UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
September 30, 2008
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or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission file number:
001-32312
Novelis Inc.
(Exact name of registrant as
specified in its charter)
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Canada
(State or other jurisdiction
of
incorporation or organization)
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98-0442987
(I.R.S. employer
identification number)
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3399 Peachtree Road NE, Suite 1500
Atlanta, Georgia
(Address of principal
executive offices)
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30326
(Zip
Code)
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Telephone:
(404) 814-4200
(Registrants telephone
number, including area code)
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer o
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Accelerated
filer o
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Non-accelerated
filer þ
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Smaller reporting
company o
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(Do not check if a smaller reporting
company)
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
As of October 31, 2008, the registrant had 77,459,658
common shares outstanding. All of the Registrants
outstanding shares were held indirectly by Hindalco Industries
Ltd., the Registrants parent company.
TABLE OF
CONTENTS
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FINANCIAL INFORMATION
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Financial Statements
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Condensed Consolidated Statements of Operations
and Comprehensive Income (Loss) (unaudited) Three Months Ended
September 30, 2008; Three Months Ended September 30,
2007 (Restated); Six Months Ended September 30, 2008;
May 16, 2007 Through September 30, 2007 (Restated);
and April 1, 2007 Through May 15, 2007
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2
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Condensed Consolidated Balance Sheets (unaudited)
As of September 30, 2008 and March 31, 2008
(Restated)
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3
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Condensed Consolidated Statements of Cash Flows
(unaudited) Six Months Ended September 30, 2008;
May 16, 2007 Through September 30, 2007 (Restated);
and April 1, 2007 Through May 15, 2007
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4
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Condensed Consolidated Statement of
Shareholders Equity (unaudited) Six Months Ended
September 30, 2008 (Restated as to opening balance)
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6
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Notes to the Condensed Consolidated Financial
Statements (unaudited)
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7
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Managements Discussion and Analysis of
Financial Condition and Results of Operations
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51
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Quantitative and Qualitative Disclosures About
Market Risk
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90
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Controls and Procedures
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94
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OTHER INFORMATION
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Legal Proceedings
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96
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Exhibits
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98
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EX-10.1 |
EX-31.1 |
EX-31.2 |
EX-32.1 |
EX-32.2 |
1
PART I.
FINANCIAL INFORMATION
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Item 1.
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Financial
Statements
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Three Months
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Six Months
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May 16, 2007
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April 1, 2007
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Ended
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Ended
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Through
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Through
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September 30,
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September 30,
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September 30,
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May 15,
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2008
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2007
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2008
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2007
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2007
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(Restated)
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(Restated)
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Successor
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Successor
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Successor
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Successor
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Predecessor
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Net sales
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$
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2,959
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$
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2,821
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$
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6,062
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$
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4,368
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$
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1,281
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Cost of goods sold (exclusive of depreciation and amortization
shown below)
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2,791
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2,555
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5,622
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3,991
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1,205
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Selling, general and administrative expenses
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89
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88
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173
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130
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95
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Depreciation and amortization
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107
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103
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223
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156
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28
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Research and development expenses
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10
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10
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22
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23
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6
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Interest expense and amortization of debt issuance
costs net
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41
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56
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81
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81
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26
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(Gain) loss on change in fair value of derivative
instruments net
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185
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30
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119
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16
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(20
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Equity in net (income) loss of non-consolidated affiliates
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(2
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(20
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(19
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(1
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Sale transaction fees
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32
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Other (income) expenses net
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10
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(2
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32
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9
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4
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3,231
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2,820
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6,272
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4,387
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1,375
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Income (loss) before provision (benefit) for taxes on income
(loss) and minority interests share
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(272
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1
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(210
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(19
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(94
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Provision (benefit) for taxes on income (loss)
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(169
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20
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(134
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47
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4
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Income (loss) before minority interests share
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(103
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(19
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(76
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(66
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(98
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Minority interests share
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(2
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2
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1
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Net income (loss)
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(103
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(19
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(78
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(64
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(97
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Other comprehensive income (loss):
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Currency translation adjustment
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(73
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27
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(63
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14
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31
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Change in fair value of effective portion of hedges
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(16
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2
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3
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4
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(1
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Postretirement benefit plans:
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Amortization of net actuarial loss
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(1
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Change in pension and other benefits
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2
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2
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Other comprehensive income (loss) before income tax effect
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(87
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29
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(58
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18
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29
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Income tax (expense) benefit related to items of other
comprehensive income (loss)
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6
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2
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(2
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12
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4
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Other comprehensive income (loss) net of tax
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(81
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)
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31
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(60
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)
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30
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33
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Comprehensive income (loss)
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$
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(184
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)
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$
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12
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$
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(138
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)
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$
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(34
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)
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$
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(64
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)
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The accompanying notes are an integral part of these condensed
consolidated financial statements.
2
Novelis
Inc.
(in millions, except number of shares)
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As of
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September 30,
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March 31,
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2008
|
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2008
|
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(Restated)
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Successor
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Successor
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ASSETS
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Current assets
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Cash and cash equivalents
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$
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219
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$
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326
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Accounts receivable (net of allowances of $1 as of
September 30, 2008 and March 31, 2008)
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third parties
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1,347
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1,248
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related parties
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24
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31
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Inventories
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1,413
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1,455
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Prepaid expenses and other current assets
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75
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58
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Current portion of fair value of derivative instruments
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237
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203
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Deferred income tax assets
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186
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125
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Total current assets
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3,501
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3,446
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Property, plant and equipment net
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3,032
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3,357
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Goodwill
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1,864
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1,869
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Intangible assets net
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827
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888
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Investment in and advances to non-consolidated affiliates
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924
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946
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Fair value of derivative instruments net of current
portion
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46
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21
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Deferred income tax assets
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10
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12
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Other long-term assets
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third parties
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91
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102
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related parties
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29
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41
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Total assets
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$
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10,324
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$
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10,682
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LIABILITIES AND SHAREHOLDERS EQUITY
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Current liabilities
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Current portion of long-term debt
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$
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14
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$
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15
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Short-term borrowings
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351
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115
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Accounts payable
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third parties
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1,418
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1,582
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related parties
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57
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55
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Accrued expenses and other current liabilities
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965
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|
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|
850
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Deferred income tax liabilities
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34
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|
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|
39
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|
|
|
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Total current liabilities
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2,839
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2,656
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Long-term debt net of current portion
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2,544
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2,560
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Deferred income tax liabilities
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|
557
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|
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|
701
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Accrued postretirement benefits
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420
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421
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Other long-term liabilities
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|
457
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|
|
|
672
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|
|
|
|
|
|
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|
|
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6,817
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|
|
7,010
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Commitments and contingencies
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Minority interests in equity of consolidated affiliates
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|
122
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|
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|
149
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|
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Shareholders equity
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Common stock, no par value; unlimited number of shares
authorized; 77,459,658 shares issued and outstanding as of
September 30, 2008 and March 31, 2008
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Additional paid-in capital
|
|
|
3,497
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|
|
|
3,497
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Retained earnings (Accumulated deficit)
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|
|
(98
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)
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|
|
(20
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)
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Accumulated other comprehensive income (loss)
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(14
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)
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|
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46
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|
|
|
|
|
|
|
|
|
|
Total shareholders equity
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|
|
3,385
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|
|
|
3,523
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|
|
|
|
|
|
|
|
|
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Total liabilities and shareholders equity
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|
$
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10,324
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|
|
$
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10,682
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|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
Novelis
Inc.
(unaudited)
(in millions)
|
|
|
|
|
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|
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|
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Six Months
|
|
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May 16, 2007
|
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|
|
April 1, 2007
|
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|
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Ended
|
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Through
|
|
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Through
|
|
|
|
September 30,
|
|
|
September,
|
|
|
|
May 15,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
2007
|
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|
|
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(Restated)
|
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Successor
|
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Successor
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Predecessor
|
|
OPERATING ACTIVITIES
|
|
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|
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|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(78
|
)
|
|
$
|
(64
|
)
|
|
|
$
|
(97
|
)
|
Adjustments to determine net cash provided by (used in)
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
223
|
|
|
|
156
|
|
|
|
|
28
|
|
(Gain) loss on change in fair value of derivative
instruments net
|
|
|
119
|
|
|
|
16
|
|
|
|
|
(20
|
)
|
Deferred income taxes
|
|
|
(183
|
)
|
|
|
|
|
|
|
|
(18
|
)
|
Amortization of debt issuance costs
|
|
|
3
|
|
|
|
7
|
|
|
|
|
1
|
|
Write-off and amortization of fair value adjustments
net
|
|
|
(124
|
)
|
|
|
(82
|
)
|
|
|
|
|
|
Foreign exchange remeasurement on non-working capital
items net
|
|
|
17
|
|
|
|
(2
|
)
|
|
|
|
|
|
Gain on reversal of accrued legal claim
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
Provision for uncollectible accounts receivable
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
Equity in net (income) loss of non-consolidated affiliates
|
|
|
|
|
|
|
(19
|
)
|
|
|
|
(1
|
)
|
Dividends from non-consolidated affiliates
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Minority interests share
|
|
|
2
|
|
|
|
(2
|
)
|
|
|
|
(1
|
)
|
Impairment charges on long-lived assets
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
(Gain) loss on sales of property, plant and equipment and
business net
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
third parties
|
|
|
(183
|
)
|
|
|
54
|
|
|
|
|
(21
|
)
|
Inventories
|
|
|
(71
|
)
|
|
|
105
|
|
|
|
|
(76
|
)
|
Prepaid expenses and other current assets
|
|
|
(25
|
)
|
|
|
(2
|
)
|
|
|
|
(7
|
)
|
Other long-term assets
|
|
|
9
|
|
|
|
(2
|
)
|
|
|
|
(1
|
)
|
Accounts payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
third parties
|
|
|
(33
|
)
|
|
|
(124
|
)
|
|
|
|
(62
|
)
|
related parties
|
|
|
9
|
|
|
|
3
|
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
|
|
(74
|
)
|
|
|
(57
|
)
|
|
|
|
42
|
|
Accrued postretirement benefits
|
|
|
22
|
|
|
|
8
|
|
|
|
|
1
|
|
Other long-term liabilities
|
|
|
4
|
|
|
|
7
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(390
|
)
|
|
|
3
|
|
|
|
|
(230
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(70
|
)
|
|
|
(57
|
)
|
|
|
|
(17
|
)
|
Proceeds from sales of property, plant and equipment
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
Changes to investment in and advances to non-consolidated
affiliates
|
|
|
13
|
|
|
|
3
|
|
|
|
|
1
|
|
Proceeds from loans receivable net
related parties
|
|
|
13
|
|
|
|
10
|
|
|
|
|
|
|
Net proceeds from settlement of derivative instruments
|
|
|
94
|
|
|
|
72
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
52
|
|
|
|
29
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
4
Novelis
Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (in millions) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
May 16, 2007
|
|
|
|
April 1, 2007
|
|
|
|
Ended
|
|
|
Through
|
|
|
|
Through
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
May 15,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
2007
|
|
|
|
|
|
|
(Restated)
|
|
|
|
|
|
|
|
Successor
|
|
|
Successor
|
|
|
|
Predecessor
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
|
|
|
|
92
|
|
|
|
|
|
|
Proceeds from issuance of debt
|
|
|
|
|
|
|
960
|
|
|
|
|
150
|
|
Principal repayments
|
|
|
(7
|
)
|
|
|
(905
|
)
|
|
|
|
(1
|
)
|
Short-term borrowings net
|
|
|
263
|
|
|
|
(65
|
)
|
|
|
|
60
|
|
Dividends minority interests
|
|
|
(5
|
)
|
|
|
(1
|
)
|
|
|
|
(7
|
)
|
Debt issuance costs
|
|
|
|
|
|
|
(35
|
)
|
|
|
|
(2
|
)
|
Proceeds from the exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
251
|
|
|
|
46
|
|
|
|
|
201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(87
|
)
|
|
|
78
|
|
|
|
|
(27
|
)
|
Effect of exchange rate changes on cash balances held in
foreign currencies
|
|
|
(20
|
)
|
|
|
1
|
|
|
|
|
1
|
|
Cash and cash equivalents beginning of period
|
|
|
326
|
|
|
|
102
|
|
|
|
|
128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents end of period
|
|
$
|
219
|
|
|
$
|
181
|
|
|
|
$
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
82
|
|
|
$
|
102
|
|
|
|
$
|
13
|
|
Income taxes paid
|
|
$
|
67
|
|
|
$
|
31
|
|
|
|
$
|
9
|
|
Supplemental schedule of non-cash investing and financing
activities related to the Acquisition of Novelis Common Stock
(See Note 1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
|
|
|
$
|
(1,244
|
)
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
$
|
(1,866
|
)
|
|
|
|
|
|
Intangible assets
|
|
|
|
|
|
$
|
(859
|
)
|
|
|
|
|
|
Investment in and advances to non-consolidated affiliates
|
|
|
|
|
|
$
|
(610
|
)
|
|
|
|
|
|
Debt
|
|
|
|
|
|
$
|
66
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
Novelis
Inc.
CONDENSED
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
(unaudited)
(in millions, except number of shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Earnings
|
|
|
Other
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
(Accumulated
|
|
|
Comprehensive
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit)
|
|
|
Income (Loss)
|
|
|
Total
|
|
|
Successor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2008 (Restated)
|
|
|
77,459,658
|
|
|
$
|
|
|
|
$
|
3,497
|
|
|
$
|
(20
|
)
|
|
$
|
46
|
|
|
$
|
3,523
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(78
|
)
|
|
|
|
|
|
|
(78
|
)
|
Currency translation adjustment net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(65
|
)
|
|
|
(65
|
)
|
Change in fair value of effective portion of hedges
net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
2
|
|
Postretirement benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in pension and other benefits net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2008
|
|
|
77,459,658
|
|
|
$
|
|
|
|
$
|
3,497
|
|
|
$
|
(98
|
)
|
|
$
|
(14
|
)
|
|
$
|
3,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
6
Novelis
Inc.
FINANCIAL
STATEMENTS (unaudited)
|
|
1.
|
Business
and Summary of Significant Accounting Policies
|
References herein to Novelis, the
Company, we, our, or
us refer to Novelis Inc. and its subsidiaries unless
the context specifically indicates otherwise. References herein
to Hindalco refer to Hindalco Industries Limited. In
October 2007, the Rio Tinto Group purchased all the outstanding
shares of Alcan, Inc. References herein to Alcan
refer to Rio Tinto Alcan Inc.
Description
of Business and Basis of Presentation
Novelis Inc., formed in Canada on September 21, 2004, and
its subsidiaries, is the worlds leading aluminum rolled
products producer based on shipment volume. We produce 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. As of
September 30, 2008, we had operations on four continents:
North America; Europe; Asia and South America, through 32
operating plants, one research facility and several
market-focused innovation centers in 11 countries. In addition
to aluminum rolled products plants, our South American
businesses include bauxite mining, alumina refining, primary
aluminum smelting and power generation facilities that are
integrated with our rolling plants in Brazil.
The accompanying unaudited condensed consolidated financial
statements should be read in conjunction with our audited
consolidated financial statements and accompanying notes in our
Annual Report on
Form 10-K/A
for the year ended March 31, 2008 filed with the United
States Securities and Exchange Commission (SEC) on
August 11, 2008. The accompanying unaudited condensed
consolidated financial statements have been prepared pursuant to
SEC
Rule 10-01
of
Regulation S-X.
Certain information and note disclosures normally included in
annual financial statements prepared in accordance with
generally accepted accounting principles in the United States of
America (GAAP) have been condensed or omitted pursuant to those
rules and regulations, although we believe that the disclosures
made are adequate to make the information not misleading.
Acquisition
of Novelis Common Stock and Predecessor and Successor
Reporting
On May 15, 2007, the Company was acquired by Hindalco
through its indirect wholly-owned subsidiary pursuant to a plan
of arrangement (the Arrangement) at a price of $44.93 per share.
The aggregate purchase price for all of the Companys
common shares was $3.4 billion and Hindalco also assumed
$2.8 billion of Novelis debt for a total transaction
value of $6.2 billion. Subsequent to completion of the
Arrangement on May 15, 2007, all of our common shares were
indirectly held by Hindalco.
