Exhibit 99.1
NOVELIS REPORTS REVISED FIRST QUARTER RESULTS
REGIONAL INCOME INCREASED 14%
ROLLED PRODUCT SHIPMENTS UP 4% IN THE 1ST QUARTER
DEBT POSITION REDUCED BY $70 MILLION
ATLANTA, May 12 /PRNewswire-FirstCall/ -- Novelis Inc. (NYSE, TSX: NVL)
today reported first quarter 2005 net income of $29 million, or earnings per
share (EPS) of $0.39. This is comprised of consolidated net income of $59
million for the period of January 6, the effective date of our spin from Alcan
Inc., to March 31, 2005, and a combined loss of $30 million on mark-to-market
derivatives from January 1 to 5, 2005, prior to our spin from Alcan. Net
income in the carve out statements as a part of Alcan for the first quarter
2004 was $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 decreased by $17
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 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 income of $14 million in the first
quarter of 2005 and included Financial Accounting Standard No. 133 (FAS 133)
mark-to-market gains on derivatives of $14 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 gains 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 47% 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 rate 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 $47
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 from 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% -75 249.3%
Dividends -13 -2 550% 0 N/M
Capital
Expenditures -23 -20 15% -70 67.1%
Free Cash Flow(1) 76 116 -34.5% -145 152.4%
(1) "Free cash flow" consists of cash from operating activities less capital
expenditures and dividends. Dividends include those paid by our less
than wholly-owned subsidiaries to their minority shareholders and
dividends to the common shareholders of Novelis. Management believes
that free cash flow is relevant to investors as it provides a measure of
the cash generated internally that is available for debt service and
other value creation opportunities.
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 reduced its debt position by $70 million to $2,881 million as at
March 31, 2005.
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 $654 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 $65 million increase.
Novelis faces challenges in our first year as an independent company.
Significant changes in currency, energy costs, economies and raw material
costs are uncertainties that are not under our control. The 2005 outlook is
based on information currently available to management.
Attachment A
The following table summarizes the reconciliation of Regional Income to
Income Before Income Taxes and Other Items.
First Quarter Fourth
------------------- Quarter
($ 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 19 49 40
Restructuring, rationalization &
impairment 1 7 (74)
Depreciation & amortization (58) (61) (68)
Interest (44) (19) (19)
Income before income taxes and other
items 62 114 (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 AND COMBINED STATEMENTS OF INCOME (unaudited)
(in millions of US$, except per share amounts)
Three months ended March 31 2005 2004
---------------------------------------------- -------- --------
Sales and operating revenues
- third parties 2,118 1,718
- related parties - 92
2,118 1,810
Costs and expenses
Cost of sales and operating expenses,
excluding depreciation and
amortization noted below
- third parties 1,884 1,505
- related parties - 80
Depreciation and amortization 58 61
Selling, general and administrative expenses 76 60
Research and development expenses 8 10
Interest
- third parties 44 11
- related parties - 8
Other expenses (income) - net
- third parties (14) 4
- related parties - (43)
2,056 1,696
Income before income taxes and other items 62 114
Income taxes 29 43
Income before other items 33 71
Equity income 2 2
Minority interests (6) (4)
Net income 29 69
Earnings per share
Net income per share - basic 0.39 0.93
Net income per share - diluted 0.39 0.92
Dividends per common share 0.09 -
Supplemental information (note 1):
Net income attributable to consolidated
results of Novelis from January 6
to March 31, 2005 - increase to
Retained earnings 59
Net loss attributable to combined results of
Novelis from January 1 to 5, 2005 -
decrease to Owner's net investment (30)
Net income 29
Novelis Inc.
