Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

November 3, 2021

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to            
Commission File Number: 001-32312
Novelis Inc.
(Exact name of registrant as specified in its charter) 
Canada   98-0442987
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification Number)
3560 Lenox Road, Suite 2000
Atlanta, GA
  30326
(Address of principal executive offices)   (Zip Code)
(404760-4000
(Registrant’s telephone number, including area code) 

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
N/A N/A N/A
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  ¨    No  
The registrant is a voluntary filer and is not subject to the filing requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934. However, the registrant 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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes      No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer Smaller reporting company
¨
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  
As of November 2, 2021, the registrant had 1,000 shares of common stock, no par value, outstanding. All of the registrant’s outstanding shares were held indirectly by Hindalco Industries Ltd., the registrant’s parent company.



TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
PART II. OTHER INFORMATION

2


COMMONLY USED OR DEFINED TERMS
Term Definition
Aleris Aleris Corporation
AluInfra AluInfra Services
Alunorf Aluminium Norf GmbH
Duffel
Plant located in Duffel, Belgium required to be divested (Refer to Note 3 – Discontinued Operations)
Adjusted EBITDA
Exchange Act Securities Exchange Act of 1934, as amended
fiscal 2016 Fiscal year ended March 31, 2016
fiscal 2019 Fiscal year ended March 31, 2019
fiscal 2020 Fiscal year ended March 31, 2020
fiscal 2021 Fiscal year ended March 31, 2021
fiscal 2022 Fiscal year ending March 31, 2022
FRP Flat-rolled products
GAAP Generally Accepted Accounting Principles
Hindalco SARs Hindalco Stock Appreciation Rights
kt kilotonne (One kt is 1,000 metric tonnes.)
Kobe Kobe Steel, Ltd.
Lewisport
Plant located in Lewisport, Kentucky required to be divested (Refer to Note 3 – Discontinued Operations)
Logan Logan Aluminum Inc.
LME The London Metals Exchange
LMP Local market premium
MMBtu One decatherm or 1 million British Thermal Units
OEM Original equipment manufacturer
RSU Restricted stock unit
SEC United States Securities and Exchange Commission
Segment income
SG&A Selling, general and administrative expenses
SPE Special purpose entity
Tri-Arrows Tri-Arrows Aluminum Inc.
UAL Ulsan Aluminum Ltd.
UBC Used beverage can
U.S. United States
VIE Variable interest entity
2021 Form 10-K
Our Annual Report on Form 10-K for the fiscal year ended March 31, 2021 as filed with the SEC on May 12, 2021
3


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Novelis Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
 
Three Months Ended
September 30,
Six Months Ended
September 30,
in millions 2021 2020 2021 2020
Net sales $ 4,119  $ 2,978  $ 7,974  $ 5,404 
Cost of goods sold (exclusive of depreciation and amortization) 3,400  2,384  6,537  4,485 
Selling, general and administrative expenses 142  129  301  251 
Depreciation and amortization 134  141  268  259 
Interest expense and amortization of debt issuance costs 60  70  119  140 
Research and development expenses 21  18  45  37 
Loss on extinguishment of debt, net
64    62   
Restructuring and impairment expenses (reversal), net
  7  (2) 8 
Equity in net income of non-consolidated affiliates
  (1) (1) (2)
Business acquisition and other related costs       11 
Other (income) expenses, net
(20) 18  (84) 93 
3,801  2,766  7,245  5,282 
Income from continuing operations before income tax provision
318  212  729  122 
Income tax provision
79  68  187  39 
Net income from continuing operations
239  144  542  83 
Loss from discontinued operations, net of tax
(2) (11) (65) (29)
Loss on sale of discontinued operations, net of tax   (170)   (170)
Net loss from discontinued operations (2) (181) (65) (199)
Net income (loss)
237  (37) 477  (116)
Net income attributable to noncontrolling interests
       
Net income (loss) attributable to our common shareholder
$ 237  $ (37) $ 477  $ (116)
____________________
See accompanying notes to the condensed consolidated financial statements.