Our acquisition by Hindalco was recorded in accordance with
Staff Accounting Bulletin No. 103, Push Down Basis
of Accounting Required in Certain Limited Circumstances. In
the accompanying condensed consolidated balance sheets, the
consideration and related costs paid by Hindalco in connection
with the acquisition have been pushed down to us and
have been allocated to the assets acquired and liabilities
assumed in accordance with Financial Accounting Standards Board
(FASB) Statement No. 141, Business Combinations. Due
to the impact of push down accounting, the Companys
condensed consolidated financial statements and certain note
presentations for the six months ended September 30, 2007
are presented in two distinct periods to indicate the
application of two different bases of accounting between the
periods presented: (1) the period up to, and including, the
acquisition date (April 1, 2007 through May 15, 2007,
labeled Predecessor) and (2) the period after
that date (May 16, 2007 through September 30, 2007,
labeled Successor). The accompanying condensed
consolidated financial statements include a black line division
which indicates that the Predecessor and Successor reporting
entities shown are not comparable.
7
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
Interim
Reporting
The unaudited results of operations for the interim periods
shown in these condensed consolidated financial statements,
including the periods shown as Predecessor and Successor, are
not necessarily indicative of operating results for the entire
fiscal year. In the opinion of management, the accompanying
unaudited condensed consolidated financial statements recognize
all adjustments of a normal recurring nature considered
necessary to fairly state our consolidated financial position as
of September 30, 2008 and March 31, 2008 (as
restated); the consolidated results of our operations for
(1) the three months ended September 30, 2008,
(2) the six months ended September 30, 2008,
(3) the three months ended September 30, 2007 (as
restated), and (4) the periods from May 16, 2007
through September 30, 2007 (as restated) and (5) from
April 1, 2007 through May 15, 2007; our consolidated
cash flows for (1) the six months ended September 30,
2008, and (2) the periods from May 16, 2007 through
September 30, 2007 (as restated) and from April 1,
2007 through May 15, 2007; and changes in our consolidated
shareholders equity for the six months ended
September 30, 2008 (restated as to opening balance).
Reclassifications
Certain reclassifications of the prior period amounts and
presentation have been made to conform to the presentation
adopted for the current periods. The following reclassifications
and presentation changes were made to the prior periods
condensed consolidated statements of cash flows to conform to
the current period presentation: (a) certain amounts
previously presented in Accounts payable third
parties were reclassified to Foreign exchange
remeasurement on non-working capital items net.
These reclassifications have no effect on total assets, total
shareholders equity, net income (loss) or total cash flows
as previously presented.
Dividends
Our board of directors has declared no dividends since
October 26, 2006. Future dividends are at the discretion of
the board of directors and will depend on, among other things,
our financial resources, cash flows generated by our business,
our cash requirements, restrictions under the instruments
governing our indebtedness, being in compliance with the
appropriate indentures and covenants under the instruments that
govern our indebtedness that would allow us to legally pay
dividends and other relevant factors.
Recently
Adopted Accounting Standards
The following accounting standards have been adopted by us
during the six months ended September 30, 2008.
On April 1, 2008, we adopted FASB Statement No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities including an amendment of FASB Statement
No. 115 (FASB Statement No. 159). FASB Statement
No. 159 permits entities to choose to measure financial
instruments and certain other assets and liabilities at fair
value on an
instrument-by-instrument
basis (the fair value option) with changes in fair
value reported in earnings each reporting period. The fair value
option enables some companies to reduce the volatility in
reported earnings caused by measuring related assets and
liabilities differently without applying the complex hedge
accounting requirements under FASB Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities
(FASB Statement No. 133), to achieve similar results.
We already record our derivative contracts and hedging
activities at fair value in accordance with FASB Statement
No. 133. We did not elect the fair value option for any
other financial instruments or certain other financial assets
and liabilities that were not previously required to be measured
at fair value.
On April 1, 2008, we adopted FASB Statement No. 157,
Fair Value Measurements (FASB Statement No. 157), as
it relates to financial assets and financial liabilities. In
February 2008, the FASB issued FASB
8
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
Staff Position
No. FAS 157-2,
Effective Date of FASB Statement No. 157, which
delayed our required adoption date of FASB Statement
No. 157 for all nonfinancial assets and nonfinancial
liabilities, except those that are recognized or disclosed at
fair value in the financial statements on at least an annual
basis, until April 1, 2009. Also in February 2008, the FASB
issued FASB Staff Position
No. FAS 157-1,
Application of FASB Statement No. 157 to FASB Statement
No. 13 and Other Accounting Pronouncements That Address
Fair Value Measurements for Purposes of Lease Classification or
Measurement under Statement 13, which states that FASB
Statement No. 13, Accounting for Leases, and other
accounting pronouncements that address fair value measurements
for purposes of lease classification or measurement under FASB
Statement No. 13 are excluded from the provisions of FASB
Statement No. 157, except for assets and liabilities
related to leases assumed in a business combination that are
required to be measured at fair value under FASB Statement
No. 141 or FASB Statement No. 141 (Revised),
Business Combinations. See Note 13 Fair
Value Measurements regarding our adoption of this standard.
On April 1, 2008, we adopted FASB Staff Position (FSP)
No. FIN 39-1,
Amendment of FASB Interpretation No. 39, (FSP
FIN 39-1).
FSP
FIN 39-1
amends FASB Statement No. 39, Offsetting of Amounts
Related to Certain Contracts, by permitting entities that
enter into master netting arrangements as part of their
derivative transactions to offset in their financial statements
net derivative positions against the fair value of amounts (or
amounts that approximate fair value) recognized for the right to
reclaim cash collateral or the obligation to return cash
collateral under those arrangements. Our adoption of this
standard did not have a material impact on our consolidated
financial position, results of operations and cash flows.
Recently
Issued Accounting Standards
The following new accounting standards have been issued, but
have not yet been adopted by us as of September 30, 2008,
as adoption is not required until future reporting periods.
In May 2008, the FASB issued Statement No. 162, The
Hierarchy of Generally Accepted Accounting Principles (FASB
Statement No. 162). FASB Statement No. 162 defines the
order in which accounting principles that are generally accepted
should be followed. FASB Statement No. 162 is effective
60 days following the SECs approval of the Public
Company Accounting Oversight Board (PCAOB) amendments to AU
Section 411, The Meaning of Present Fairly in Conformity
with Generally Accepted Accounting Principles. We have not
yet commenced evaluating the potential impact, if any, of the
adoption of FASB Statement No. 162 on our consolidated
financial position, results of operations and cash flows.
In April 2008, the FASB issued Staff Position
No. FAS 142-3,
Determination of Useful Life of Intangible Assets, (FSP
FAS 142-3).
FSP
FAS 142-3
amends the factors that should be considered in developing the
renewal or extension assumptions used to determine the useful
life of a recognized intangible asset under FASB Statement
No. 142, Goodwill and Other Intangible Assets. FSP
FAS 142-3
also requires expanded disclosure related to the determination
of intangible asset useful lives. FSP
FAS 142-3
is effective for fiscal years beginning after December 15,
2008. Earlier adoption is prohibited. We have not yet commenced
evaluating the potential impact, if any, of the adoption of FSP
FAS 142-3
on our consolidated financial position, results of operations
and cash flows.
In March 2008, the FASB issued Statement No. 161,
Disclosures about Derivative Instruments and Hedging
Activities (FASB Statement No. 161), an amendment of
FASB Statement No. 133. FASB Statement No. 161 changes
the disclosure requirements for derivative instruments and
hedging activities. Entities are required to provide enhanced
disclosures about (i) how and why an entity uses derivative
instruments, (ii) how derivative instruments and related
hedged items are accounted for under FASB Statement No. 133
and its related interpretations and (iii) how derivative
instruments and related hedged items affect an entitys
financial position, results of operations and cash flows. FASB
Statement No. 161 is effective for financial statements
issued for fiscal years and interim periods beginning after
November 15, 2008, with early adoption permitted.
9
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
FASB Statement No. 161 permits, but does not require,
comparative disclosures for earlier periods upon initial
adoption. As FASB Statement No. 161 only requires enhanced
disclosures, this standard will have no impact on our
consolidated financial position, results of operations and cash
flows.
In December 2007, the FASB issued Statement No. 141
(Revised), Business Combinations, (FASB Statement
No. 141(R)) which establishes principles and requirements
for how the acquirer in a business combination
(i) recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree, (ii) recognizes
and measures the goodwill acquired in the business combination
or a gain from a bargain purchase, and (iii) determines
what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the
business combination. FASB Statement No. 141(R) also
requires acquirers to estimate the acquisition-date fair value
of any contingent consideration and to recognize any subsequent
changes in the fair value of contingent consideration in
earnings. We will be required to apply this new standard
prospectively to business combinations for which the acquisition
date is on or after the beginning of the annual reporting period
beginning on or after December 15, 2008, with the exception
of the accounting for valuation allowances on deferred taxes and
acquired tax contingencies. FASB Statement No. 141(R)
amends certain provisions of FASB Statement No. 109,
Accounting for Income Taxes, such that adjustments made to
valuation allowances on deferred taxes and acquired tax
contingencies associated with acquisitions that closed prior to
the effective date of FASB Statement No. 141(R) would also
apply the provisions of FASB Statement No. 141(R). Early
adoption is prohibited. We are currently evaluating the effects
that FASB Statement No. 141(R) may have on our consolidated
financial position, results of operations and cash flows.
In December 2007, the FASB issued Statement No. 160,
Noncontrolling Interests in Consolidated Financial Statements
(FASB Statement No. 160), which establishes accounting
and reporting standards that require: (i) the ownership
interest in subsidiaries held by parties other than the parent
to be clearly identified and presented in the consolidated
balance sheet within shareholders equity, but separate
from the parents equity; (ii) the amount of
consolidated net income attributable to the parent and the
noncontrolling interest to be clearly identified and presented
on the face of the consolidated statement of operations and
(iii) changes in a parents ownership interest while
the parent retains its controlling financial interest in its
subsidiary to be accounted for consistently. FASB Statement
No. 160 applies to fiscal years beginning after
December 15, 2008. Earlier adoption is prohibited. We have
not yet commenced evaluating the potential impact, if any, of
the adoption of FASB Statement No. 160 on our consolidated
financial position, results of operations and cash flows.
We have determined that all other recently issued accounting
standards will not have a material impact on our consolidated
financial position, results of operations or cash flows, or do
not apply to our operations.
|
|
2.
|
Restatement
of Financial Statements
|
We have restated our consolidated financial statements as of
March 31, 2008 and for the period from May 16, 2007
through March 31, 2008. This restatement corrects non-cash
errors relating to our application of purchase accounting
associated with an equity method investment which led to a
misstatement of our provision for income taxes during the period
we were finalizing our purchase accounting. We also corrected
other miscellaneous adjustments that were deemed to be not
material by management, either individually or in the aggregate.
These adjustments do not have an impact on our compliance with
the financial covenants under our 7.25% Senior Notes or
under our New Senior Secured Credit Facilities (see
Note 8 Debt). See our Annual Report on
Form 10-K/A
filed with the SEC on August 11, 2008 for details of these
corrections, including the effects of the restatement on our
March 31, 2008 balance sheet. Items in the accompanying
condensed consolidated financial statements and related notes
that have been restated are marked accordingly.
10
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
The following tables highlight the financial statement effects
related to the above corrections for the period from
May 16, 2007 through September 30, 2007.
Our condensed consolidated statement of operations and
comprehensive income (loss) for the three months ended
September 30, 2007 is restated as follows (in millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
September 30, 2007
|
|
|
|
As Previously
|
|
|
|
|
|
As
|
|
|
|
Reported
|
|
|
Restatements
|
|
|
Restated
|
|
|
|
Successor
|
|
|
|
|
|
Successor
|
|
|
Net sales
|
|
$
|
2,821
|
|
|
$
|
|
|
|
$
|
2,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold (exclusive of depreciation and amortization
shown below)
|
|
|
2,555
|
|
|
|
|
|
|
|
2,555
|
|
Selling, general and administrative expenses
|
|
|
88
|
|
|
|
|
|
|
|
88
|
|
Depreciation and amortization
|
|
|
102
|
|
|
|
1
|
|
|
|
103
|
|
Research and development expenses
|
|
|
10
|
|
|
|
|
|
|
|
10
|
|
Interest expense and amortization of debt issuance
costs net
|
|
|
56
|
|
|
|
|
|
|
|
56
|
|
(Gain) loss on change in fair value of derivative
instruments net
|
|
|
36
|
|
|
|
(6
|
)
|
|
|
30
|
|
Equity in net (income) loss of non-consolidated affiliates
|
|
|
4
|
|
|
|
(24
|
)
|
|
|
(20
|
)
|
Other (income) expenses net
|
|
|
(7
|
)
|
|
|
5
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,844
|
|
|
|
(24
|
)
|
|
|
2,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision (benefit) for taxes on income
(loss) and minority interests share
|
|
|
(23
|
)
|
|
|
24
|
|
|
|
1
|
|
Provision (benefit) for taxes on income (loss)
|
|
|
(36
|
)
|
|
|
56
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before minority interests share
|
|
|
13
|
|
|
|
(32
|
)
|
|
|
(19
|
)
|
Minority interests share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
13
|
|
|
|
(32
|
)
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustment
|
|
|
27
|
|
|
|
|
|
|
|
27
|
|
Change in fair value of effective portion of hedges
net
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before income tax effect
|
|
|
29
|
|
|
|
|
|
|
|
29
|
|
Income tax (expense) benefit related to items of other
comprehensive income (loss)
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) net of tax
|
|
|
31
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
$
|
44
|
|
|
$
|
(32
|
)
|
|
$
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
Our condensed consolidated statement of operations and
comprehensive income (loss) for the period from May 16,
2007 through September 30, 2007 is restated as follows (in
millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 16, 2007
|
|
|
|
Through
|
|
|
|
September 30, 2007
|
|
|
|
As Previously
|
|
|
|
|
|
As
|
|
|
|
Reported
|
|
|
Restatements
|
|
|
Restated
|
|
|
|
Successor
|
|
|
|
|
|
Successor
|
|
|
Net sales
|
|
$
|
4,368
|
|
|
$
|
|
|
|
$
|
4,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold (exclusive of depreciation and amortization
shown below)
|
|
|
3,991
|
|
|
|
|
|
|
|
3,991
|
|
Selling, general and administrative expenses
|
|
|
130
|
|
|
|
|
|
|
|
130
|
|
Depreciation and amortization
|
|
|
155
|
|
|
|
1
|
|
|
|
156
|
|
Research and development expenses
|
|
|
23
|
|
|
|
|
|
|
|
23
|
|
Interest expense and amortization of debt issuance
costs net
|
|
|
81
|
|
|
|
|
|
|
|
81
|
|
(Gain) loss on change in fair value of derivative
instruments net
|
|
|
22
|
|
|
|
(6
|
)
|
|
|
16
|
|
Equity in net (income) loss of non-consolidated affiliates
|
|
|
5
|
|
|
|
(24
|
)
|
|
|
(19
|
)
|
Other (income) expenses net
|
|
|
4
|
|
|
|
5
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,411
|
|
|
|
(24
|
)
|
|
|
4,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision (benefit) for taxes on income
(loss) and minority interests share
|
|
|
(43
|
)
|
|
|
24
|
|
|
|
(19
|
)
|
Provision (benefit) for taxes on income (loss)
|
|
|
|
|
|
|
47
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before minority interests share
|
|
|
(43
|
)
|
|
|
(23
|
)
|
|
|
(66
|
)
|
Minority interests share
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(41
|
)
|
|
|
(23
|
)
|
|
|
(64
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustment
|
|
|
14
|
|
|
|
|
|
|
|
14
|
|
Change in fair value of effective portion of hedges
net
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before income tax effect
|
|
|
18
|
|
|
|
|
|
|
|
18
|
|
Income tax (expense) benefit related to items of other
comprehensive income (loss)
|
|
|
12
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) net of tax
|
|
|
30
|
|
|
|
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
$
|
(11
|
)
|
|
$
|
(23
|
)
|
|
$
|
(34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
Our condensed consolidated statement of cash flows for the
period from May 16, 2007 through September 30, 2007 is
restated as follows (in millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 16, 2007
|
|
|
|
Through
|
|
|
|
September 30, 2007
|
|
|
|
As Previously
|
|
|
|
|
|
As
|
|
|
|
Reported
|
|
|
Restatements
|
|
|
Restated
|
|
|
|
Successor
|
|
|
|
|
|
Successor
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(41
|
)
|
|
$
|
(23
|
)
|
|
$
|
(64
|
)
|
Adjustments to determine net cash provided by (used in)
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
155
|
|
|
|
1
|
|
|
|
156
|
|
(Gain) loss on change in fair value of derivative
instruments net
|
|
|
22
|
|
|
|
(6
|
)
|
|
|
16
|
|
Deferred income taxes
|
|
|
(46
|
)
|
|
|
46
|
|
|
|
|
|
Amortization of debt issuance costs
|
|
|
7
|
|
|
|
|
|
|
|
7
|
|
Write-off and amortization of fair value adjustments
net
|
|
|
(82
|
)
|
|
|
|
|
|
|
(82
|
)
|
Foreign exchange remeasurement on non-working capital
items net
|
|
|
(2
|
)
|
|
|
|
|
|
|
(2
|
)
|
Provision for uncollectible accounts receivable
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Equity in net (income) loss of non-consolidated affiliates
|
|
|
5
|
|
|
|
(24
|
)
|
|
|
(19
|
)
|
Minority interests share
|
|
|
(2
|
)
|
|
|
|
|
|
|
(2
|
)
|
Changes in assets and liabilities (net of effects from
acquisitions and divestitures):
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable third parties
|
|
|
54
|
|
|
|
|
|
|
|
54
|
|
Inventories
|
|
|
105
|
|
|
|
|
|
|
|
105
|
|
Prepaid expenses and other current assets
|
|
|
(2
|
)
|
|
|
|
|
|
|
(2
|
)
|
Other long-term assets
|
|
|
(2
|
)
|
|
|
|
|
|
|
(2
|
)
|
Accounts payable third parties
|
|
|
(124
|
)
|
|
|
|
|
|
|
(124
|
)
|
Accounts payable related parties
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
Accrued expenses and other current liabilities
|
|
|
(57
|
)
|
|
|
|
|
|
|
(57
|
)
|
Accrued postretirement benefits
|
|
|
8
|
|
|
|
|
|
|
|
8
|
|
Other long-term liabilities
|
|
|
7
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
9
|
|
|
|
(6
|
)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(57
|
)
|
|
|
|
|
|
|
(57
|
)
|
Proceeds from sales of assets
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Changes to investment in and advances to non-consolidated
affiliates
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
Proceeds from loans receivable net
related parties
|
|
|
10
|
|
|
|
|
|
|
|
10
|
|
Net proceeds from settlement of derivative instruments
|
|
|
66
|
|
|
|
6
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
23
|
|
|
|
6
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
92
|
|
|
|
|
|
|
|
92
|
|
Proceeds from issuance of debt
|
|
|
960
|
|
|
|
|
|
|
|
960
|
|
Principal repayments
|
|
|
(905
|
)
|
|
|
|
|
|
|
(905
|
)
|
Short-term borrowings net
|
|
|
(65
|
)
|
|
|
|
|
|
|
(65
|
)
|
Dividends minority interests
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
Debt issuance costs
|
|
|
(35
|
)
|
|
|
|
|
|
|
(35
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
46
|
|
|
|
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
78
|
|
|
|
|
|
|
|
78
|
|
Effect of exchange rate changes on cash balances held in
foreign currencies
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Cash and cash equivalents beginning of period
|
|
|
102
|
|
|
|
|
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents end of period
|
|
$
|
181
|
|
|
$
|
|
|
|
$
|
181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
|
|
3.
