Form: 8-K

Current report filing

February 9, 2016

Documents


Exhibit 99.1
  
News Release

Novelis Reports Third Quarter of Fiscal Year 2016 Results
Record Automotive Shipments and Solid Execution Deliver Strong Quarterly Results

Third Quarter Fiscal Year 2016 Highlights
•
Net income of $6 million; excluding special items, net income $32 million
•
Excluding metal price lag, Adjusted EBITDA increased 4% YoY to $238 million
•
Record automotive shipments up 52% YoY
•
Global FRP shipments of 779 kilotonnes, up 3% YoY

ATLANTA, February 9, 2016 – Novelis, the world leader in aluminum rolling and recycling, today reported net income of $6 million for the third quarter of fiscal year 2016.  Excluding tax-effected special items, the company reported net income of $32 million in the third quarter of fiscal 2016 compared to $54 million in the third quarter of fiscal 2015.
Excluding the impact of metal price lag in both quarters, Adjusted EBITDA was $238 million in the third quarter of fiscal 2016, up four percent compared to $228 million in the prior year. The increase was driven by higher shipments of automotive and beverage can sheet, partially offset by less favorable recycling benefits due to depressed aluminum prices as compared to the prior year. Current year results also reflect higher fixed costs associated with new automotive and recycling operations.
"Our good performance this quarter validates our strategy to grow aluminum rolled products capabilities around the world to serve high growth, high value industries including automotive and packaging," said Steve Fisher, President and Chief Executive Officer for Novelis. "The success of our expansion projects coupled with our steady improvement in operational performance positions Novelis for continued growth and profitability."
Shipments of rolled aluminum products grew three percent to 779 kilotonnes in the third quarter of fiscal 2016, as compared to 757 kilotonnes reported in the prior year period. Despite higher shipments, revenues decreased 17 percent to $2.4 billion for the third quarter of fiscal 2016 driven by significantly lower average aluminum prices and local market premiums.
While average local market metal premiums stabilized during the third quarter of fiscal 2016, the company reported negative metal price lag of $26 million as it continued to turn higher average metal cost inventory from previous months. Although the company uses derivatives contracts to minimize the price lag associated with LME base aluminum prices, adequate cost-effective hedges are not available for local market premiums. Adjusted EBITDA for the third quarter of fiscal 2016 including metal price lag was $212 million.
The company reported negative $12 million of free cash flow in the third quarter of fiscal 2016 as compared to negative $12 million in the third quarter of fiscal 2015. Capital expenditures totaled $78 million in the third quarter of fiscal 2016, down from $104 million reported in the prior year period. The company continues to expect positive free cash flow for the full fiscal year, and capital expenditures slightly below $400 million in fiscal 2016.
As of December 31, 2015, the company reported solid liquidity of $946 million.

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Third Quarter of Fiscal Year 2016 Earnings Conference Call
Novelis will discuss its third quarter of fiscal year 2016 results via a live webcast and conference call for investors at 8:00 a.m. ET on Tuesday, February 9, 2016. To view slides and listen only, visit the web at
https://cc.callinfo.com/r/1jziyt410jabm&eom. To join by telephone, dial toll-free in North America at 800 918 9478, India toll-free at 0008008521493 or the international toll line at +1 303 223 0117. Presentation materials and access information may also be found at novelis.com/investors.

About Novelis
Novelis Inc. is the global leader in aluminum rolled products and the world's largest recycler of aluminum. The company operates in 11 countries, has approximately 11,500 employees and reported $11.1 billion in revenue for its 2015 fiscal year. Novelis supplies premium aluminum sheet and foil products to transportation, packaging, construction, industrial and consumer electronics markets throughout North America, Europe, Asia and South America. The company is a subsidiary of Hindalco Industries Limited, part of the Aditya Birla Group, a multinational conglomerate based in Mumbai, India. For more information, visit novelis.com and follow us on Facebook at facebook.com/NovelisInc and Twitter at twitter.com/Novelis.
 