4

Novelis Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)
 
Three Months Ended
September 30,
Six Months Ended
September 30,
in millions 2021 2020 2021 2020
Net income (loss)
$ 237  $ (37) $ 477  $ (116)
Other comprehensive (loss) income:
Currency translation adjustment (64) 96  (34) 151 
Net change in fair value of effective portion of cash flow hedges (190) 6  (205) (71)
Net change in pension and other benefits 7  79  10  87 
Other comprehensive (loss) income before income tax effect
(247) 181  (229) 167 
Income tax (benefit) provision related to items of other comprehensive (loss) income
(48) 21  (48) 2 
Other comprehensive (loss) income, net of tax
(199) 160  (181) 165 
Comprehensive income
38  123  296  49 
Comprehensive income attributable to noncontrolling interests, net of tax
  2    3 
Comprehensive income attributable to our common shareholder
$ 38  $ 121  $ 296  $ 46 
____________________
See accompanying notes to the condensed consolidated financial statements.
5

Novelis Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
in millions, except number of shares September 30,
2021
March 31,
2021
ASSETS
Current assets:
Cash and cash equivalents $ 659  $ 998 
Accounts receivable, net
— third parties (net of allowance for credit losses of $7 and $5 as of September 30, 2021 and March 31, 2021, respectively)
2,124  1,687 
— related parties 222  166 
Inventories 2,623  1,928 
Prepaid expenses and other current assets 212  198 
Fair value of derivative instruments 217  137 
Assets held for sale 5  5 
Current assets of discontinued operations 12  15 
Total current assets 6,074  5,134 
Property, plant and equipment, net 4,628  4,687 
Goodwill 1,083  1,083 
Intangible assets, net 655  696 
Investment in and advances to non–consolidated affiliates 831  838 
Deferred income tax assets 137  130 
Other long–term assets
— third parties 271  316 
— related parties 1  1 
Total assets $ 13,680  $ 12,885 
LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities:
Current portion of long–term debt $ 443  $ 71 
Short–term borrowings 247  236 
Accounts payable
— third parties 3,083  2,498 
— related parties 296  230 
Fair value of derivative instruments 582  280 
Accrued expenses and other current liabilities 655  670 
Current liabilities of discontinued operations 13  16 
Total current liabilities 5,319  4,001 
Long–term debt, net of current portion 4,942  5,653 
Deferred income tax liabilities 172  162 
Accrued postretirement benefits 852  878 
Other long–term liabilities 313  305 
Total liabilities 11,598  10,999 
Commitments and contingencies
Shareholder’s equity:
Common stock, no par value; Unlimited number of shares authorized; 1,000 shares issued and outstanding as of September 30, 2021 and March 31, 2021
   
Additional paid–in capital 1,304  1,404 
Retained earnings 1,341  864 
Accumulated other comprehensive loss (547) (366)
Total equity of our common shareholder 2,098  1,902 
Noncontrolling interests (16) (16)
Total equity 2,082  1,886 
Total liabilities and equity $ 13,680  $ 12,885 
____________________
See accompanying notes to the condensed consolidated financial statements. Refer to Note 6 – Consolidation for information on our consolidated VIE.
6