|
Restructuring
Programs
|
The following table summarizes the activity in our restructuring
reserves (in millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Exit
|
|
|
|
|
|
|
Severance Reserves
|
|
|
Related Reserves
|
|
|
Total
|
|
|
|
|
|
|
North
|
|
|
|
|
|
|
|
|
North
|
|
|
|
|
|
Restructuring
|
|
|
|
Europe
|
|
|
America
|
|
|
Total
|
|
|
Europe
|
|
|
America
|
|
|
Total
|
|
|
Reserves
|
|
|
Successor:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2008
|
|
$
|
4
|
|
|
$
|
3
|
|
|
$
|
7
|
|
|
$
|
16
|
|
|
$
|
1
|
|
|
$
|
17
|
|
|
$
|
24
|
|
Provisions (recoveries) net
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
Cash payments
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
(2
|
)
|
Adjustments other
|
|
|
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2008
|
|
|
3
|
|
|
|
4
|
|
|
|
7
|
|
|
|
15
|
|
|
|
1
|
|
|
|
16
|
|
|
|
23
|
|
Cash payments
|
|
|
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
(4
|
)
|
Adjustments other
|
|
|
(2
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2008
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
12
|
|
|
$
|
1
|
|
|
$
|
13
|
|
|
$
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories consist of the following (in millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
|
|
September 30, 2008
|
|
|
March 31, 2008
|
|
|
|
|
|
|
Successor
|
|
|
Successor
|
|
|
|
|
|
Finished goods
|
|
$
|
330
|
|
|
$
|
357
|
|
|
|
|
|
Work in process
|
|
|
570
|
|
|
|
638
|
|
|
|
|
|
Raw materials
|
|
|
428
|
|
|
|
386
|
|
|
|
|
|
Supplies
|
|
|
87
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,415
|
|
|
|
1,456
|
|
|
|
|
|
Allowances
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
$
|
1,413
|
|
|
$
|
1,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
|
|
5.
|
Property,
Plant and Equipment
|
Property, plant and equipment net, consists of the
following (in millions).
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
September 30, 2008
|
|
|
March 31, 2008
|
|
|
|
|
|
|
(Restated)
|
|
|
|
Successor
|
|
|
Successor
|
|
|
Land and property rights
|
|
$
|
235
|
|
|
$
|
258
|
|
Buildings
|
|
|
805
|
|
|
|
826
|
|
Machinery and equipment
|
|
|
2,431
|
|
|
|
2,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,471
|
|
|
|
3,544
|
|
Accumulated depreciation and amortization
|
|
|
(518
|
)
|
|
|
(331
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
2,953
|
|
|
|
3,213
|
|
Construction in progress
|
|
|
79
|
|
|
|
144
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment net
|
|
$
|
3,032
|
|
|
$
|
3,357
|
|
|
|
|
|
|
|
|
|
|
Total depreciation expense is shown in the table below (in
millions). We capitalized no material amounts of interest on
construction projects related to property, plant and equipment
for the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
Six Months
|
|
May 16, 2007
|
|
|
April 1, 2007
|
|
|
Ended
|
|
Ended
|
|
Through
|
|
|
Through
|
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
|
May 15,
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
2007
|
|
|
|
|
(Restated)
|
|
|
|
(Restated)
|
|
|
|
|
|
Successor
|
|
Successor
|
|
Successor
|
|
Successor
|
|
|
Predecessor
|
Depreciation expense related to property, plant and equipment
|
|
$
|
97
|
|
|
$
|
93
|
|
|
$
|
203
|
|
|
$
|
142
|
|
|
|
$
|
28
|
|
The components of amortization expense related to intangible
assets are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
May 16, 2007
|
|
|
|
April 1, 2007
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Through
|
|
|
|
Through
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
May 15,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
2007
|
|
|
|
Successor
|
|
|
Successor
|
|
|
Successor
|
|
|
Successor
|
|
|
|
Predecessor
|
|
Total Amortization expense related to intangible assets
|
|
$
|
15
|
|
|
$
|
15
|
|
|
$
|
30
|
|
|
$
|
22
|
|
|
|
$
|
|
|
Less: Amortization expense related to intangible assets included
in Cost of goods sold(A)
|
|
|
(5
|
)
|
|
|
(5
|
)
|
|
|
(10
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense related to intangible assets included in
Depreciation and amortization
|
|
$
|
10
|
|
|
$
|
10
|
|
|
$
|
20
|
|
|
$
|
14
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
|
Relates to amortization of favorable energy and other supply
contracts. |
15
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
6. Investment
in and Advances to Non-Consolidated Affiliates and Related Party
Transactions
The following table summarizes the ownership structure and our
ownership percentage of the non-consolidated affiliates in which
we have an investment as of September 30, 2008, and which
we account for using the equity method. We have no material
investments in affiliates that we account for using the cost
method.
|
|
|
|
|
|
|
|
|
|
|
Ownership
|
|
Affiliate Name
|
|
Ownership Structure
|
|
Percentage
|
|
|
Aluminium Norf GmbH
|
|
Corporation Unincorporated Joint
|
|
|
50
|
%
|
Consorcio Candonga
|
|
Venture Limited Liability
|
|
|
50
|
%
|
MiniMRF LLC
|
|
Company
|
|
|
50
|
%
|
Deutsche Aluminium Verpackung Recycling GmbH
|
|
Corporation
|
|
|
30
|
%
|
France Aluminium Recyclage S.A.
|
|
Public Limited Company
|
|
|
20
|
%
|
The following table summarizes the condensed results of
operations of our equity method affiliates (on a 100% basis, in
millions) on a historical basis of accounting. These results do
not include the incremental depreciation and amortization
expense that we record in our equity method accounting, which
arises as a result of the amortization of fair value adjustments
we made to our investments in non-consolidated affiliates due to
the Arrangement. For the three and six months ended
September 30, 2008, we recorded $9 million and
$18 million, respectively, for the incremental depreciation
and amortization expense, net of tax, as part of our equity
method accounting for these investments. For the three months
ended September 30, 2007, we recorded incremental
depreciation and amortization expense of $8 million, which
was more than offset by $24 million of tax benefits
associated with this amortization and a statutory tax rate
change, as part of our equity method accounting for these
investments. For the period from May 16, 2007 through
September 30, 2007, we recorded incremental depreciation
and amortization expense of $11 million, which was more
than offset by $24 million of tax benefits associated with
this amortization and a statutory tax rate change, as part of
our equity method accounting for these investments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
May 16, 2007
|
|
|
April 1, 2007
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Through
|
|
|
Through
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
May 15,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2007
|
|
|
Net sales
|
|
$
|
167
|
|
|
$
|
138
|
|
|
$
|
324
|
|
|
$
|
223
|
|
|
$
|
45
|
|
Costs, expenses and provisions for taxes on income
|
|
|
146
|
|
|
|
130
|
|
|
|
288
|
|
|
|
211
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
21
|
|
|
$
|
8
|
|
|
$
|
36
|
|
|
$
|
12
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in the accompanying condensed consolidated financial
statements are transactions and balances arising from business
we conduct with these non-consolidated affiliates, which we
classify as related party transactions and balances. We earned
less than $1 million of interest income on a loan due from
Aluminium
16
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
Norf GmbH during each of the periods presented in the table
below. The following table describes the nature and amounts of
significant transactions that we had with related parties (in
millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
May 16, 2007
|
|
|
|
April 1, 2007
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Through
|
|
|
|
Through
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
May 15,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
2007
|
|
|
|
Successor
|
|
|
Successor
|
|
|
Successor
|
|
|
Successor
|
|
|
|
Predecessor
|
|
Purchases of tolling services and electricity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aluminium Norf GmbH(A)
|
|
$
|
74
|
|
|
$
|
66
|
|
|
$
|
147
|
|
|
$
|
106
|
|
|
|
$
|
21
|
|
Consorcio Candonga(B)
|
|
|
10
|
|
|
|
3
|
|
|
|
13
|
|
|
|
6
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchases from related parties
|
|
$
|
84
|
|
|
$
|
69
|
|
|
$
|
160
|
|
|
$
|
112
|
|
|
|
$
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. |
The following table describes the period-end account balances
that we have with these non-consolidated affiliates, shown as
related party balances in the accompanying condensed
consolidated balance sheets (in millions). We have no other
material related party balances.
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
September 30, 2008
|
|
|
March 31, 2008
|
|
|
|
Successor
|
|
|
Successor
|
|
|
Accounts receivable(A)
|
|
$
|
24
|
|
|
$
|
31
|
|
Other long-term receivables(A)
|
|
$
|
29
|
|
|
$
|
41
|
|
Accounts payable(B)
|
|
$
|
57
|
|
|
$
|
55
|
|
|
|
|
(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
|
Accrued expenses and other current liabilities are comprised of
the following (in millions).
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
September 30, 2008
|
|
|
March 31, 2008
|
|
|
|
Successor
|
|
|
Successor
|
|
|
Accrued compensation and benefits
|
|
$
|
122
|
|
|
$
|
141
|
|
Accrued settlement of legal claim
|
|
|
|
|
|
|
39
|
|
Accrued interest payable
|
|
|
18
|
|
|
|
15
|
|
Accrued income taxes
|
|
|
3
|
|
|
|
35
|
|
Current portion of fair value of unfavorable sales contracts
|
|
|
225
|
|
|
|
242
|
|
Current portion of fair value of derivative instruments
|
|
|
385
|
|
|
|
148
|
|
Other current liabilities
|
|
|
212
|
|
|
|
230
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
|
$
|
965
|
|
|
$
|
850
|
|
|
|
|
|
|
|
|
|
|
17
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
Debt consists of the following (in millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
|
|
September 30, 2008
|
|
|
March 31, 2008
|
|
|
|
|
|
|
|
|
|
Unamortized
|
|
|
|
|
|
|
|
|
Unamortized
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
Fair Value
|
|
|
Carrying
|
|
|
|
|
|
Fair Value
|
|
|
Carrying
|
|
|
|
Rates(A)
|
|
|
Principal
|
|
|
Adjustments(B)
|
|
|
Value
|
|
|
Principal
|
|
|
Adjustments(B)
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
|
|
Novelis Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.25% Senior Notes, due February 2015
|
|
|
7.25
|
%
|
|
$
|
1,399
|
|
|
$
|
63
|
|
|
$
|
1,462
|
|
|
$
|
1,399
|
|
|
$
|
67
|
|
|
$
|
1,466
|
|
Floating rate Term Loan facility, due July 2014
|
|
|
5.88
|
%
|
|
|
296
|
|
|
|
|
|
|
|
296
|
|
|
|
298
|
|
|
|
|
|
|
|
298
|
|
Novelis Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating rate Term Loan facility, due July 2014
|
|
|
5.88
|
%(C)
|
|
|
652
|
|
|
|
|
|
|
|
652
|
|
|
|
655
|
|
|
|
|
|
|
|
655
|
|
Novelis Switzerland S.A.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease obligation, due January 2020 (Swiss francs (CHF)
52 million)
|
|
|
7.50
|
%
|
|
|
47
|
|
|
|
(3
|
)
|
|
|
44
|
|
|
|
54
|
|
|
|
(4
|
)
|
|
|
50
|
|
Capital lease obligation, due August 2011 (CHF 3 million)
|
|
|
2.49
|
%
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
Novelis Korea Limited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank loan, due October 2010
|
|
|
5.44
|
%
|
|
|
100
|
|
|
|
|
|
|
|
100
|
|
|
|
100
|
|
|
|
|
|
|
|
100
|
|
Bank loans, due September 2010 through June 2011 (Korean won
(KRW) 400 million)
|
|
|
3.50
|
%(D)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other debt, due April 2009 through December 2012
|
|
|
1.40
|
%(D)
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
|
|
|
|
2,498
|
|
|
|
60
|
|
|
|
2,558
|
|
|
|
2,512
|
|
|
|
63
|
|
|
|
2,575
|
|
Less: current portion
|
|
|
|
|
|
|
(14
|
)
|
|
|
|
|
|
|
(14
|
)
|
|
|
(15
|
)
|
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt net of current portion
|
|
|
|
|
|
$
|
2,484
|
|
|
$
|
60
|
|
|
$
|
2,544
|
|
|
$
|
2,497
|
|
|
$
|
63
|
|
|
$
|
2,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
|
Interest rates are as of September 30, 2008 and exclude the
effects of accretion/amortization of fair value adjustments as a
result of the Arrangement. |
|
(B) |
|
Debt was recorded at fair value as a result of the Arrangement. |
|
(C) |
|
Excludes the effect of related interest rate swaps. |
|
(D) |
|
Weighted average interest rate. |
18
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
Due to the change in the market price of our 7.25% Senior
Notes from 105.25% of par value as of May 14, 2007 to 86%
of par value as of September 30, 2008, the estimated fair
value of this debt has decreased $270 million to
$1.203 billion.