Non-GAAP Financial Measures
This press release and the presentation slides for the earnings call contain non-GAAP financial measures as defined by SEC rules. We believe these measures are helpful to investors in measuring our financial performance and liquidity and comparing our performance to our peers. However, our non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures used by other companies. These non-GAAP financial measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for GAAP financial measures. To the extent we discuss any non-GAAP financial measures on the earnings call, a reconciliation of each measure to the most directly comparable GAAP measure will be available in the presentation slides filed as Exhibit 99.2 to our Current Report on Form 8-K furnished to the SEC concurrently with the issuance of this press release. In addition, the Form 8-K includes a more detailed description of each of these non-GAAP financial measures, together with a discussion of the usefulness and purpose of such measures.

Attached to this news release are tables showing the Condensed Consolidated Statements of Operations, Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Cash Flows, Reconciliation to Adjusted EBITDA and Adjusted EBITDA excluding Metal Price Lag, Free Cash Flow, Reconciliation to Liquidity, Reconciliation to Net (Loss) Income excluding Special Items, and Segment Information.

Forward-Looking Statements
Statements made in this news release which describe Novelis' intentions, expectations, beliefs or predictions may be forward-looking statements within the meaning of securities laws.  Forward-looking statements include statements preceded by, followed by, or including the words "believes," "expects," "anticipates," "plans," "estimates," "projects," "forecasts," or similar expressions.  An example of forward looking statements in this news release is the company's expectation for positive free cash flow for the full fiscal year. Novelis cautions that, by their nature, forward-looking statements involve risk and uncertainty and Novelis' actual results could differ materially from those expressed or implied in such statements.  We do not intend, and we disclaim any obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise.  Factors that could cause actual results or outcomes to differ from the results expressed or implied by forward-looking statements include, among other things: changes in the prices and availability of aluminum (or premiums associated with such prices) or other materials and raw materials we use; the capacity and effectiveness of our hedging activities; relationships with, and financial and operating conditions of, our customers, suppliers and other stakeholders; fluctuations in the supply of, and prices for, energy in the areas in which we maintain production facilities; our ability to access financing for future capital requirements; changes in the relative values of various currencies and the effectiveness of our currency hedging activities; factors affecting our operations, such

2

as litigation, environmental remediation and clean-up costs, labor relations and negotiations, breakdown of equipment and other events; the impact of restructuring efforts in the future; economic, regulatory and political factors within the countries in which we operate or sell our products, including changes in duties or tariffs; competition from other aluminum rolled products producers as well as from substitute materials such as steel, glass, plastic and composite materials; changes in general economic conditions including deterioration in the global economy, particularly sectors in which our customers operate; cyclical demand and pricing within the principal markets for our products as well as seasonality in certain of our customers’ industries; changes in government regulations, particularly those affecting taxes, derivative instruments, environmental, health or safety compliance; changes in interest rates that have the effect of increasing the amounts we pay under our credit facilities and other financing agreements; the effect of taxes and changes in tax rates; our level of indebtedness and our ability to generate cash. The above list of factors is not exhaustive.  Other important risk factors included under the caption "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2015 are specifically incorporated by reference into this news release.

Media Contact:
 
Investor Contact:
Charles Belbin
 
Megan Cochard
+1 404 760 4122
 
+1 404 760 4170
charles.belbin@novelis.com
 
megan.cochard@novelis.com

3



Novelis Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in millions)



 
 
 
 
 
Three Months Ended December 31,
 
Nine Months Ended December 31,
 
2015
 
2014
 
2015
 
2014
Net sales
$
2,354

 
$
2,847

 
$
7,470

 
$
8,358

Cost of goods sold (exclusive of depreciation and amortization)
2,051

 
2,498

 
6,692

 
7,310

Selling, general and administrative expenses
104

 
108

 
304

 
319

Depreciation and amortization
88

 
87

 
264

 
266

Interest expense and amortization of debt issuance costs
82

 
85

 
244

 
248

Research and development expenses
13

 
14

 
39

 
38

Gain on assets held for sale
—

 
(12
)
 
—

 
(23
)
Loss on extinguishment of debt
—

 
—

 
13

 
—

Restructuring and impairment, net
10

 
25

 
29

 
38

Equity in net loss of non-consolidated affiliates
—

 
2

 
2

 
4

Other (income) expense, net
(16
)
 
(9
)
 
(78
)
 
14

 
2,332

 
2,798

 
7,509

 
8,214

Income (loss) before income taxes
22

 
49

 
(39
)
 
144

Income tax provision
16

 
3

 
28

 
25

Net income (loss)
6

 
46

 
(67
)
 