Novelis Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
 
Six Months Ended
September 30,
in millions 2021 2020
OPERATING ACTIVITIES
Net income (loss) $ 477  $ (116)
Net loss from discontinued operations (65) (199)
Net income from continuing operations $ 542  $ 83 
Adjustments to determine net cash provided by operating activities:
Depreciation and amortization 268  259 
Loss on unrealized derivatives and other realized derivatives in investing activities, net
36  11 
Loss (gain) on sale of assets
2  (2)
Loss on extinguishment of debt, net
62   
Deferred income taxes, net 54  (33)
Equity in net income of non-consolidated affiliates (1) (2)
Loss on foreign exchange remeasurement of debt
1   
Amortization of debt issuance costs and carrying value adjustments 9  14 
Other, net 2  (1)
Changes in assets and liabilities including assets and liabilities held for sale (net of effects from divestitures):
Accounts receivable (540) 52 
Inventories (728) 195 
Accounts payable 706  (68)
Other assets (25) 52 
Other liabilities (49) (187)
Net cash provided by operating activities - continuing operations
339  373 
Net cash used in operating activities - discontinued operations
(5) (31)
Net cash provided by operating activities
$ 334  $ 342 
INVESTING ACTIVITIES
Capital expenditures $ (194) $ (226)
Acquisition of business, net of cash and restricted cash acquired   (2,614)
Proceeds from sales of assets, third party, net of transaction fees and hedging
  2 
Proceeds from investment in and advances to non-consolidated affiliates, net
10  8 
Outflows from the settlement of derivative instruments, net
(4) (1)
Other 7  5 
Net cash used in investing activities - continuing operations
(181) (2,826)
Net cash provided by investing activities - discontinued operations
  217 
Net cash used in investing activities
$ (181) $ (2,609)
FINANCING ACTIVITIES
Proceeds from issuance of long-term and short-term borrowings $ 1,520  $ 1,910 
Principal payments of long-term and short-term borrowings (1,923) (30)
Revolving credit facilities and other, net 14  (358)
Debt issuance costs (24) (24)
Return of capital to our common shareholder (100)  
Net cash (used in) provided by financing activities - continuing operations
(513) 1,498 
Net cash used in financing activities - discontinued operations
  (2)
Net cash (used in) provided by financing activities
$ (513) $ 1,496 
Net decrease in cash, cash equivalents and restricted cash
(360) (771)
Effect of exchange rate changes on cash 6  19 
Cash, cash equivalents and restricted cash — beginning of period 1,027  2,402 
Cash, cash equivalents and restricted cash — end of period $ 673  $ 1,650 
Cash and cash equivalents $ 659  $ 1,627 
Restricted cash (Included in other long–term assets)
14  14 
Restricted cash (Included in prepaid expenses and other current assets)
  9 
Cash, cash equivalents and restricted cash — end of period $ 673  $ 1,650 
Supplemental Disclosures:
Accrued capital expenditures as of September 30
$ 57  $ 55 
Accrued merger consideration as of September 30
  10 
____________________
See accompanying notes to the condensed consolidated financial statements.
7

Novelis Inc.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY (unaudited)
Equity of our Common Shareholder
Common Stock Additional
Paid-in Capital
Retained Earnings Accumulated
Other
Comprehensive Income (Loss)
Non-
controlling
Interests
Total Equity
in millions, except number of shares Shares Amount
Balance as of March 31, 2020
1,000  $   $ 1,404  $ 628  $ (620) $ (51) $ 1,361 
Net loss attributable to our common shareholder
—  —  —  (116) —  —  (116)
Currency translation adjustment included in accumulated other comprehensive loss
—  —  —  —  151  —  151 
Change in fair value of effective portion of cash flow hedges, net of tax benefit of $19 included in accumulated other comprehensive loss
—  —  —  —  (52) —  (52)
Change in pension and other benefits, net of tax provision of $21 included in accumulated other comprehensive loss
—  —  —  —  63  3  66 
Balance as of September 30, 2020
1,000  $   $ 1,404  $ 512  $ (458) $ (48) $ 1,410 
Equity of our Common Shareholder    
Common Stock Additional
Paid-in Capital
Retained Earnings Accumulated
Other
Comprehensive Income (Loss)
Non-
controlling
Interests
Total Equity
Shares Amount
Balance as of March 31, 2021
1,000  $   $ 1,404  $ 864  $ (366) $ (16) $ 1,886 
Net income attributable to our common shareholder
—  —  —  477  —  —  477 
Currency translation adjustment included in accumulated other comprehensive loss
—  —  —  —  (34) —  (34)
Change in fair value of effective portion of cash flow hedges, net of tax benefit of $53 included in accumulated other comprehensive loss
—  —  —  —  (152) —  (152)
Change in pension and other benefits, net of tax provision of $5 included in accumulated other comprehensive loss
—  —  —  —  5    5 
Return of capital to our common shareholder —  —  (100) —  —  —  (100)
Balance as of September 30, 2021
1,000  $   $ 1,304  $ 1,341  $ (547) $ (16) $ 2,082 
Equity of our Common Shareholder
Common Stock Additional
Paid-in Capital
Retained Earnings Accumulated
Other
Comprehensive Income (Loss)
Non-
controlling
Interest
Total Equity
Shares Amount
Balance as of June 30, 2020
1,000  $   $ 1,404  $ 549  $ (616) $ (50) $ 1,287 
Net loss attributable to our common shareholder
—  —  —  (37) —  —  (37)
Currency translation adjustment included in accumulated other comprehensive loss
—  —  —  —  96  —  96 
Change in fair value of effective portion of cash flow hedges, net of tax provision of $2 included in accumulated other comprehensive loss
—  —  —  —  4  —  4 
Change in pension and other benefits, net of tax provision of $19 included in accumulated other comprehensive loss
—  —  —  —  58  2  60 
Balance as of September 30, 2020
1,000  $   $ 1,404  $ 512  $ (458) $ (48) $ 1,410 
Equity of our Common Shareholder
Common Stock Additional
Paid-in Capital
Retained Earnings Accumulated
Other
Comprehensive Income (Loss)
Non-
controlling
Interest
Total Equity
Shares Amount
Balance as of June 30, 2021
1,000  $   $ 1,404  $ 1,104  $ (348) $ (16) $ 2,144 
Net income attributable to our common shareholder
—  —  —  237  —  —  237 
Currency translation adjustment included in accumulated other comprehensive loss
—  —  —  —  (64) —  (64)
Change in fair value of effective portion of cash flow hedges, net of tax benefit of $52 included in accumulated other comprehensive loss
—  —  —  —  (138) —  (138)
Change in pension and other benefits, net of tax provision of $4 included in accumulated other comprehensive loss
—  —  —  —  3    3 
Return of capital to our common shareholder —  —  (100) —  —  —  (100)
Balance as of September 30, 2021
1,000  $   $ 1,304  $ 1,341  $ (547) $ (16) $ 2,082 
____________________
See accompanying notes to the condensed consolidated financial statements.
8