Interest
Rate Swaps
During the quarter ended December 31, 2007, we entered into
interest rate swaps to fix the variable London Interbank Offered
Rate (LIBOR) interest rate for up to $600 million of our
floating rate Term Loan facility at effective weighted average
interest rates and amounts expiring as follows: (i) 4.0% on
$500 million through March 31, 2009 and (ii) 4.0%
on $400 million through March 31, 2010. An interest
rate swap at an interest rate of 4.1% on $100 million of
our Term Loan facility expired on September 30, 2008. We
are still obligated to pay any applicable margin, as defined in
our New Credit Facilities, in addition to these interest rates.
As of September 30, 2008 approximately 76% of our debt was
fixed rate and approximately 24% was variable rate.
Short-Term
Borrowings and Lines of Credit
As of September 30, 2008, our short-term borrowings were
$351 million consisting of (1) $328 million of
short-term loans under our ABL facility, (2) a
$10 million short-term loan in Italy and
(3) $13 million in bank overdrafts. As of
September 30, 2008, $20 million of our ABL facility
was utilized for letters of credit and we had $364 million
in remaining availability under this revolving credit facility.
The New Credit Facilities include customary affirmative and
negative covenants. Under the ABL facility, if our excess
availability, as defined under the borrowing, is less than 10%
of the borrowing base, we are required to maintain a minimum
fixed charge coverage ratio of 1 to 1. As of September 30,
2008, our fixed charge coverage ratio is less than 1 to 1. As a
result, our borrowing availability is limited to 90% of the
available borrowing base to avoid potential default of our
financial covenants, resulting in a reduction of availability
under our ABL facility of $80 million.
As of September 30, 2008, we had an additional
$170 million outstanding under letters of credit in Korea
not included in our revolving credit facility. The weighted
average interest rate on our total short-term borrowings was
5.60% and 4.12% as of September 30, 2008 and March 31,
2008, respectively.
|
|
9.
|
Share-Based
Compensation
|
Novelis
Long-Term Incentive Plan
In June 2008, our board of directors authorized the Novelis
Long-Term Incentive Plan FY 2009 FY 2012 (2009 LTIP)
covering the performance period from April 1, 2008 through
March 31, 2012. Under the 2009 LTIP, stock appreciation
rights (SARs) are to be granted to certain of our executive
officers and key employees. The SARs will vest at the rate of
25% per year, subject to performance criteria (see below) and
expire seven years from the date the plan was authorized by the
board. Each SAR is to be settled in cash based on the difference
between the market value of one Hindalco share on the date of
grant compared to the date of exercise, converted from Indian
rupees to the participants payroll currency at the time of
exercise. The amount of cash paid would be limited to
(i) 2.5 times the target payout if exercised within one
year of vesting or (ii) 3 times the target payout if
exercised after one year of vesting. The SARs do not transfer
any shareholder rights in Hindalco to a participant. As of
September 30, 2008, no SARs have been awarded.
The performance criterion for vesting is based on the actual
overall Novelis Operating Earnings before Interest,
Depreciation, Amortization and Taxes (Operating EBITDA, as
defined in the 2009 LTIP) compared to
19
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
the target Operating EBITDA established and approved each fiscal
year. The minimum threshold for vesting each year is 75% of each
annual target Operating EBITDA, at which point 75% of the SARs
for that period would vest, with an equal pro rata amount of
SARs vesting through 100% achievement of the target.
Share-Based
Compensation Expense
As a result of our acquisition by Hindalco on May 15, 2007,
all of our share-based compensation awards (except for our
Recognition Awards) were accelerated to vest, cancelled and
settled in cash using the $44.93 purchase price per common share
paid by Hindalco in the transaction. Compensation expense
resulting from the accelerated vesting of plan awards, totaling
$45 million is included in Selling, general and
administrative expenses in our condensed consolidated
statement of operations for the period from April 1, 2007
through May 15, 2007. Compensation expense of
$1 million was recognized during the period from
May 16, 2007 through September 30, 2007.
On October 29, 2008, the board of directors approved an
amendment to the 2009 LTIP (Amended 2009 LTIP). The design
elements of the Amended 2009 LTIP are largely unchanged from the
original 2009 LTIP. However, the Amended 2009 LTIP now specifies
that (a) the plan shall be administered by the Compensation
Committee of the Board of Directors, (b) all payments shall
be made in cash upon exercise (less applicable withholdings),
and (c) the Compensation Committee has the authority to
make adjustments in the number and price of SARs covered by the
plan in order to prevent dilution or enlargement of the rights
of employees that would otherwise result from a change in the
capital structure of the Company (e.g., dividends, stock splits,
rights issuances, reorganizations, liquidation of assets, etc.).
For each of the three and six months ended September 30,
2008 and for the three months ended September 30, 2007,
compensation expense related to share-based awards was less than
$1 million.
|
|
10.
|
Postretirement
Benefit Plans
|
Components of net periodic benefit cost for all of our
significant postretirement benefit plans are shown in the tables
below (in millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
May 16, 2007
|
|
|
|
April 1, 2007
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Through
|
|
|
|
Through
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
May 15,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
2007
|
|
|
|
Successor
|
|
|
Successor
|
|
|
Successor
|
|
|
Successor
|
|
|
|
Predecessor
|
|
Pension Benefit Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
11
|
|
|
$
|
12
|
|
|
$
|
21
|
|
|
$
|
18
|
|
|
|
$
|
6
|
|
Interest cost
|
|
|
15
|
|
|
|
12
|
|
|
|
30
|
|
|
|
18
|
|
|
|
|
6
|
|
Expected return on assets
|
|
|
(13
|
)
|
|
|
(11
|
)
|
|
|
(26
|
)
|
|
|
(16
|
)
|
|
|
|
(5
|
)
|
Amortization prior service cost
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Curtailment/settlement losses
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
12
|
|
|
$
|
13
|
|
|
$
|
25
|
|
|
$
|
20
|
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
May 16, 2007
|
|
|
|
April 1, 2007
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Through
|
|
|
|
Through
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
May 15,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
2007
|
|
|
|
Successor
|
|
|
Successor
|
|
|
Successor
|
|
|
Successor
|
|
|
|
Predecessor
|
|
Other Postretirement Benefit Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
3
|
|
|
$
|
2
|
|
|
|
$
|
1
|
|
Interest cost
|
|
|
2
|
|
|
|
2
|
|
|
|
5
|
|
|
|
3
|
|
|
|
|
1
|
|
Amortization actuarial losses
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Curtailment/settlement losses
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
4
|
|
|
$
|
3
|
|
|
$
|
7
|
|
|
$
|
5
|
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The expected long-term rate of return on plan assets is 6.9% in
fiscal 2009.
Employer
Contributions to Plans
For pension plans, our policy is to fund an amount required to
provide for contractual benefits attributed to service to date,
and amortize unfunded actuarial liabilities typically over
periods of 15 years or less. We also participate in savings
plans in Canada and the U.S., as well as defined contribution
pension plans in the U.S., U.K., Canada, Germany, Italy,
Switzerland, Malaysia and Brazil. We contributed the following
amounts to all plans (in millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
May 16, 2007
|
|
|
|
April 1, 2007
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Through
|
|
|
|
Through
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
May 15,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
2007
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Successor
|
|
|
Successor
|
|
|
|
Predecessor
|
|
Funded pension plans
|
|
$
|
7
|
|
|
$
|
11
|
|
|
$
|
11
|
|
|
$
|
16
|
|
|
|
$
|
4
|
|
Unfunded pension plans
|
|
|
4
|
|
|
|
4
|
|
|
|
8
|
|
|
|
6
|
|
|
|
|
2
|
|
Savings and defined contribution pension plans
|
|
|
4
|
|
|
|
4
|
|
|
|
9
|
|
|
|
6
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contributions
|
|
$
|
15
|
|
|
$
|
19
|
|
|
$
|
28
|
|
|
$
|
28
|
|
|
|
$
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the remainder of fiscal 2009, we expect to contribute an
additional $24 million to our funded pension plans,
$9 million to our unfunded pension plans and
$8 million to our savings and defined contribution plans.
For the six months ended September 30, 2008, actual returns
for our worldwide funded pension plans were significantly below
our expected rate of return of 6.9% due to adverse conditions in
the equity markets. Continued actual returns below our expected
rate may unfavorably impact the amount and timing of future
contributions to funded plans.
21
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
|
|
11.
|
Currency
(Gains) Losses
|
The following currency (gains) losses are included in the
accompanying condensed consolidated statements of operations (in
millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
May 16, 2007
|
|
|
|
April 1, 2007
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Through
|
|
|
|
Through
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
May 15,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
2007
|
|
|
|
|
|
|
(Restated)
|
|
|
|
|
|
(Restated)
|
|
|
|
|
|
|
|
Successor
|
|
|
Successor
|
|
|
Successor
|
|
|
Successor
|
|
|
|
Predecessor
|
|
Net (gain) loss on change in fair value of currency derivative
instruments(A)
|
|
$
|
(7
|
)
|
|
$
|
(2
|
)
|
|
$
|
(39
|
)
|
|
$
|
(18
|
)
|
|
|
$
|
(10
|
)
|
Net (gain) loss on translation of monetary assets and
liabilities(B)
|
|
|
36
|
|
|
|
8
|
|
|
|
56
|
|
|
|
15
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
29
|
|
|
$
|
6
|
|
|
$
|
17
|
|
|
$
|
(3
|
)
|
|
|
$
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
|
Included in (Gain) loss on change in fair value of derivative
instruments net.
|
|
(B) |
|
Included in Other (income) expenses net.
|
The following currency gains (losses) are included in
Accumulated other comprehensive income (loss) in the
accompanying condensed consolidated balance sheets (net of tax
effect and in millions).
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
May 16, 2007
|
|
|
|
Ended
|
|
|
Through
|
|
|
|
September 30, 2008
|
|
|
March 31, 2008
|
|
|
|
|
|
|
(Restated)
|
|
|
|
Successor
|
|
|
Successor
|
|
|
Cumulative currency translation adjustment beginning
of period
|
|
$
|
59
|
|
|
$
|
|
|
Effect of changes in exchange rates
|
|
|
(65
|
)
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
Cumulative currency translation adjustment end of
period
|
|
$
|
(6
|
)
|
|
$
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
12.
|
Financial
Instruments and Commodity Contracts
|
In conducting our business, we use various derivative and
non-derivative instruments to manage the risks arising from
fluctuations in exchange rates, interest rates, aluminum prices
and energy prices. Such instruments are used for risk management
purposes only. We may be exposed to losses in the future if the
counterparties to the contracts fail to perform. We are
satisfied that the risk of such non-performance is remote, due
to our monitoring of credit exposures. Our maximum potential
loss may exceed the amount recognized in the accompanying
September 30, 2008 condensed consolidated balance sheet.
The decision of whether and when to execute derivative
instruments, along with the duration of the instrument, can vary
from period to period depending on market conditions, the
relative costs of the instruments and capacity to hedge. The
duration is always linked to the timing of the underlying
exposure, with the connection between the two being regularly
monitored.
The current and noncurrent portions of derivative assets are
presented on the face of our accompanying condensed consolidated
balance sheets. The current and noncurrent portions of
derivative liabilities are included in Accrued expenses and
other current liabilities and Other long-term
liabilities, respectively, in the accompanying condensed
consolidated balance sheets.
22
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
The fair values of our financial instruments and commodity
contracts as of September 30, 2008 and March 31, 2008
are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2008
|
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Net Fair Value
|
|
|
|
Current
|
|
|
Noncurrent
|
|
|
Current
|
|
|
Noncurrent
|
|
|
Assets/(Liabilities)
|
|
Successor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross-currency swaps
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(65
|
)
|
|
$
|
(65
|
)
|
Interest rate swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
(4
|
)
|
Electricity swap
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives designated as hedging instruments
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
(69
|
)
|
|
|
(63
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts
|
|
|
43
|
|
|
|
1
|
|
|
|
(50
|
)
|
|
|
(16
|
)
|
|
|
(22
|
)
|
Cross-currency swaps
|
|
|
12
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
3
|
|
Interest rate currency swaps
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
Aluminum forward contracts
|
|
|
126
|
|
|
|
11
|
|
|
|
(297
|
)
|
|
|
(7
|
)
|
|
|
(167
|
)
|
Aluminum options
|
|
|
2
|
|
|
|
5
|
|
|
|
(22
|
)
|
|
|
(7
|
)
|
|
|
(22
|
)
|
Embedded derivative instruments
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54
|
|
Natural gas swaps
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives not designated as hedging instruments
|
|
|
237
|
|
|
|
40
|
|
|
|
(385
|
)
|
|
|
(30
|
)
|
|
|
(138
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative fair value
|
|
$
|
237
|
|
|
$
|
46
|
|
|
$
|
(385
|
)
|
|
$
|
(99
|
)
|
|
$
|
(201
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2008
|
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Net Fair Value
|
|
|
|
Current
|
|
|
Noncurrent
|
|
|
Current
|
|
|
Noncurrent
|
|
|
Assets/(Liabilities)
|
|
Successor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross-currency swaps
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(184
|
)
|
|
$
|
(184
|
)
|
Interest rate swaps
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
(12
|
)
|
|
|
(15
|
)
|
Electricity swap
|
|
|
3
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives designated as hedging instruments
|
|
|
3
|
|
|
|
11
|
|
|
|
(3
|
)
|
|
|
(196
|
)
|
|
|
(185
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts
|
|
|
43
|
|
|
|
4
|
|
|
|
(112
|
)
|
|
|
(4
|
)
|
|
|
(69
|
)
|
Cross-currency swaps
|
|
|
19
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
(1
|
)
|
|
|
14
|
|
Interest rate currency swaps
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Aluminum forward contracts
|
|
|
130
|
|
|
|
4
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
125
|
|
Aluminum options
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Embedded derivative instruments
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
(20
|
)
|
Natural gas swaps
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives not designated as hedging instruments
|
|
|
200
|
|
|
|
10
|
|
|
|
(145
|
)
|
|
|
(5
|
)
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative fair value
|
|
$
|
203
|
|
|
$
|
21
|
|
|
$
|
(148
|
)
|
|
$
|
(201
|
)
|
|
$
|
(125
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Investment Hedges
We use cross-currency swaps to manage our exposure to
fluctuating exchange rates arising from our loans to and
investments in our European operations. We have designated these
as net investment hedges. The effective portion of gain or loss
on the derivative is included in Other comprehensive income
(loss). The ineffective portion of gain or loss on the
derivative is included in (Gain) loss on change in fair value
of derivative instruments net.
The following table summarizes the amount of gain (loss) we
recognized in Other comprehensive income (loss) related
to our net investment hedge derivatives (in millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
Six Months
|
|
May 16, 2007
|
|
|
April 1, 2007
|
|
|
Ended
|
|
Ended
|
|
Through
|
|
|
Through
|
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
|
May 15,
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
2007
|
|
|
Successor
|
|
Successor
|
|
Successor
|
|
Successor
|
|
|
Predecessor
|
Cross-currency swaps
|
|
$
|
81
|
|
|
$
|
(28
|
)
|
|
$
|
120
|
|
|
$
|
(28
|
)
|
|
|
$
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
Cash Flow
Hedges
We own an interest in an electricity swap which we have
designated as a cash flow hedge against our exposure to
fluctuating electricity prices. The effective portion of gain or
loss on the derivative is included in Other comprehensive
income (loss) and reclassified into (Gain) loss on change
in fair value of derivatives net in our
accompanying condensed consolidated statements of operations and
comprehensive income (loss).
We use interest rate swaps to manage our exposure to changes in
the benchmark LIBOR interest rate arising from our variable rate
debt. We have designated these as cash flow hedges. The
effective portion of gain or loss on the derivative is included
in Other comprehensive income (loss) and reclassified
into Interest expense and amortization of debt issuance costs
net in our accompanying condensed
consolidated statements of operations and comprehensive income
(loss).