119

Net income attributable to noncontrolling interests
—

 
—

 
—

 
—

Net income (loss) attributable to our common shareholder
$
6

 
$
46

 
$
(67
)
 
$
119


























4

Novelis Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in millions, except number of shares)
 
December 31, 2015
 
March 31, 2015
ASSETS
 
Current assets
 
 
 
Cash and cash equivalents
$
457

 
$
628

Accounts receivable, net
 
 
 
— third parties (net of uncollectible accounts of $3 as of December 31, 2015 and March 31, 2015)
1,110

 
1,289

— related parties
56

 
53

Inventories
1,277

 
1,431

Prepaid expenses and other current assets
107

 
112

Fair value of derivative instruments
64

 
77

Deferred income tax assets
95

 
79

Assets held for sale
5

 
6

Total current assets
3,171

 
3,675

Property, plant and equipment, net
3,465

 
3,542

Goodwill
607

 
607

Intangible assets, net
545

 
584

Investment in and advances to non–consolidated affiliate
452

 
447

Deferred income tax assets
109

 
95

Other long–term assets
 
 
 
— third parties
109

 
137

— related parties
17

 
15

Total assets
$
8,475

 
$
9,102

LIABILITIES AND SHAREHOLDER’S DEFICIT
 
 
 
Current liabilities
 
 
 
Current portion of long–term debt
$
47

 
$
108

Short–term borrowings
932

 
846

Accounts payable
 
 
 
— third parties
1,384

 
1,854

— related parties
49

 
44

Fair value of derivative instruments
111

 
149

Accrued expenses and other current liabilities
514

 
572

Deferred income tax liabilities
8

 
20

Total current liabilities
3,045

 
3,593

Long–term debt, net of current portion
4,442

 
4,349

Deferred income tax liabilities
243

 
261

Accrued postretirement benefits
749

 
748

Other long–term liabilities
168

 
221

Total liabilities
8,647

 
9,172

Commitments and contingencies
 
 
 
Shareholder’s deficit
 
 
 
Common stock, no par value; unlimited number of shares authorized; 1,000 shares issued and outstanding as of December 31, 2015 and March 31, 2015
—

 
—

Additional paid–in capital
1,404

 
1,404

Accumulated deficit
(992
)
 
(925
)
Accumulated other comprehensive loss
(594
)
 
(561
)
Total deficit of our common shareholder
(182
)
 
(82
)
Noncontrolling interests
10

 
12

Total deficit
(172
)
 
(70
)
Total liabilities and deficit
$
8,475

 
$
9,102


5


Novelis Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in millions)
 
Nine Months Ended December 31,
 
2015
 
2014
OPERATING ACTIVITIES
 
 
 
Net (loss) income
$
(67
)
 
$
119

Adjustments to determine net cash provided by operating activities:
 
 
 
Depreciation and amortization
264

 
266

(Gain) loss on unrealized derivatives and other realized derivatives in investing activities, net
(25
)
 
6

Gain on assets held for sale
—

 
(23
)
Loss on sale of assets
2

 
4

Impairment charges
8

 
7

Loss on extinguishment of debt
13

 
—

Deferred income taxes
(60
)
 
(46
)
Amortization of fair value adjustments, net
9

 
9

Equity in net loss of non-consolidated affiliates
2

 
4

Gain on foreign exchange remeasurement of debt
(5
)
 
(4
)
Amortization of debt issuance costs and carrying value adjustments
15

 
19

Changes in assets and liabilities including assets and liabilities held for sale (net of effects from divestitures):
 
 
 
Accounts receivable
166

 
(176
)
Inventories
146

 
(437
)
Accounts payable
(422
)
 
427

Other current assets
6

 
(62
)
Other current liabilities
(42
)
 
(6
)
Other noncurrent assets
21

 
3

Other noncurrent liabilities
(30
)
 
(23
)
Net cash provided by operating activities
1

 
87

INVESTING ACTIVITIES
 
 
 
Capital expenditures
(282
)
 
(368
)
Proceeds from sales of assets, third party, net of transaction fees and hedging
2

 
100

Outflows from investments in and advances to non-consolidated affiliates, net
(5
)
 
(17
)
(Outflows) proceeds from settlement of other undesignated derivative instruments, net
(11
)
 
