was payable to Alcan and was fully repaid in the first quarter of 2005. The
related party debt was comprised of a combination of fixed and floating rate
debt of $1,392 and fixed rate promissory notes (Alcan Notes) obtained in
December 2004 of $1,205. The Alcan Notes comprised a major portion of the $1,375
bridge financing provided by Alcan to the Company as a result of the
reorganization transactions described in note 1 - Background and Basis of
Presentation. The remaining balance of the Alcan Notes of $170 was obtained in
January 2005. The Alcan Notes were duly refinanced with the proceeds of the $1.4
billion 10-year Senior Notes issued in February 2005, discussed below.
In connection with the reorganization transactions described in note 1 -
Background and Basis of Presentation, the Company entered into senior secured
credit facilities providing for aggregate borrowings of up to $1.8 billion.
These facilities consist of a $1.3 billion seven-year senior secured Term Loan B
facility, bearing interest at LIBOR plus 1.75%, all of which was borrowed on
January 10, 2005, and a $500 five-year multi-currency revolving credit facility.
The Term Loan B facility consists of an $825 Term Loan B in the U.S. and a $475
Term Loan B in Canada. The proceeds of the Term Loan B facility were used in
connection with the reorganization transactions, the Company's separation from
Alcan and to pay related fees and expenses.
The Company has entered into interest rate swaps to fix the interest rate on
$310 of the variable rate Term Loan B debt at an effective weighted average
interest rate of 5.5% for periods of up to three years.
On February 3, 2005, Novelis sold $1.4 billion aggregate principal amount of
senior unsecured debt securities (Senior Notes). The Senior Notes, which were
priced at par, bear interest at 7.25% and will mature on February 15, 2015. The
net proceeds of the placement, received on February 3, 2005, were used to repay
the Alcan Notes.
Novelis, incorporated January 6, 2005, is the global leader in aluminum
rolled products and aluminum can recycling, with 37 operating facilities in 12
countries and more than 13,500 dedicated employees. Novelis has the unique
ability to provide its customers with a regional supply of high-end rolled
aluminum throughout Asia, Europe, North America, and South America. Through its
advanced production capabilities, Novelis supplies aluminum sheet and foil to
automotive, transportation, beverage and food packaging, construction,
industrial and printing markets. Please visit http://www.novelis.com for more
information on Novelis.
Statements made in this news release which describe the Company's
intentions, expectations or predictions may be forward-looking statements within
the meaning of securities laws. The Company cautions that, by their nature,
forward-looking statements involve risk and uncertainty and that the Company's
actual results could differ materially from those expressed or implied in such
statements. Important factors which could cause such differences include global
supply and demand conditions for rolled aluminium products, changes in the
relative value of various currencies, demand and pricing within the principal
markets for the Company's products, changes in government regulations,
particularly those affecting environmental, health or safety compliance,
economic developments, relationships with (and financial or operating conditions
of) customers and suppliers, competition from other aluminium rolled products
producers as well as from substitute materials such as steel, glass, plastic and
composite materials, and the level of our indebtedness and ability to generate
cash and other factors relating to the Company's ongoing operations. Reference
should be made to the Company's 2004 annual report on Form 10-K for a summary of
major risk factors.
NOTE TO FINANCIAL MEDIA
Novelis executives will discuss the company's performance during a
conference call today with financial analysts beginning at 8:00 a.m. ET.
Reporters are invited to listen to the call. To access the call, U.S. callers
should dial (800) 561-2601. International callers should dial (617) 614-3518,
passcode for both numbers is 4975 6737. Beginning at 11:00 a.m. ET today, a
replay of the presentation will be available until midnight on Wednesday, May
18, 2005. To access the replay, U.S. callers should dial 888-286-8010,
international callers should call 617-801-6888. The access code for U.S. and
International is 6311 2284.
The conference call will also be webcast on the Novelis Investor Relations
website at http://www.novelis.com. A presentation will be available during the
webcast and a downloadable version will be accessible on the Novelis website.
SOURCE Novelis Inc.
-0- 05/11/2005
/CONTACT: Media: Jennifer Dervin, +1-404-814-4208, or Investor: Holly
Ash, +1-404-814-4212, both of Novelis Inc./
/Web site: http://www.novelis.com