For all derivatives designated as cash flow hedges, gains or
losses representing hedge ineffectiveness are recognized in
(Gain) loss on change in fair value of derivative instruments
net in our current period earnings. If
at any time during the life of a cash flow hedge relationship we
determine that the relationship is no longer effective, the
derivative will be de-designated as a cash flow hedge. This
could occur if the underlying hedged exposure is determined to
no longer be probable, or if our ongoing assessment of hedge
effectiveness determines that the hedge relationship no longer
meets the measures we have established at the inception of the
hedge. Gains or losses recognized to date in Accumulated
other comprehensive income (loss) would be immediately
reclassified into current period earnings, as would any
subsequent changes in the fair value of any such derivative.
During the next twelve months we expect to realize
$1 million in effective net gains from our cash flow
hedges. The maximum period over which we have hedged our
exposure to cash flow variability is through 2017.
The following table summarizes the (1) the amount of gain
or (loss) recognized in Other comprehensive income (loss)
(OCI), (2) the amount of gain or (loss) reclassified
from Accumulated OCI into income and (3) the amount
of gain or (loss) recognized in income (ineffective portion)
related to our cash flow hedge derivatives (in millions).
Three
Month Comparison:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain or (Loss)
|
|
|
|
|
Amount of Gain or (Loss)
|
|
Recognized in Income on
|
|
|
Amount of Gain or (Loss)
|
|
Reclassified from Accumulated
|
|
Derivative (Ineffective Portion
|
|
|
Recognized in OCI on Derivative
|
|
OCI into Income
|
|
and Amount Excluded from
|
|
|
(Effective Portion)
|
|
(Effective Portion)
|
|
Effectiveness Testing)
|
|
|
Three Months
|
|
Three Months
|
|
Three Months
|
|
Three Months
|
|
Three Months
|
|
Three Months
|
|
|
Ended
|
|
Ended
|
|
Ended
|
|
Ended
|
|
Ended
|
|
Ended
|
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
Successor
|
|
Successor
|
|
Successor
|
|
Successor
|
|
Successor
|
|
Successor
|
|
Electricity swap
|
|
$
|
(12
|
)
|
|
$
|
4
|
|
|
$
|
(4
|
)
|
|
$
|
2
|
|
|
$
|
|
|
|
$
|
|
|
Interest rate swaps
|
|
$
|
1
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
25
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
Six Month
Comparison:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain or (Loss)
|
|
|
|
|
|
|
Recognized in Income
|
|
|
Amount of Gain or (Loss) Recognized
|
|
Amount of Gain or (Loss)
|
|
on Derivative
|
|
|
in OCI on Derivative
|
|
Reclassified from Accumulated
|
|
(Ineffective Portion and Amount
|
|
|
(Effective Portion)
|
|
OCI into Income (Effective Portion)
|
|
Excluded from Effectiveness Testing)
|
|
|
Six Months
|
|
Six Months
|
|
Six Months
|
|
|
Ended
|
|
Ended
|
|
Ended
|
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
|
2008
|
|
2008
|
|
2008
|
|
|
Successor
|
|
Successor
|
|
Successor
|
|
Electricity swap
|
|
$
|
|
|
|
$
|
(7
|
)
|
|
$
|
|
|
Interest rate swaps
|
|
$
|
11
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain or (Loss)
|
|
|
Amount of Gain or (Loss)
|
|
Amount of Gain or (Loss)
|
|
Recognized in Income on Derivative
|
|
|
Recognized in OCI on
|
|
Reclassified from Accumulated
|
|
(Ineffective Portion and Amount
|
|
|
Derivative (Effective Portion)
|
|
OCI into Income (Effective Portion)
|
|
Excluded from Effectiveness Testing)
|
|
|
May 16, 2007
|
|
|
April 1, 2007
|
|
May 16, 2007
|
|
|
April 1, 2007
|
|
May 16, 2007
|
|
|
April 1, 2007
|
|
|
Through
|
|
|
Through
|
|
Through
|
|
|
Through
|
|
Through
|
|
|
Through
|
|
|
September 30,
|
|
|
May 15,
|
|
September 30,
|
|
|
May 15,
|
|
September 30,
|
|
|
May 15,
|
|
|
2007
|
|
|
2007
|
|
2007
|
|
|
2007
|
|
2007
|
|
|
2007
|
|
|
Successor
|
|
|
Predecessor
|
|
Successor
|
|
|
Predecessor
|
|
Successor
|
|
|
Predecessor
|
Foreign exchange forward contracts
|
|
$
|
|
|
|
|
$
|
3
|
|
|
$
|
|
|
|
|
$
|
(1
|
)
|
|
$
|
|
|
|
|
$
|
|
|
Electricity swap
|
|
$
|
6
|
|
|
|
$
|
4
|
|
|
$
|
2
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
$
|
|
|
Derivative
Instruments Not Designated as Hedges
We use foreign exchange forward contracts and cross currency
swaps to manage our exposure to changes in exchange rates. These
exposures arise from recorded assets and liabilities, firm
commitments and forecasted cash flows denominated in currencies
other than the functional currency of certain of our operations.
We use aluminum forward contracts and options to hedge our
exposure to changes in the London Metal Exchange (LME) price of
aluminum. These exposures arise from firm commitments to sell
aluminum in future periods at fixed or capped prices, the
forecasted output of our smelter operations in South America,
and the forecasted metal price lag associated with firm
commitments to sell aluminum in future periods at prices based
on the LME.
We have an embedded derivative which arises from a contractual
relationship with a customer that entitles us to pass-through
the economic effect of trading positions that we take with other
third parties on their behalf.
We use natural gas swaps to manage our exposure to fluctuating
energy prices in North America.
While each of these derivatives is intended to be effective in
helping us manage risk, they have not been designated as hedging
instruments under FASB Statement No. 133. The change in
fair value of these derivatives is included in (Gain) loss on
change in fair value of derivative instruments net
in the condensed consolidated statement of operations and
comprehensive income (loss).
26
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
The following table summarizes the gains (losses) recognized in
current period earnings (in millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
May 16, 2007
|
|
|
|
April 1, 2007
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Through
|
|
|
|
Through
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
May 15,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
2007
|
|
|
|
Successor
|
|
|
Successor
|
|
|
Successor
|
|
|
Successor
|
|
|
|
Predecessor
|
|
Derivative Instruments Not Designated as Hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts
|
|
$
|
17
|
|
|
$
|
(4
|
)
|
|
$
|
7
|
|
|
$
|
12
|
|
|
|
$
|
11
|
|
Interest rate currency swaps
|
|
|
15
|
|
|
|
(2
|
)
|
|
|
24
|
|
|
|
(2
|
)
|
|
|
|
(1
|
)
|
Aluminum forward contracts
|
|
|
(207
|
)
|
|
|
(30
|
)
|
|
|
(191
|
)
|
|
|
(34
|
)
|
|
|
|
9
|
|
Aluminum options
|
|
|
(27
|
)
|
|
|
|
|
|
|
(25
|
)
|
|
|
1
|
|
|
|
|
|
|
Embedded derivative instruments
|
|
|
53
|
|
|
|
15
|
|
|
|
58
|
|
|
|
12
|
|
|
|
|
2
|
|
Natural gas swaps
|
|
|
(16
|
)
|
|
|
(2
|
)
|
|
|
(9
|
)
|
|
|
(3
|
)
|
|
|
|
1
|
|
Cross currency swaps
|
|
|
(25
|
)
|
|
|
(9
|
)
|
|
|
8
|
|
|
|
(6
|
)
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) recognized
|
|
|
(190
|
)
|
|
|
(32
|
)
|
|
|
(128
|
)
|
|
|
(20
|
)
|
|
|
|
19
|
|
Derivative Instruments Designated as Cash Flow Hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electricity swap
|
|
|
5
|
|
|
|
2
|
|
|
|
9
|
|
|
|
4
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on change in fair value of derivative instruments
net
|
|
$
|
(185
|
)
|
|
$
|
(30
|
)
|
|
$
|
(119
|
)
|
|
$
|
(16
|
)
|
|
|
$
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.
|
Fair
Value Measurements
|
FASB Statement No. 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about
fair value measurements. The provisions of this standard apply
to other accounting pronouncements that require or permit fair
value measurements and are to be applied prospectively with
limited exceptions. Our adoption of FASB Statement No. 157
on April 1, 2008 resulted in (1) a gain of less than
$1 million for the three months ended June 30, 2008,
which is included in (Gain) loss on change in fair value of
derivative instruments net in our condensed
consolidated statement of operations, (2) a $1 million
decrease to the fair value of effective portion of
hedges net included in Accumulated other
comprehensive income (loss) and (3) a $35 million
increase to the foreign currency translation adjustment included
in Accumulated other comprehensive income (loss) during
the quarter ended June 30, 2008. These adjustments are
primarily due to the inclusion of nonperformance risk (i.e.,
credit spreads) in our valuation models related to certain of
our cross-currency swap derivative instruments (see
Note 12 Financial Instruments and Commodity
Contracts).
FASB Statement No. 157 defines fair value as the price that
would be received to sell an asset or paid to transfer a
liability (an exit price) in an orderly transaction between
market participants at the measurement date. FASB Statement
No. 157 will be the single source in GAAP for the
definition of fair value, except for the fair value of leased
property as defined in FASB Statement No. 13, for purposes
of lease classification or measurement. FASB Statement
No. 157 establishes a fair value hierarchy that
distinguishes between (1) market participant assumptions
developed based on market data obtained from independent sources
(observable inputs) and (2) an entitys own
assumptions about market participant assumptions developed based
on the best information available in the circumstances
(unobservable inputs). The fair value hierarchy consists of
three broad levels, which gives the highest priority to
unadjusted quoted prices in active markets for identical assets
27
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). The three levels of the fair
value hierarchy under FASB Statement No. 157 are described
as follows:
Level 1 Unadjusted quoted prices in
active markets that are accessible at the measurement date for
identical, unrestricted assets or liabilities;
Level 2 Inputs other than quoted prices
included within Level 1 that are observable for the asset
or liability, either directly or indirectly; and
Level 3 Inputs that are unobservable for
the asset or liability.
The following section describes the valuation methodologies we
used to measure our various financial instruments at fair value,
including an indication of the level in the fair value hierarchy
in which each instrument is generally classified:
Derivative
contracts
For certain of our derivative contracts whose fair values are
based upon trades in liquid markets, such as aluminum forward
contracts and options, valuation model inputs can generally be
verified and valuation techniques do not involve significant
judgment. The fair values of such financial instruments are
generally classified within Level 2 of the fair value
hierarchy.
The majority of our derivative contracts are valued using
industry-standard models that use observable market inputs as
their basis, such as time value, forward interest rates,
volatility factors, and current (spot) and forward market prices
for foreign exchange rates. We generally classify these
instruments within Level 2 of the valuation hierarchy. Such
derivatives include interest rate swaps, cross-currency swaps,
foreign currency forward contracts and certain energy-related
forward contracts (e.g., natural gas).
We classify derivative contracts that are valued based on models
with significant unobservable market inputs as Level 3 of
the valuation hierarchy. These derivatives include certain of
our energy-related forward contracts (e.g., electricity) and
certain foreign currency forward contracts. Models for these
fair value measurements include inputs based on estimated future
prices for periods beyond the term of the quoted prices.
FASB Statement No. 157 requires that for Level 2 and 3
of the fair value hierarchy, where appropriate, valuations are
adjusted for various factors such as liquidity, bid/offer
spreads and credit considerations (nonperformance risk).
The following table presents our assets and liabilities that are
measured and recognized at fair value on a recurring basis
classified under the appropriate level of the fair value
hierarchy as of September 30, 2008 (in millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Successor:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets Derivative instruments
|
|
$
|
|
|
|
$
|
277
|
|
|
$
|
6
|
|
|
$
|
283
|
|
Liabilities Derivative instruments
|
|
$
|
|
|
|
$
|
(468
|
)
|
|
$
|
(16
|
)
|
|
$
|
(484
|
)
|
Financial instruments classified as Level 3 in the fair
value hierarchy represent derivative contracts (primarily
energy-related and certain foreign currency forward contracts)
in which at least one significant unobservable input is used in
the valuation model. We incurred $22 million of unrealized
losses related to Level 3 financial instruments that were
still held as of September 30, 2008. These unrealized
losses are
28
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
included in (Gain) loss on change in fair value of derivative
instruments net. The following table presents a
reconciliation of activity for Level 3 derivative contracts
on a net basis (in millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Realized/
|
|
|
|
|
|
|
|
|
|
|
Net Realized/
|
|
Unrealized
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
Gains (Losses)
|
|
|
|
|
|
|
|
|
Beginning
|
|
Gains
|
|
Included
|
|
|
|
|
|
Ending
|
|
|
Balance
|
|
(Losses)
|
|
in Other
|
|
Net Purchases,
|
|
Net Transfers
|
|
Balance
|
|
|
April 1,
|
|
Included in
|
|
Comprehensive
|
|
Issuances and
|
|
in and/or
|
|
September 30,
|
|
|
2008
|
|
Earnings(B)
|
|
Income (Loss)(C)
|
|
Settlements
|
|
(out) of Level 3
|
|
2008
|
Successor:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments(A)
|
|
$
|
11
|
|
|
$
|
(5
|
)
|
|
$
|
(8
|
)
|
|
$
|
(9
|
)
|
|
$
|
1
|
|
|
$
|
(10
|
)
|
|
|
|
(A) |
|
Represents derivative assets net of derivative liabilities. |
|
(B) |
|
Included in (Gain) loss on change in fair value of derivative
instruments net. |
|
(C) |
|
Included in Change in fair value of effective portion of
hedges net.
|
|
|
14.
|
Other
(Income) Expenses Net
|
Other (income) expenses net is comprised of the
following (in millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
May 16, 2007
|
|
|
|
April 1, 2007
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Through
|
|
|
|
Through
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
May 15,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
2007
|
|
|
|
|
|
|
(Restated)
|
|
|
|
|
|
(Restated)
|
|
|
|
|
|
|
|
Successor
|
|
|
Successor
|
|
|
Successor
|
|
|
Successor
|
|
|
|
Predecessor
|
|
Exchange (gains) losses net
|
|
$
|
36
|
|
|
$
|
8
|
|
|
$
|
56
|
|
|
$
|
15
|
|
|
|
$
|
4
|
|
(Gain) loss on reversal of accrued legal claim(A)
|
|
|
(26
|
)
|
|
|
|
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
(Gain) loss on partial reversal of accrued social contribution
tax
|
|
|
|
|
|
|
(14
|
)
|
|
|
|
|
|
|
(14
|
)
|
|
|
|
|
|
Restructuring charges (recoveries) net
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
|
1
|
|
Impairment charges on long-lived assets
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
(Gain) loss on disposal of property, plant and equipment
net
|
|
|
(1
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
Other net
|
|
|
1
|
|
|
|
4
|
|
|
|
4
|
|
|
|
7
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expenses net
|
|
$
|
10
|
|
|
$
|
(2
|
)
|
|
$
|
32
|
|
|
$
|
9
|
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
|
See Note 16 Commitments and Contingencies for a
discussion regarding the settlement of the Reynolds Boat Case. |
The Provision (benefit) for taxes on income (loss) for
the three and six months ended September 30, 2008 was based
on the estimated effective tax rates applicable for the fiscal
year ending March 31, 2009, after considering items
specifically related to the interim period. The Provision
(benefit) for taxes on income (loss) for the periods from
May 16, 2007 through September 30, 2007 (as restated)
and April 1, 2007 through May 15, 2007 were based on
the estimated effective tax rates applicable for the year ended
March 31, 2008, after considering items specifically
related to the interim periods.