Novelis Inc.
NOTES TO THE CONDENSED CONSOLIDATED 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. Hindalco acquired Novelis in May 2007. All of the common shares of Novelis are owned directly by AV Metals Inc. and indirectly by Hindalco.
Organization and Description of Business
We produce aluminum plate, sheet, and light gauge products for use in the packaging market, which includes beverage and food can and foil products, as well as for use in the automotive, transportation, aerospace, electronics, architectural, and industrial product markets. We have recycling operations in many of our plants to recycle post-consumer aluminum, such as used-beverage cans, and post-industrial aluminum, such as class scrap. As of September 30, 2021, we had manufacturing operations in nine countries on four continents: North America, South America, Asia, and Europe, through 33 operating facilities, which may include any combination of hot or cold rolling, finishing, casting, or recycling capabilities. We have recycling operations in 15 of our operating facilities.
The March 31, 2021 condensed consolidated balance sheet data was derived from the March 31, 2021 audited financial statements but does not include all disclosures required by U.S. GAAP. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes in our 2021 Form 10-K. Management believes that all adjustments necessary for the fair statement of results, consisting of normally recurring items, have been included in the unaudited condensed consolidated financial statements for the interim periods presented.
Consolidation Policy
Our condensed consolidated financial statements include the assets, liabilities, revenues, and expenses of all wholly-owned subsidiaries, majority-owned subsidiaries over which we exercise control, and entities in which we have a controlling financial interest or are deemed to be the primary beneficiary. We eliminate intercompany accounts and transactions from our condensed consolidated financial statements.
We use the equity method to account for our investments in entities that we do not control but have the ability to exercise significant influence over operating and financial policies. Consolidated net income (loss) attributable to our common shareholder includes our share of net income (loss) of these entities. The difference between consolidation and the equity method impacts certain of our financial ratios because of the presentation of the detailed line items reported in the condensed consolidated financial statements for consolidated entities, compared to a two-line presentation of investment in and advances to non–consolidated affiliates and equity in net income of non-consolidated affiliates.
Use of Estimates and Assumptions
The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. The principal areas of judgment relate to (1) impairment of goodwill; (2) actuarial assumptions related to pension and other postretirement benefit plans; (3) tax uncertainties and valuation allowances; (4) assessment of loss contingencies, including environmental and litigation liabilities; (5) the fair value of derivative financial instruments; and (6) the fair value of the contingent consideration resulting from the sale of Duffel. Future events and their effects cannot be predicted with certainty, and accordingly, our accounting estimates require the exercise of judgment. The accounting estimates used in the preparation of our condensed consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained, and as our operating environment changes. We evaluate and update our assumptions and estimates on an ongoing basis and may employ outside experts to assist in our evaluations. Actual results could differ from the estimates we have used.
Risks & Uncertainty resulting from COVID-19
Beginning late in the fourth quarter of fiscal 2020 and carrying into the current fiscal year, the COVID-19 pandemic and its unprecedented negative economic implications have affected production and sales across a range of industries around the world.
Our global operations, similar to those of many other large, multi-national corporations, primarily felt this impact in early fiscal 2021 as we adjusted schedules at some of our facilities based on customer demand, resulting in disruptions to our supply chain, interruptions to our production, and delays of shipments to our customers, mainly during the first quarter of fiscal 2021.
9