CONSOLIDATED AND COMBINED BALANCE SHEETS (unaudited)
(in millions of US$, except number of shares)
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 $9 in 2004) 33 35
Goodwill 263 256
Total assets 5,667 5,954
LIABILITIES AND SHAREHOLDERS'/INVESTED EQUITY
Current liabilities
Payables and accrued liabilities
- third parties 1,443 859
- related parties 36 401
Short-term borrowings
- third parties 26 229
- related parties - 312
Debt maturing within one year
- third parties 4 1
- related parties - 290
Total current liabilities 1,509 2,092
Debt not maturing within one year
- third parties 2,851 139
- related parties - 2,307
Deferred credits and other liabilities 460 472
Deferred income taxes 179 249
Minority interests 141 140
Shareholders'/Invested equity
Common shares, no par value - unlimited
number of shares authorized;
issued and outstanding: 73,988,932 shares - -
Additional paid-in capital 460 -
Retained earnings 52 -
Accumulated other comprehensive income 15 88
Owner's net investment - 467
527 555
Commitments and contingencies
Total liabilities and shareholders'/
invested equity 5,667 5,954
Novelis Inc.
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS (unaudited)
(in millions of US$)
Three months ended March 31 2005 2004
------------------------------------------------------------ ------------ ------------
OPERATING ACTIVITIES
Net income 29 69
Adjustments to determine cash from operating
activities:
Depreciation and amortization 58 61
Deferred income taxes (21) 19
Equity income (2) (2)
Stock option compensation 1 -
Change in operating working capital,
deferred items and other - net 47 (9)
Cash from operating activities 112 138
FINANCING ACTIVITIES
Proceeds from issuance of new debt
from third parties 2,748 317
Debt repayments to third parties (2,720) -
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)
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 AND COMBINED STATEMENTS OF SHAREHOLDERS'/INVESTED EQUITY
(unaudited)
(in millions of US$, except number of shares which is in thousands)
Common Shares Additional
--------------------- Paid-in Retained
Shares Amount Capital Earnings
--------- --------- ---------- ---------
Balance at December 31, 2004 - - - -
Net income - Q1 2005 - - - 59
Comprehensive loss - - - -
Dividends - - - (7)
Transfer (to)/from
Alcan - net - - - -
Issuance of common stock in
connection with the distribution 73,989 - 460(a) -
Balance at March 31, 2005 73,989 - 460 52
Accumulated
Other Owner's
Comprehensive Net
Income Investment Total
------------- ---------- -------
Balance at December 31, 2004 88 467 555
Net income - Q1 2005 - (30)(b) 29
Comprehensive loss (73) - (73)
Dividends - (7) (14)
Transfer (to)/from Alcan - net - 30 30
Issuance of common stock in
connection with the distribution - (460) -
Balance at March 31, 2005 15 - 527
(a) Represents the amount of Owner's net investment after transfers
(to)/from Alcan - net.
(b) Refer to note 1 - Background and Basis of Presentation.
Novelis Inc.
(in millions of US$)
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.
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 by the end of 2005. These
adjustments, for the most part, will be reflected as changes to shareholders'
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 combined financial results for the period from January 1 to
January 5, 2005 represent the operations and cash flows of the Novelis
entities on a carve-out basis. The unaudited consolidated results as at March
31, 2005 and for the period from January 6 (the date of the spin-off from
Alcan) to March 31, 2005 represent the operations, cash flows and financial
position of the Company as a stand-alone entity. The consolidated and
combined financial statements include the financial results for both of these
periods. 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 unaudited
consolidated results for the period from January 6 to March 31, 2005, with the
exception of mark-to-market losses of $30 on derivative contracts primarily
with Alcan. These mark-to-market losses for the period from January 1 to 5,
2005, were recorded in the unaudited consolidated and combined statements of
income for the three months ended March 31, 2005, and are reflected as a
decrease in Owner's net investment.
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 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.
In certain instances, amounts presented in the unaudited historical
combined financial statements have been adjusted prospectively in the
unaudited consolidated and combined financial statements as at and for the
quarter ended March 31, 2005.
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 (refer to note 3 - Debt Not Maturing Within One Year).
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 January 31, 2005, Novelis announced that it had agreed to sell $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 aluminum
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
aluminum 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- 05/12/2005
/CONTACT: Media, Jennifer Dervin, +1-404-814-4208, or Investors, Holly
Ash, +1-404-814-4212, both of Novelis Inc./
/Web site: http://www.novelis.com