29
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
A reconciliation of the Canadian statutory tax rates to our
effective tax rates is as follows (in millions, except
percentages).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
May 16, 2007
|
|
|
|
April 1, 2007
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Through
|
|
|
|
Through
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
May 15,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
2007
|
|
|
|
|
|
|
(Restated)
|
|
|
|
|
|
(Restated)
|
|
|
|
|
|
|
|
Successor
|
|
|
Successor
|
|
|
Successor
|
|
|
Successor
|
|
|
|
Predecessor
|
|
Pre-tax income (loss) before equity in net (income) loss of
non-consolidated affiliates and minority interests share
|
|
$
|
(274
|
)
|
|
$
|
(19
|
)
|
|
$
|
(210
|
)
|
|
$
|
(38
|
)
|
|
|
$
|
(95
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian statutory tax rate
|
|
|
31
|
%
|
|
|
33
|
%
|
|
|
31
|
%
|
|
|
33
|
%
|
|
|
|
33
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit) at the Canadian statutory rate
|
|
|
(85
|
)
|
|
|
(6
|
)
|
|
|
(65
|
)
|
|
|
(13
|
)
|
|
|
|
(31
|
)
|
Increase (decrease) for taxes on income (loss) resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange translation items
|
|
|
(22
|
)
|
|
|
30
|
|
|
|
(13
|
)
|
|
|
49
|
|
|
|
|
23
|
|
Exchange remeasurement of deferred income taxes
|
|
|
(41
|
)
|
|
|
4
|
|
|
|
(21
|
)
|
|
|
7
|
|
|
|
|
3
|
|
Change in valuation allowances
|
|
|
15
|
|
|
|
19
|
|
|
|
18
|
|
|
|
41
|
|
|
|
|
13
|
|
Expense (income) items not subject to tax
|
|
|
10
|
|
|
|
(5
|
)
|
|
|
6
|
|
|
|
(19
|
)
|
|
|
|
(9
|
)
|
Enacted statutory tax rate changes
|
|
|
2
|
|
|
|
(25
|
)
|
|
|
2
|
|
|
|
(25
|
)
|
|
|
|
|
|
Tax rate differences on foreign earnings
|
|
|
(54
|
)
|
|
|
(2
|
)
|
|
|
(68
|
)
|
|
|
|
|
|
|
|
2
|
|
Uncertain tax positions
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Other net
|
|
|
6
|
|
|
|
5
|
|
|
|
6
|
|
|
|
7
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for taxes on income (loss)
|
|
$
|
(169
|
)
|
|
$
|
20
|
|
|
$
|
(134
|
)
|
|
$
|
47
|
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
62
|
%
|
|
|
(105
|
)%
|
|
|
64
|
%
|
|
|
(124
|
)%
|
|
|
|
(4
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our effective tax rate differs from the Canadian statutory rate
primarily due to the following factors: (1) pre-tax foreign
currency gains or losses with no tax effect and the tax effect
of U.S. dollar denominated currency gains or losses with no
pre-tax effect, which is shown above as exchange translation
items; (2) the remeasurement of deferred income taxes due
to foreign currency changes, which is shown above as exchange
remeasurement of deferred income taxes; (3) changes 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
(4) differences between the Canadian statutory and foreign
effective tax rates applied to entities in different
jurisdictions shown above as tax rate differences on foreign
earnings.
Tax
Uncertainties
Adoption
of FASB Interpretation No. 48
In June 2006, the FASB issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes (FIN 48).
FIN 48 clarifies the accounting for income taxes, by
prescribing a minimum recognition threshold a tax position is
required to meet before being recognized in the financial
statements. FIN 48 also provides guidance on derecognition,
measurement, classification, interest and penalties, accounting
in interim periods, disclosure and transition.
30
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
During the quarter ended September 30, 2008, our
unrecognized tax benefits decreased $7 million as a result
of tax positions taken during a prior period and settlements
with taxing authorities. Our reserves for uncertain tax
positions totaled $54 million and $61 million as of
September 30, 2008 and March 31, 2008, respectively.
As of September 30, 2008 and March 31, 2008, the total
amount of unrecognized tax benefits that, if recognized, would
affect the effective income tax rate in future periods based on
anticipated settlement dates was $46 million and
$47 million, respectively.
Tax authorities are currently examining certain of our prior
years tax returns for
2004-2006.
We are evaluating potential adjustments related to these
examinations and do not anticipate that settlement of the
examinations will result in a material payment.
During the quarter ended September 30, 2008, taxing
authorities in Germany concluded their audit of the tax years
1999-2003.
As a result of this settlement, we reduced our unrecognized tax
benefits by $10 million including cash payments to taxing
authorities of $6 million and a reduction to
Goodwill of $4 million.
Separately, we are awaiting a court ruling regarding the
utilization of certain operating losses. We anticipate that it
is reasonably possible that this ruling will result in a
$12 million decrease in unrecognized tax benefits by
March 31, 2009 related to this matter. We have fully funded
this contingent liability through a judicial deposit, which is
included in Other long-term assets third parties
since January 2007.
With the exception of the ongoing tax examinations described
above, we are not currently under examination by any income tax
authorities for years before 2004. With few exceptions, our tax
returns for all tax years before 2001 are no longer subject to
examination by taxing authorities.
Our continuing practice and policy is to record potential
interest and penalties related to unrecognized tax benefits in
our Provision (benefit) for taxes on income (loss). As of
September 30, 2008 and March 31, 2008, we had
$12 million and $14 million (as restated) accrued for
potential interest on income taxes, respectively. For the three
and six months ended September 30, 2008, our Provision
(benefit) for taxes on income (loss) included an additional
charge of $1 and $2 million of potential interest,
respectively. For the three months ended September 30, 2007
and the periods from May 16, 2007 through
September 30, 2007 and from April 1, 2007 through
May 15, 2007, our Provision (benefit) for taxes on
income (loss) included charges for an additional
$1 million, $3 million and $1 million of
potential interest, respectively.
|
|
16.
|
Commitments
and Contingencies
|
Primary
Supplier
Alcan is our primary supplier of metal inputs, including prime
and sheet ingot. The table below shows our purchases from Alcan
as a percentage of our total combined metal purchases.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
Six Months
|
|
May 16, 2007
|
|
|
April 1, 2007
|
|
|
Ended
|
|
Ended
|
|
Through
|
|
|
Through
|
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
|
May 15,
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
2007
|
|
|
Successor
|
|
Successor
|
|
Successor
|
|
Successor
|
|
|
Predecessor
|
Purchases from Alcan as a percentage of total metal purchases in
kt(A)
|
|
|
36
|
%
|
|
|
37
|
%
|
|
|
35
|
%
|
|
|
36
|
%
|
|
|
|
34
|
%
|
|
|
|
(A) |
|
One kilotonne (kt) is 1,000 metric tonnes. One metric tonne is
equivalent to 2,204.6 pounds. |
Legal
Proceedings
Reynolds Boat Case. As previously disclosed,
we and Alcan were defendants in a case in the United States
District Court for the Western District of Washington, in
Tacoma, Washington, case number C04-
31
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
0175RJB. Plaintiffs were Reynolds Metals Company, Alcoa, Inc.
and National Union Fire Insurance Company of Pittsburgh PA. The
case was tried before a jury beginning on May 1, 2006 under
implied warranty theories, based on allegations that from 1998
to 2001 we and Alcan sold certain aluminum products that were
ultimately used for marine applications and were unsuitable for
such applications. The jury reached a verdict on May 22,
2006 against us and Alcan for approximately $60 million,
and the court later awarded Reynolds and Alcoa approximately
$16 million in prejudgment interest and court costs.
The case was settled during July 2006 as among us, Alcan,
Reynolds, Alcoa and their insurers for $71 million. We
contributed approximately $1 million toward the settlement,
and the remaining $70 million was funded by our insurers.
Although the settlement was substantially funded by our
insurance carriers, certain of them have reserved the right to
request a refund from us, after reviewing details of the
plaintiffs damages to determine if they include costs of a
nature not covered under the insurance contracts. Of the
$70 million funded, $39 million was in dispute with
and under further review by certain of our insurance carriers.
In the quarter ended September 30, 2006, we posted a letter
of credit in the amount of approximately $10 million in
favor of one of those insurance carriers, while we sought to
resolve the extent of coverage of the costs included in the
settlement. On October 8, 2007, we received a letter from
these insurers stating that they had completed their review and
they were requesting a refund of the $39 million plus
interest. We reviewed the insurers position, and on
January 7, 2008, we sent a letter to the insurers rejecting
their position that Novelis is not entitled to insurance
coverage for the judgment against Novelis.
Since our fiscal 2005 Annual Report on
Form 10-K
was not filed until August 25, 2006, we recognized a
liability for the full settlement amount of $71 million on
December 31, 2005, included in Accrued expenses and
other current liabilities on our consolidated balance sheet,
with a corresponding charge against earnings. We also recognized
an insurance receivable included in Prepaid expenses and
other current assets on our consolidated balance sheet of
$31 million, with a corresponding increase to earnings.
Although $70 million of the settlement was funded by our
insurers, we only recognized an insurance receivable to the
extent that coverage was not in dispute. This resulted in a net
charge of $40 million during the quarter ended
December 31, 2005.
In July 2006, we contributed and paid $1 million to our
insurers who subsequently paid the entire settlement amount of
$71 million to the plaintiffs. Accordingly, during the
quarter ended September 30, 2006, we reversed the
previously recorded insurance receivable of $31 million and
reduced our recorded liability by the same amount plus the
$1 million contributed by us. The remaining liability of
$39 million at September 30, 2006 represented the
amount of the settlement claim that was funded by our insurers
but was still in dispute with and under review by the parties as
described above. The $39 million liability was included in
Accrued expenses and other current liabilities in our
condensed consolidated balance sheet for all periods through and
as of June 30, 2008.
On September 4, 2008, Novelis, our insurers, and Alcan
entered into a settlement agreement to resolve the insurance
coverage dispute related to the Reynolds boat case. Pursuant to
that settlement agreement, we paid approximately
$13 million to our insurers on September 8, 2008 and
recognized a non-cash pre-tax gain of $26 million included
in Other (income) expenses net upon the
reversal of our previously recorded $39 million liability.
Our insurers returned our letter of credit that had been on
deposit pending the outcome of settlement discussions. This
concludes the Reynolds Boat Case insurance coverage matter.
Coca-Cola
Lawsuits. A lawsuit was commenced against Novelis
Corporation on February 15, 2007 by
Coca-Cola
Bottlers Sales and Services Company LLC (CCBSS) in state
court in Georgia. In addition, a lawsuit was commenced against
Novelis Corporation and Alcan Corporation on April 3, 2007
by Coca-Cola
Enterprises Inc., Enterprises Acquisition Company, Inc., The
Coca-Cola
Company and The
Coca-Cola
Trading Company, Inc. (collectively CCE) in federal court in
Georgia. Novelis intends to defend these claims vigorously.
32
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
CCBSS is a consortium of
Coca-Cola
bottlers across the United States, including
Coca-Cola
Enterprises Inc. CCBSS alleges that Novelis Corporation breached
an aluminum can stock supply agreement between the parties, and
seeks monetary damages in an amount to be determined at trial
and a declaration of its rights under the agreement. The
agreement includes a most favored nations provision
regarding certain pricing matters. CCBSS alleges that Novelis
Corporation breached the terms of the most favored
nations provision. The dispute will likely turn on the
facts that are presented to the court by the parties and the
courts finding as to how certain provisions of the
agreement ought to be interpreted. If CCBSS were to prevail in
this litigation, the amount of damages would likely be material.
Novelis Corporation has filed its answer and the parties are
proceeding with discovery.
The claim by CCE seeks monetary damages in an amount to be
determined at trial for breach of a prior aluminum can stock
supply agreement between CCE and Novelis Corporation, successor
to the rights and obligations of Alcan Aluminum Corporation
under the agreement. According to its terms, that agreement with
CCE terminated in 2006. The CCE supply agreement included a
most favored nations provision regarding certain
pricing matters. CCE alleges that Novelis Corporations
entry into a supply agreement with Anheuser-Busch, Inc. breached
the most favored nations provision of the CCE supply
agreement. Novelis Corporation moved to dismiss the complaint
and on March 26, 2008, the U.S. District Court for the
Northern District of Georgia issued an order granting Novelis
Corporations motion to dismiss CCEs claim. On
April 24, 2008, CCE filed a notice of appeal of the
courts order with the United States Court of Appeals for
the Eleventh Circuit and filed its appellate brief on
July 11, 2008. On August 13, 2008, Novelis Corporation
filed its response brief with the United States Court of Appeals
for the Eleventh Circuit. CCE filed its response on
September 5, 2008.
On October 24, 2008, the United States Court of Appeals for
the Eleventh Circuit affirmed the decision of the
U.S. District Court for the Northern District of Georgia to
dismiss CCEs lawsuit against Novelis Corporation for
breach of the most favored nations clause.
Anheuser-Busch Litigation. On
September 19, 2006, Novelis Corporation filed a lawsuit
against Anheuser-Busch, Inc. (Anheuser-Busch) in federal court
in Ohio. Anheuser-Busch subsequently filed suit against Novelis
Corporation and the Company in federal court in Missouri. On
January 3, 2007, Anheuser-Buschs suit was transferred
to the Ohio federal court.
Novelis Corporation alleged that Anheuser-Busch breached the
existing multi-year aluminum can stock supply agreement between
the parties, and sought monetary damages and declaratory relief.
Among other claims, we asserted that since entering into the
supply agreement, Anheuser-Busch has breached its
confidentiality obligations and there has been a structural
change in market conditions that requires a change to the
pricing provisions under the agreement.
In its complaint, Anheuser-Busch asked for a declaratory
judgment that Anheuser-Busch is not obligated to modify the
supply agreement as requested by Novelis Corporation, and that
Novelis Corporation must continue to perform under the existing
supply agreement.
On January 18, 2008, Anheuser-Busch filed a motion for
summary judgment. On May 22, 2008, the court granted
Anheuser-Buschs motion for summary judgment. Novelis
Corporation filed a notice of appeal with the United States
Court of Appeals for the Sixth Circuit on June 20, 2008.
On August 18, 2008, Novelis and Anheuser-Busch entered into
an agreement to terminate the litigation between the parties.
Pursuant to the litigation termination agreement, Anheuser-Busch
agreed to drop its claims against Novelis in consideration for
the withdrawal of our appeal. The parties then filed a Notice of
Withdrawal with the United States Court of Appeals for the Sixth
Circuit on August 19, 2008. This concludes the
Anheuser-Busch litigation matter.
33
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
ARCO Aluminum Complaint. On May 24, 2007,
Arco Aluminum Inc. (ARCO) filed a complaint against Novelis
Corporation and Novelis Inc. in the United States District Court
for the Western District of Kentucky. ARCO and Novelis are
partners in a joint venture rolling mill located in Logan,
Kentucky. In the complaint, ARCO seeks to resolve a perceived
dispute over management and control of the joint venture
following Hindalcos acquisition of Novelis.
ARCO alleges that its consent was required in connection with
Hindalcos acquisition of Novelis. Failure to obtain
consent, ARCO alleges, has put us in default of the joint
venture agreements, thereby triggering certain provisions in
those agreements. The provisions include a reversion of the
production management at the joint venture to Logan Aluminum
from Novelis, and a reduction of the board of directors of the
entity that manages the joint venture from seven members (four
appointed by Novelis and three appointed by ARCO) to six members
(three appointed by each of Novelis and ARCO).
ARCO seeks a court declaration that (1) Novelis and its
affiliates are prohibited from exercising any managerial
authority or control over the joint venture,
(2) Novelis interest in the joint venture is limited
to an economic interest only and (3) ARCO has authority to
act on behalf of the joint venture. Or, alternatively, ARCO is
seeking a reversion of the production management function to
Logan Aluminum, and a change in the composition of the board of
directors of the entity that manages the joint venture. Novelis
filed its answer to the complaint on July 16, 2007.
On July 3, 2007, ARCO filed a motion for partial summary
judgment with respect to one of the counts of its complaint
relating to the claim that Novelis breached the joint venture
agreement by not seeking ARCOs consent. On July 30,
2007, Novelis filed a motion to hold ARCOs motion for
summary judgment in abeyance (pending further discovery), along
with a demand for a jury. On February 14, 2008, the judge
issued an order granting our motion to hold ARCOs summary
judgment motion in abeyance. Pursuant to this ruling, management
and the board of the joint venture are conducting their
activities as normal.
Environmental
Matters
The following describes certain environmental matters relating
to our business. None of the environmental matters include
government sanctions of $100,000 or more.