1

Net cash used in investing activities
(296
)
 
(284
)
FINANCING ACTIVITIES
 
 
 
Proceeds from issuance of long-term and short-term borrowings
151

 
303

Principal payments of long-term and short-term borrowings
(194
)
 
(209
)
Revolving credit facilities and other, net
178

 
238

Return of capital to our common shareholder
—

 
(250
)
Dividends, noncontrolling interest
(1
)
 
(1
)
Debt issuance costs
(15
)
 
(3
)
Net cash provided by financing activities
119

 
78

Net decrease in cash and cash equivalents
(176
)
 
(119
)
Effect of exchange rate changes on cash
5

 
(3
)
Cash and cash equivalents — beginning of period
628

 
509

Cash and cash equivalents — end of period
$
457

 
$
387





6

Reconciliation from Net income (loss) attributable to our common shareholder to Adjusted EBITDA, and Adjusted EBITDA excluding Metal Price Lag (unaudited)
Novelis is providing disclosure of the reconciliation of reported non-GAAP financial measures to their comparable financial measures on a GAAP basis. To better analyze underlying operational results, the following table also shows Adjusted EBITDA to Adjusted EBITDA excluding the impact of Metal Price Lag. On certain sales contracts we experience timing differences on the pass through of changing aluminum prices from our suppliers to our customers. Additional timing differences occur in the flow of metal costs through moving average inventory cost values and cost of goods sold. This timing difference is referred to as metal price lag.
(in millions)
Three Months Ended December 31,
 
Nine Months Ended December 31,
 
2015
 
2014
 
2015
 
2014
Net income (loss) attributable to our common shareholder
$
6

 
$
46

 
$
(67
)
 
$
119

Income tax provision
(16
)
 
(3
)
 
(28
)
 
(25
)
Interest, net
(77
)
 
(84
)
 
(235
)
 
(244
)
Depreciation and amortization
(88
)
 
(87
)
 
(264
)
 
(266
)
EBITDA
187

 
220

 
460

 
654

 
 
 
 
 
 
 
 
Unrealized (losses) gains on change in fair value of derivative instruments, net
(2
)
 
12

 
18

 
12

Realized gains (losses) on derivative instruments not included in segment income
1

 
(3
)
 
(1
)
 
(4
)
Adjustment to eliminate proportional consolidation
(7
)
 
(10
)
 
(22
)
 
(27
)
Loss on sale of fixed assets
(1
)
 
(1
)
 
(2
)
 
(4
)
Gain on assets held for sale
—

 
12

 
—

 
23

Loss on extinguishment of debt
—

 
—

 
(13
)
 
—

Restructuring and impairment, net
(10
)
 
(25
)
 
(29
)
 
(38
)
Other expense, net
(6
)
 
(1
)
 
(12
)
 
(9
)
Adjusted EBITDA   
$
212

 
$
236

 
$
521

 
$
701

 
 
 
 
 
 
 
 
Metal price lag
(26
)
 
8

 
(165
)
 
19

Adjusted EBITDA excluding metal price lag
$
238

 
$
228

 
$
686

 
$
682


Free Cash Flow and Cash and Cash Equivalents (unaudited)
The following table shows the “Free cash flow” for the nine months ended December 31, 2015 and 2014 and the ending balances of cash and cash equivalents (in millions).
 
 
Nine Months Ended December 31,
 
2015
 
2014
Net cash provided by operating activities
$
1

 
$
87

Net cash used in investing activities
(296
)
 
(284
)
Less: Proceeds from sales of assets, net of transaction fees and hedging
(2
)
 
(100
)
Free cash flow
$
(297
)
 
$
(297
)
Ending cash and cash equivalents
$
457

 
$
387


Total Liquidity (unaudited)
The following table shows available liquidity as of December 31, 2015 and March 31, 2015 (in millions).
 
December 31,
 
March 31,
 
2015
 
2015
Cash and cash equivalents
$
457

 
$
628

Availability under committed credit facilities
489

 
510

Total liquidity
$
946

 
$
1,138



7


Reconciliation of Net income (loss) to Net income, excluding Special Items (unaudited)
The following table shows Net income (loss) attributable to our common shareholder excluding special items (in millions). We adjust for items which may recur in varying magnitude which affect the comparability of the operational results of our underlying business.
 