We are involved in proceedings under the U.S. Comprehensive
Environmental Response, Compensation, and Liability Act, also
known as CERCLA or Superfund, or analogous state provisions
regarding liability arising from the usage, storage, treatment
or disposal of hazardous substances and wastes at a number of
sites in the United States, as well as similar proceedings under
the laws and regulations of the other jurisdictions in which we
have operations, including Brazil and certain countries in the
European Union. Many of these jurisdictions have laws that
impose joint and several liability, without regard to fault or
the legality of the original conduct, for the costs of
environmental remediation, natural resource damages, third party
claims, and other expenses, on those persons who contributed to
the release of a hazardous substance into the environment. In
addition, we are, from time to time, subject to environmental
reviews and investigations by relevant governmental authorities.
As described further in the following paragraph, we have
established procedures for regularly evaluating environmental
loss contingencies, including those arising from such
environmental reviews and investigations and any other
environmental remediation or compliance matters. We believe we
have a reasonable basis for evaluating these environmental loss
contingencies, and we believe we have made reasonable estimates
of the costs that are likely to be borne by us for these
environmental loss contingencies. Accordingly, we have
established reserves based on our reasonable estimates for the
currently anticipated costs associated with these environmental
matters. We estimate that the undiscounted remaining
clean-up
costs related to all of our known environmental matters as of
September 30, 2008 will be approximately $43 million.
Of this amount,
34
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
$33 million is included in Other long-term
liabilities, with the remaining $10 million included in
Accrued expenses and other current liabilities in our
condensed consolidated balance sheet as of September 30,
2008. Management has reviewed the environmental matters,
including those for which we assumed liability as a result of
our spin-off from Alcan. As a result of this review, management
has determined that the currently anticipated costs associated
with these environmental matters will not, individually or in
the aggregate, materially impair our operations or materially
adversely affect our financial condition, results of operations
or liquidity.
With respect to environmental loss contingencies, we record a
loss contingency on a non-discounted basis whenever such
contingency is probable and reasonably estimable. The evaluation
model includes all asserted and unasserted claims that can be
reasonably identified. Under this evaluation model, the
liability and the related costs are quantified based upon the
best available evidence regarding actual liability loss and cost
estimates. Except for those loss contingencies where no estimate
can reasonably be made, the evaluation model is fact-driven and
attempts to estimate the full costs of each claim. Management
reviews the status of, and estimated liability related to,
pending claims and civil actions on a quarterly basis. The
estimated costs in respect of such reported liabilities are not
offset by amounts related to cost-sharing between parties,
insurance, indemnification arrangements or contribution from
other potentially responsible parties (PRPs) unless otherwise
noted.
Butler Tunnel Site. Novelis Corporation was a
party in a 1989 U.S. Environmental Protection Agency (EPA)
lawsuit before the U.S. District Court for the Middle
District of Pennsylvania involving the Butler Tunnel Superfund
site, a third-party disposal site. In May 1991, the Court
granted summary judgment against Novelis Corporation for alleged
disposal of hazardous waste. After unsuccessful appeals, Novelis
Corporation paid the entire judgment plus interest.
The EPA filed a second cost recovery action against Novelis
Corporation seeking recovery of expenses associated with the
installation of an early warning and response system for
potential future releases from the Butler Tunnel site. In
January 2008, Novelis Corporation and the Department of Justice,
on behalf of the EPA, entered into a consent decree whereby
Novelis Corporation agreed to pay $1.9 million in three
installments in settlement of its liability with the
U.S. government.
Prior to the execution of the Novelis Corporation consent
decree, the EPA entered into consent decrees with the other
Butler Tunnel PRPs to finance and construct the early warning
and response system. On October 30, 2008, the trustee for
the PRPs provided a detailed analysis of the past and future
costs associated with the implementation of the early warning
system and advised us of their intention to file a contribution
action against us. Given the success of these types of civil
claims in environmental cases and our prior adverse court
rulings, we have recognized a liability for $3.8 million
reflecting our portion of the previous and remaining costs to
complete the early warning and response system.
Brazil
Tax Matters
Primarily as a result of legal proceedings with Brazils
Ministry of Treasury regarding certain taxes in South America,
as of September 30, 2008 and March 31, 2008, we had
cash deposits aggregating approximately $33 million and
$36 million, respectively, in judicial depository accounts
pending finalization of the related cases. The depository
accounts are in the name of the Brazilian government and will be
expended towards these legal proceedings or released to us,
depending on the outcome of the legal cases. These deposits are
included in Other long-term assets third parties
in our accompanying condensed consolidated balance sheets.
In addition, we are involved in several disputes with
Brazils Minister of Treasury about various forms of
manufacturing taxes and social security contributions, for which
we have made no judicial deposits but for which we have
established reserves ranging from $7 million to
$94 million as of September 30, 2008. In total, these
reserves approximate $113 million and $111 million as
of September 30,
35
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
2008 and March 31, 2008, respectively, and are included in
Other long-term liabilities in our accompanying condensed
consolidated balance sheets.
On July 16, 2008, the second instance court in Brazil ruled
in favor of the Ministry of Treasury in the amount of
$5.5 million in one of these tax disputes. On
August 11, 2008, we requested a clarification of the
courts order to better understand the reasoning behind the
decision and prepare our appeal. The request for clarification
suspends the deadline for appeal, which usually must be filed
within 30 days of receiving the order. While we are fully
reserved for these disputed credits, we must make a judicial
deposit of $5.5 million at the time we file the appeal.
Guarantees
of Indebtedness
We have issued guarantees on behalf of certain of our
subsidiaries and non-consolidated affiliates, including:
|
|
|
|
|
certain of our wholly-owned subsidiaries and
|
|
|
|
Aluminium Norf GmbH, which is a fifty percent (50%) owned joint
venture that does not meet the requirements for consolidation
under FASB Interpretation No. 46 (Revised),
Consolidation of Variable Interest Entities.
|
In the case of our wholly-owned subsidiaries, the indebtedness
guaranteed is for trade accounts payable to third parties. Some
of the guarantees have annual terms while others have no
expiration and have termination notice requirements. Neither we
nor any of our subsidiaries or non-consolidated affiliates holds
any assets of any third parties as collateral to offset the
potential settlement of these guarantees.
Since we consolidate wholly-owned and majority-owned
subsidiaries in our condensed consolidated financial statements,
all liabilities associated with trade payables and short-term
debt facilities for these entities are already included in our
condensed consolidated balance sheets.
The following table discloses information about our obligations
under guarantees of indebtedness of others as of
September 30, 2008 (in millions). We did not have any
obligations under guarantees of indebtedness related to our
majority-owned subsidiaries as of September 30, 2008.
|
|
|
|
|
|
|
|
|
|
|
Maximum
|
|
|
Liability
|
|
|
|
Potential
|
|
|
Carrying
|
|
Type of Entity
|
|
Future Payment
|
|
|
Value
|
|
|
Wholly-owned subsidiaries
|
|
$
|
89
|
|
|
$
|
63
|
|
Aluminium Norf GmbH
|
|
$
|
14
|
|
|
$
|
|
|
We have no 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.
|
|
17.
|
Segment
and Major Customer Information
|
Segment
Information
Due in part to the regional nature of supply and demand of
aluminum rolled products and in order to best serve our
customers, we manage our activities on the basis of geographical
areas and are organized under four operating segments: North
America, Europe, Asia and South America.
36
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
The following is a description of our operating segments:
|
|
|
|
|
North America. Headquartered in Cleveland,
Ohio, this segment manufactures aluminum sheet and light gauge
products and operates 11 plants, including two fully dedicated
recycling facilities, in two countries.
|
|
|
|
Europe. Headquartered in Zurich, Switzerland,
this segment manufactures aluminum sheet and light gauge
products and operates 14 plants, including one recycling
facility, in six countries.
|
|
|
|
Asia. Headquartered in Seoul, South Korea,
this segment manufactures aluminum sheet and light gauge
products and operates three plants in two countries.
|
|
|
|
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 four plants in
Brazil.
|
Adjustment to Eliminate Proportional
Consolidation. The financial information for our
segments 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 the financial information for the segments shown in
the tables below to the relevant GAAP-based measures, we must
remove our proportional share of each line item that we included
in the segment amounts. See Note 6 Investment
in and Advances to Non-Consolidated Affiliates and Related Party
Transactions for further information about these
non-consolidated affiliates.
The tables below show selected segment financial information (in
millions). The Corporate and Other column in the tables below
includes functions that are managed directly from our corporate
office, which focuses on strategy development and oversees
governance, policy, legal compliance, human resources and
finance matters. It also includes consolidating and other
elimination accounts.
Selected
Segment Financial Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliminate
|
|
|
|
|
|
|
North
|
|
|
|
|
|
South
|
|
Proportional
|
|
Corporate
|
|
|
Total Assets
|
|
America
|
|
Europe
|
|
Asia
|
|
America
|
|
Consolidation
|
|
and Other
|
|
Total
|
(Successor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2008
|
|
$
|
4,003
|
|
|
$
|
3,775
|
|
|
$
|
985
|
|
|
$
|
1,486
|
|
|
$
|
(191
|
)
|
|
$
|
266
|
|
|
$
|
10,324
|
|
March 31, 2008 (Restated)
|
|
$
|
3,888
|
|
|
$
|
4,171
|
|
|
$
|
1,081
|
|
|
$
|
1,478
|
|
|
$
|
(199
|
)
|
|
$
|
263
|
|
|
$
|
10,682
|
|
Comparison
of Three Month Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliminate
|
|
|
|
|
|
|
|
Selected Operating Results
|
|
North
|
|
|
|
|
|
|
|
|
South
|
|
|
Proportional
|
|
|
Corporate
|
|
|
|
|
Three Months Ended September 30, 2008
|
|
America
|
|
|
Europe
|
|
|
Asia
|
|
|
America
|
|
|
Consolidation
|
|
|
and Other
|
|
|
Total
|
|
(Successor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales (to third parties)
|
|
$
|
1,111
|
|
|
$
|
1,097
|
|
|
$
|
458
|
|
|
$
|
300
|
|
|
$
|
(7
|
)
|
|
$
|
|
|
|
$
|
2,959
|
|
Intersegment sales
|
|
|
2
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
Segment Income
|
|
|
2
|
|
|
|
62
|
|
|
|
(3
|
)
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
|
109
|
|
Depreciation and amortization
|
|
|
41
|
|
|
|
54
|
|
|
|
13
|
|
|
|
19
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
107
|
|
Capital expenditures
|
|
|
10
|
|
|
|
17
|
|
|
|
6
|
|
|
|
9
|
|
|
|
(6
|
)
|
|
|
1
|
|
|
|
37
|
|
37
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliminate
|
|
|
|
|
|
|
|
Selected Operating Results
|
|
North
|
|
|
|
|
|
|
|
|
South
|
|
|
Proportional
|
|
|
Corporate
|
|
|
|
|
Three Months Ended September 30, 2007
|
|
America
|
|
|
Europe
|
|
|
Asia
|
|
|
America
|
|
|
Consolidation
|
|
|
and Other
|
|
|
Total
|
|
(Successor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales (to third parties)
|
|
$
|
1,050
|
|
|
$
|
1,092
|
|
|
$
|
438
|
|
|
$
|
241
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,821
|
|
Intersegment sales
|
|
|
2
|
|
|
|
1
|
|
|
|
4
|
|
|
|
11
|
|
|
|
|
|
|
|
(18
|
)
|
|
|
|
|
Segment Income (Restated)
|
|
|
89
|
|
|
|
68
|
|
|
|
18
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
221
|
|
Depreciation and amortization (Restated)
|
|
|
40
|
|
|
|
47
|
|
|
|
16
|
|
|
|
15
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
103
|
|
Capital expenditures
|
|
|
8
|
|
|
|
16
|
|
|
|
6
|
|
|
|
7
|
|
|
|
(3
|
)
|
|
|
1
|
|
|
|
35
|
|
Comparison
of Six Month Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliminate
|
|
|
|
|
|
|
|
Selected Operating Results
|
|
North
|
|
|
|
|
|
|
|
|
South
|
|
|
Proportional
|
|
|
Corporate
|
|
|
|
|
Six Months Ended September 30, 2008
|
|
America
|
|
|
Europe
|
|
|
Asia
|
|
|
America
|
|
|
Consolidation
|
|
|
and Other
|
|
|
Total
|
|
(Successor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales (to third parties)
|
|
$
|
2,194
|
|
|
$
|
2,315
|
|
|
$
|
968
|
|
|
$
|
595
|
|
|
$
|
(10
|
)
|
|
$
|
|
|
|
$
|
6,062
|
|
Intersegment sales
|
|
|
2
|
|
|
|
5
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
Segment Income
|
|
|
44
|
|
|
|
173
|
|
|
|
28
|
|
|
|
95
|
|
|
|
|
|
|
|
|
|
|
|
340
|
|
Depreciation and amortization
|
|
|
83
|
|
|
|
117
|
|
|
|
28
|
|
|
|
36
|
|
|
|
(42
|
)
|
|
|
1
|
|
|
|
223
|
|
Capital expenditures
|
|
|
17
|
|
|
|
36
|
|
|
|
11
|
|
|
|
15
|
|
|
|
(10
|
)
|
|
|
1
|
|
|
|
70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliminate
|
|
|
|
|
|
|
|
Selected Operating Results
|
|
North
|
|
|
|
|
|
|
|
|
South
|
|
|
Proportional
|
|
|
Corporate
|
|
|
|
|
May 16, 2007 Through September 30, 2007
|
|
America
|
|
|
Europe
|
|
|
Asia
|
|
|
America
|
|
|
Consolidation
|
|
|
and Other
|
|
|
Total
|
|
(Successor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales (to third parties)
|
|
$
|
1,624
|
|
|
$
|
1,686
|
|
|
$
|
683
|
|
|
$
|
375
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,368
|
|
Intersegment sales
|
|
|
3
|
|
|
|
1
|
|
|
|
6
|
|
|
|
27
|
|
|
|
|
|
|
|
(37
|
)
|
|
|
|
|
Segment Income (Restated)
|
|
|
112
|
|
|
|
111
|
|
|
|
16
|
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
307
|
|
Depreciation and amortization (Restated)
|
|
|
61
|
|
|
|
72
|
|
|
|
24
|
|
|
|
22
|
|
|
|
(23
|
)
|
|
|
|
|
|
|
156
|
|
Capital expenditures
|
|
|
14
|
|
|
|
25
|
|
|
|
11
|
|
|
|
8
|
|
|
|
(3
|
)
|
|
|
2
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliminate
|
|
|
|
|
|
|
|
Selected Operating Results
|
|
North
|
|
|
|
|
|
|
|
|
South
|
|
|
Proportional
|
|
|
Corporate
|
|
|
|
|
April 1, 2007 Through May 15, 2007
|
|
America
|
|
|
Europe
|
|
|
Asia
|
|
|
America
|
|
|
Consolidation
|
|
|
and Other
|
|
|
Total
|
|
(Predecessor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales (to third parties)
|
|
$
|
446
|
|
|
$
|
510
|
|
|
$
|
216
|
|
|
$
|
109
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,281
|
|
Intersegment sales
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
7
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
Segment Income
|
|
|
(24
|
)
|
|
|
32
|
|
|
|
6
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
32
|
|
Depreciation and amortization
|
|
|
7
|
|
|
|
11
|
|
|
|
7
|
|
|
|
5
|
|
|
|
(3
|
)
|
|
|
1
|
|
|
|
28
|
|
Capital expenditures
|
|
|
4
|
|
|
|
8
|
|
|
|
4
|
|
|
|
3
|
|
|
|
(3
|
)
|
|
|
1
|
|
|
|
17
|
|
38
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
The following table shows the reconciliation from Total Segment
Income to Net income (loss) (in millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
May 16, 2007
|
|
|
|
April 1, 2007
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Through
|
|
|
|
Through
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
May 15,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
2007
|
|
|
|
|
|
|
(Restated)
|
|
|
|
|
|
(Restated)
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Successor
|
|
|
Successor
|
|
|
|
Predecessor
|
|
Total Segment Income
|
|
$
|
109
|
|
|
$
|
221
|
|
|
$
|
340
|
|
|
$
|
307
|
|
|
|
$
|
32
|
|
Interest expense and amortization of debt issuance
costs net
|
|
|
(41
|
)
|
|
|
(56
|
)
|
|
|
(81
|
)
|
|
|
(81
|
)
|
|
|
|
(26
|
)
|
Unrealized gains (losses) on change in fair value of derivative
instruments net(A)
|
|
|
(221
|
)
|
|
|
(87
|
)
|
|
|
(200
|
)
|
|
|
(102
|
)
|
|
|
|
5
|
|
Realized gains (losses) on corporate derivative
instruments net
|
|
|
|
|
|
|
30
|
|
|
|
|
|
|
|
38
|
|
|
|
|
(3
|
)
|
Depreciation and amortization
|
|
|
(107
|
)
|
|
|
(103
|
)
|
|
|
(223
|
)
|
|
|
(156
|
)
|
|
|
|
(28
|
)
|
Impairment charges on long-lived assets
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Minority interests share
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
2
|
|
|
|
|
1
|
|
Adjustment to eliminate proportional consolidation(B)
|
|
|
(18
|
)
|
|
|
7
|
|
|
|
(36
|
)
|
|
|
(2
|
)
|
|
|
|
(7
|
)
|
Restructuring recoveries (charges) net
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
|
(1
|
)
|
Gain (loss) on sales of property, plant and equipment and
businesses net
|
|
|
1
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Corporate selling, general and administrative expenses
|
|
|
(16
|
)
|
|
|
(16
|
)
|
|
|
(30
|
)
|
|
|
(24
|
)
|
|
|
|
(35
|
)
|
Other costs net(C)
|
|
|
21
|
|
|
|
5
|
|
|
|
18
|
|
|
|
2
|
|
|
|
|
1
|
|
Sale transaction fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32
|
)
|
Benefit (provision) for taxes on income (loss)
|
|
|
169
|
|
|
|
(20
|
)
|
|
|
134
|
|
|
|
(47
|
)
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(103
|
)
|
|
$
|
(19
|
)
|
|
$
|
(78
|
)
|
|
$
|
(64
|
)
|
|
|
$
|
(97
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
|
Unrealized gains (losses) on change in fair value of derivative
instruments net represents the portion of gains
(losses) that were not settled in cash during the period. Total
realized and unrealized gains (losses) are shown in the table
below and are included in the aggregate each period in (Gain)
loss on change in fair value of derivative instruments
net on our condensed consolidated
statements of operations. |
39
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
Six Months
|
|
May 16, 2007
|
|
|
April 1, 2007
|
|
|
Ended
|
|
Ended
|
|
Through
|
|
|
Through
|
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
|
May 15,
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
2007
|
|
|
|
|
(Restated)
|
|
|
|
(Restated)
|
|
|
|
|
|
Successor
|
|
Successor
|
|
Successor
|
|
Successor
|
|
|
Predecessor
|
(Gains) losses on change in fair value of derivative
instruments net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized and included in Segment Income
|
|
$
|
(36
|
)
|
|
$
|
(27
|
)
|
|
$
|
(81
|
)
|
|
$
|
(48
|
)
|
|
|
$
|
(18
|
)
|
Realized on corporate derivative instruments
|
|
|
|
|
|
|
(30
|
)
|
|
|
|
|
|
|
(38
|
)
|
|
|
|
3
|
|
Unrealized
|
|
|
221
|
|
|
|
87
|
|
|
|
200
|
|
|
|
102
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gains) losses on change in fair value of derivative instruments
net
|
|
$
|
185
|
|
|
$
|
30
|
|
|
$
|
119
|
|
|
$
|
16
|
|
|
|
$
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(B) |
|
Our financial information for our segments (including Segment
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 Segment Income to Net income (loss), the
proportional Segment Income of these non-consolidated affiliates
is removed from Total Segment Income, net of our share of their
net after-tax results, which is reported as Equity in net
(income) loss of non-consolidated affiliates on our
condensed consolidated statements of operations. See
Note 6 Investment in and Advances to
Non-Consolidated Affiliates and Related Party Transactions for
further information about these non-consolidated affiliates. |
|
(C) |
|
Other costs net includes a $26 million
gain on the reversal of a legal accrual for the Reynolds Boat
Case during the three and six months ended September 30,
2008. See Note 16 Commitments and
Contingencies for additional discussion. |
Information
about Major Customers
All of our operating segments had Net sales to Rexam Plc
(Rexam), our largest customer. The table below shows our net
sales to Rexam as a percentage of total Net sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
Six Months
|
|
May 16, 2007
|
|
|
April 1, 2007
|
|
|
Ended
|
|
Ended
|
|
Through
|
|
|
Through
|
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
|
May 15,
|
|
|
2008
|
|
2007
|
|
2007
|
|
2007
|
|
|
2007
|
|
|
Successor
|
|
Successor
|
|
Successor
|
|
Successor
|
|
|
Predecessor
|
Net sales to Rexam as a percentage of total net sales
|
|
16.9%
|
|
15.6%
|
|
16.2%
|
|
14.7%
|
|
|
13.5%
|
|
|
18.
|
Supplemental
Guarantor Information
|
In connection with the issuance of our Senior Notes, certain of
our wholly-owned subsidiaries provided guarantees of the Senior
Notes. These guarantees are full and unconditional as well as
joint and several. The guarantor subsidiaries (the Guarantors)
are comprised of the majority of our businesses in Canada, the
U.S., the U.K., Brazil and Switzerland, as well as certain
businesses in Germany. Certain Guarantors may be subject to
restrictions on their ability to distribute earnings to Novelis
Inc. (the Parent). The remaining subsidiaries (the
Non-Guarantors) of the Parent are not guarantors of the Senior
Notes.
40
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
The following information presents condensed consolidating
statements of operations, balance sheets and statements of cash
flows of the Parent, the Guarantors, and the Non-Guarantors.
Investments include investment in and advances to
non-consolidated affiliates as well as investments in net assets
of divisions included in the Parent, and have been presented
using the equity method of accounting.
Novelis
Inc.
Condensed
Consolidating Statement of Operations
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2008
(Successor)
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net sales
|
|
$
|
389
|
|
|
$
|
2,482
|
|
|
$
|
767
|
|
|
$
|
(679
|
)
|
|
$
|
2,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold (exclusive of depreciation and amortization
shown below)
|
|
|
384
|
|
|
|
2,364
|
|
|
|
722
|
|
|
|
(679
|
)
|
|
|
2,791
|
|
Selling, general and administrative expenses
|
|
|
6
|
|
|
|
62
|
|
|
|
21
|
|
|
|
|
|
|
|
89
|
|
Depreciation and amortization
|
|
|
6
|
|
|
|
77
|
|
|
|
24
|
|
|
|
|
|
|
|
107
|
|
Research and development expenses
|
|
|
7
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
Interest expense and amortization of debt issuance
costs net
|
|
|
7
|
|
|
|
31
|
|
|
|
3
|
|
|
|
|
|
|
|
41
|
|
(Gain) loss on change in fair value of derivative
instruments net
|
|
|
3
|
|
|
|
197
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
185
|
|
Equity in net (income) loss of affiliates
|
|
|
81
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
(81
|
)
|
|
|
(2
|
)
|
Other (income) expenses net
|
|
|
(3
|
)
|
|
|
(22
|
)
|
|
|
35
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
491
|
|
|
|
2,710
|
|
|
|
790
|
|
|
|
(760
|
)
|
|
|
3,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision (benefit) for taxes on income
(loss) and minority interests share
|
|
|
(102
|
)
|
|
|
(228
|
)
|
|
|
(23
|
)
|
|
|
81
|
|
|
|
(272
|
)
|
Provision (benefit) for taxes on income (loss)
|
|
|
1
|
|
|
|
(165
|
)
|
|
|
(5
|
)
|
|
|
|
|
|
|
(169
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before minority interests share
|
|
|
(103
|
)
|
|
|
(63
|
)
|
|
|
(18
|
)
|
|
|
81
|
|
|
|
(103
|
)
|
Minority interests share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(103
|
)
|
|
$
|
(63
|
)
|
|
$
|
(18
|
)
|
|
$
|
81
|
|
|
$
|
(103
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
Novelis
Inc.
Condensed
Consolidating Statement of Operations
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2007
(Successor)
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
Restated
|
|
Parent
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net sales
|
|
$
|
369
|
|
|
$
|
2,340
|
|
|
$
|
736
|
|
|
$
|
(624
|
)
|
|
$
|
2,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold (exclusive of depreciation and amortization
shown below)
|
|
|
365
|
|
|
|
2,117
|
|
|
|
697
|
|
|
|
(624
|
)
|
|
|
2,555
|
|
Selling, general and administrative expenses
|
|
|
8
|
|
|
|
62
|
|
|
|
18
|
|
|
|
|
|
|
|
88
|
|
Depreciation and amortization
|
|
|
5
|
|
|
|
75
|
|
|
|
23
|
|
|
|
|
|
|
|
103
|
|
Research and development expenses
|
|
|
7
|
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
|
10
|
|
Interest expense and amortization of debt issuance
costs net
|
|
|
15
|
|
|
|
35
|
|
|
|
6
|
|
|
|
|
|
|
|
56
|
|
(Gain) loss on change in fair value of derivative
instruments net
|
|
|
1
|
|
|
|
21
|
|
|
|
8
|
|
|
|
|
|
|
|
30
|
|
Equity in net (income) loss of affiliates
|
|
|
(9
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
9
|
|
|
|
(20
|
)
|
Other (income) expenses net
|
|
|
(8
|
)
|
|
|
7
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
384
|
|
|
|
2,299
|
|
|
|
752
|
|
|
|
(615
|
)
|
|
|
2,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision (benefit) for taxes on income
(loss) and minority interests share
|
|
|
(15
|
)
|
|
|
41
|
|
|
|
(16
|
)
|
|
|
(9
|
)
|
|
|
1
|
|
Provision (benefit) for taxes on income (loss)
|
|
|
4
|
|
|
|
15
|
|
|
|
1
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before minority interests share
|
|
|
(19
|
)
|
|
|
26
|
|
|
|
(17
|
)
|
|
|
(9
|
)
|
|
|
(19
|
)
|
Minority interests share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(19
|
)
|
|
$
|
26
|
|
|
$
|
(17
|
)
|
|
$
|
(9
|
)
|
|
$
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
Novelis
Inc.
Condensed
Consolidating Statement of Operations
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended September 30, 2008
(Successor)
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net sales
|
|
$
|
784
|
|
|
$
|
5,064
|
|
|
$
|
1,603
|
|
|
$
|
(1,389
|
)
|
|
$
|
6,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold (exclusive of depreciation and amortization
shown below)
|
|
|
771
|
|
|
|
4,741
|
|
|
|
1,499
|
|
|
|
(1,389
|
)
|
|
|
5,622
|
|
Selling, general and administrative expenses
|
|
|
6
|
|
|
|
124
|
|
|
|
43
|
|
|
|
|
|
|
|
173
|
|
Depreciation and amortization
|
|
|
12
|
|
|
|
166
|
|
|
|
45
|
|
|
|
|
|
|
|
223
|
|
Research and development expenses
|
|
|
15
|
|
|
|
6
|
|
|
|
1
|
|
|
|
|
|
|
|
22
|
|
Interest expense and amortization of debt issuance
costs net
|
|
|
14
|
|
|
|
60
|
|
|
|
7
|
|
|
|
|
|
|
|
81
|
|
(Gain) loss on change in fair value of derivative
instruments net
|
|
|
3
|
|
|
|
135
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
119
|
|
Equity in net (income) loss of affiliates
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
|
(49
|
)
|
|
|
|
|
Other (income) expenses net
|
|
|
(10
|
)
|
|
|
(9
|
)
|
|
|
51
|
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
860
|
|
|
|
5,223
|
|
|
|
1,627
|
|
|
|
(1,438
|
)
|
|
|
6,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision (benefit) for taxes on income
(loss) and minority interests share
|
|
|
(76
|
)
|
|
|
(159
|
)
|
|
|
(24
|
)
|
|
|
49
|
|
|
|
(210
|
)
|
Provision (benefit) for taxes on income (loss)
|
|
|
2
|
|
|
|
(132
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
(134
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before minority interests share
|
|
|
(78
|
)
|
|
|
(27
|
)
|
|
|
(20
|
)
|
|
|
49
|
|
|
|
(76
|
)
|
Minority interests share
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(78
|
)
|
|
$
|
(27
|
)
|
|
$
|
(22
|
)
|
|
$
|
49
|
|
|
$
|
(78
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
Novelis
Inc.
Condensed
Consolidating Statement of Operations
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 16, 2007 Through September 30, 2007
(Successor)
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
Restated
|
|
Parent
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net sales
|
|
$
|
614
|
|
|
$
|
3,687
|
|
|
$
|
1,155
|
|
|
$
|
(1,088
|
)
|
|
$
|
4,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold (exclusive of depreciation and amortization
shown below)
|
|
|
612
|
|
|
|
3,368
|
|
|
|
1,099
|
|
|
|
(1,088
|
)
|
|
|
3,991
|
|
Selling, general and administrative expenses
|
|
|
13
|
|
|
|
87
|
|
|
|
30
|
|
|
|
|
|
|
|
130
|
|
Depreciation and amortization
|
|
|
8
|
|
|
|
113
|
|
|
|
35
|
|
|
|
|
|
|
|
156
|
|
Research and development expenses
|
|
|
9
|
|
|
|
9
|
|
|
|
5
|
|
|
|
|
|
|
|
23
|
|
Interest expense and amortization of debt issuance
costs net
|
|
|
18
|
|
|
|
55
|
|
|
|
8
|
|
|
|
|
|
|
|
81
|
|
(Gain) loss on change in fair value of derivative
instruments net
|
|
|
(12
|
)
|
|
|
17
|
|
|
|
11
|
|
|
|
|
|
|
|
16
|
|
Equity in net (income) loss of affiliates
|
|
|
16
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
(16
|
)
|
|
|
(19
|
)
|
Other (income) expenses net
|
|
|
(12
|
)
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
652
|
|
|
|
3,651
|
|
|
|
1,188
|
|
|
|
(1,104
|
)
|
|
|
4,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision (benefit) for taxes on income
(loss) and minority interests share
|
|
|
(38
|
)
|
|
|
36
|
|
|
|
(33
|
)
|
|
|
16
|
|
|
|
(19
|
)
|
Provision (benefit) for taxes on income (loss)
|
|
|
26
|
|
|
|
20
|
|
|
|
1
|
|
|
|
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before minority interests share
|
|
|
(64
|
)
|
|
|
16
|
|
|
|
(34
|
)
|
|
|
16
|
|
|
|
(66
|
)
|
Minority interests share
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(64
|
)
|
|
$
|
16
|
|
|
$
|
(32
|
)
|
|
$
|
16
|
|
|
$
|
(64
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
Novelis
Inc.
NOTES TO
THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (unaudited) (Continued)
Novelis
Inc.
Condensed
Consolidating Statement of Operations
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 1, 2007 Through May 15, 2007
(Predecessor)
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net sales
|
|
$
|
129
|
|
|
$
|
1,020
|
|
|
$
|
359
|
|
|
$
|
(227
|
)
|
|
$
|
1,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold (exclusive of depreciation and amortization
shown below)
|
|
|
131
|
|
|
|
961
|
|
|
|
340
|
|
|
|
(227
|
)
|
|
|
1,205
|
|
Selling, general and administrative expenses
|
|
|
29
|
|
|
|
51
|
|
|
|
15
|
|
|
|
|
|
|
|
95
|
|
Depreciation and amortization
|
|
|
2
|
|
|
|
18
|
|
|
|
8
|
|
|
|
|
|
|
|
28
|
|
Research and development expenses
|
|
|
5
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
Interest expense and amortization of debt issuance
costs net
|
|
|
3
|
|
|
|
20
|
|
|
|
3
|
|
|
|
|
|
|
|
26
|
|
(Gain) loss on change in fair value of derivative instruments
net
|
|
|
(2
|
)
|
|
|
(19
|
)
|
|
|
1
|
|
|
|
|
|
|
|