Three Months Ended December 31,
 
Nine Months Ended December 31,
 
2015
 
2014
 
2015
 
2014
Net income (loss) attributable to our common shareholder
$
6

 
$
46

 
$
(67
)
 
$
119

Special Items:
 
 
 
 
 
 
 
Gain on assets held for sale
—

 
12

 
—

 
23

Loss on extinguishment of debt
—

 
—

 
(13
)
 
—

Metal price lag
(26
)
 
8

 
(165
)
 
19

Restructuring and impairment, net
(10
)
 
(25
)
 
(29
)
 
(38
)
Tax effect on Special Items
10

 
(3
)
 
59

 
(3
)
Net income attributable to our common shareholder, excluding special items
$
32

 
$
54

 
$
81

 
$
118


Segment Information (unaudited)
The following table shows selected segment financial information (in millions, except shipments which are in kilotonnes).
Selected Operating Results Three Months Ended December 31, 2015
 
North
America
 
Europe
 
Asia
 
South
America
 
Eliminations and Other
 
Total
Adjusted EBITDA
 
$
68

 
$
37

 
$
30

 
$
77

 
$
—

 
$
212

Metal price lag
 
(16
)
 
(8
)
 
(3
)
 
1

 
—

 
(26
)
Adjusted EBITDA excluding metal price lag
 
$
84

 
$
45

 
$
33

 
$
76

 
$
—

 
$
238

Shipments
 
 
 
 
 
 
 
 
 
 
 
 
Rolled products - third party
 
253

 
220

 
183

 
123

 
—

 
779

Rolled products - intersegment
 
—

 
12

 
10

 
9

 
(31
)
 
—

Total rolled products
 
253

 
232

 
193

 
132

 
(31
)
 
779

Selected Operating Results Three Months Ended December 31, 2014
 
North
America
 
Europe
 
Asia
 
South
America
 
Eliminations and Other
 
Total
Adjusted EBITDA
 
$
71

 
$
57

 
$
33

 
$
75

 
$
—

 
$
236

Metal price lag
 
2

 
(5
)
 
8

 
3

 
—

 
8

Adjusted EBITDA excluding metal price lag
 
$
69

 
$
62

 
$
25

 
$
72

 
$
—

 
$
228

Shipments
 
 
 
 
 
 
 
 
 
 
 
 
Rolled products - third party
 
255

 
205

 
177

 
120

 
—

 
757

Rolled products - intersegment
 
—

 
13

 
21

 
9

 
(43
)
 
—

Total rolled products
 
255

 
218

 
198

 
129

 
(43
)
 
757

Selected Operating Results Nine Months Ended December 31, 2015
 
North
America
 
Europe
 
Asia
 
South
America
 
Eliminations and Other
 
Total
Adjusted EBITDA
 
$
163

 
$
69

 
$
100

 
$
190

 
$
(1
)
 
$
521

Metal price lag
 
(79
)
 
(78
)
 
(10
)
 
2

 
—

 
(165
)
Adjusted EBITDA excluding metal price lag
 
$
242

 
$
147

 
$
110

 
$
188

 
$
(1
)
 
$
686

Shipments
 
 
 
 
 
 
 
 
 
 
 
 
Rolled products - third party
 
782

 
686

 
538

 
329

 
—

 
2,335

Rolled products - intersegment
 
1

 
48

 
35

 
27

 
(111
)
 
—

Total rolled products
 
783

 
734

 
573

 
356

 
(111
)
 
2,335


8

Selected Operating Results Nine Months Ended December 31, 2014
 
North
America
 
Europe
 
Asia
 
South
America
 
Eliminations and Other
 
Total
Adjusted EBITDA
 
$
211

 
$
211

 
$
106

 
$
171

 
$
2

 
$
701

Metal price lag
 
7

 
2

 
9

 
1

 
—

 
19

Adjusted EBITDA excluding metal price lag
 
$
204

 
$
209

 
$
97

 
$
170

 
$
2

 
$
682

Shipments
 
 
 
 
 
 
 
 
 
 
 
 
Rolled products - third party
 
762

 
665

 
528

 
337

 
—

 
2,292

Rolled products - intersegment
 
2

 
33

 
44

 
22

 
(101
)
 
—

Total rolled products
 
764

 
698

 
572

 
359

 
(101
)
 
2,292




9