Novelis Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
While much of our customer demand and shipments recovered in the majority of our end markets, the overall extent of the impact of the COVID-19 pandemic on our operating results, cash flows, liquidity, and financial condition will depend on certain developments, including the duration and spread of the outbreak (including the emergence of variants of the virus) and its impact on our customers, employees, and vendors. We believe this will be primarily driven by the severity and duration of the pandemic, the pandemic’s impact on the U.S. and global economies, and the timing, scope, and effectiveness of federal, state, and local governmental responses, including the distribution and adoption of vaccines.
Although we have made our best estimates based upon current information, the effects of the COVID-19 pandemic on our business may result in future changes to our estimates and assumptions based on its duration. Actual results could materially differ from the estimates and assumptions developed by management. If so, we may be subject to future impairment charges as well as changes to recorded reserves and valuations.
Reclassifications and Revisions of Previously Issued Financial Statements
We identified a misstatement related to the calculation of accrued capital expenditures within the statement of cash flows in our previously issued Form 10-Q for the quarterly period ended September 30, 2020. As a result, the previously reported amounts for capital expenditures were understated by $4 million, changes in accounts payable were overstated by $2 million, changes in other liabilities were overstated by $2 million, and accrued capital expenditures, presented in supplemental disclosures, were understated by $3 million for the quarterly periods ended September 30, 2020. In addition, net cash used in operating activities - discontinued operations and net cash provided by investing activities - discontinued operations were each understated by $10 million for the quarterly periods ended September 30, 2020.
Additionally, we identified a misstatement related to the disclosure of changes in the components of accumulated other comprehensive loss, net in our previously issued Form 10-Q for the quarterly period ended September 30, 2020. As a result, the previously reported amount for other comprehensive income (loss) before reclassifications for currency translation was understated by $60 million for the quarterly period ended September 30, 2020, while the amounts reclassified from accumulated other comprehensive loss, net for currency translation were overstated by $60 million for the quarterly period ended September 30, 2020.
We assessed the materiality of the misstatements and concluded they were not material to the company's previously issued financial statements for the quarterly period ended September 30, 2020. However, we elected to revise the previously reported amounts for capital expenditures, changes in accounts payable and other liabilities, net cash used in operating activities - discontinued operations, and net cash provided by investing activities - discontinued operations within the condensed consolidated statement of cash flows, accrued capital expenditures within the supplemental disclosures to the condensed consolidated statement of cash flows, and capital expenditures within Note 18 – Segment, Geographical Area, Major Customer and Major Supplier Information. We have also revised the amounts for other comprehensive income (loss) before reclassifications for currency translation and the amounts reclassified from accumulated other comprehensive loss, net for currency translation within Note 13 – Accumulated Other Comprehensive Loss.
Recently Issued Accounting Standards (Not yet adopted)
There are no recent accounting pronouncements pending adoption that we expect will have a material impact on our consolidated financial condition, results of operations, or cash flows.

10

Novelis Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
2. BUSINESS COMBINATION
On April 14, 2020, Novelis completed its acquisition of 100% of the issued and outstanding shares of Aleris Corporation, a global supplier of rolled aluminum products.
The Company's condensed consolidated statement of operations for the six months ended September 30, 2020 includes the results of operations for Aleris Corporation from the acquisition date of April 14, 2020 to September 30, 2020. The following unaudited supplemental pro forma combined financial information presents the Company’s results of operations for the three and six months ended September 30, 2020 as if the acquisition of Aleris had occurred on April 1, 2019. The pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the Company’s operating results that may have actually occurred had the acquisition of Aleris been completed on April 1, 2019. In addition, the unaudited pro forma financial information does not give effect to any anticipated cost savings, operating efficiencies or other synergies that may be associated with the acquisition, or any estimated costs that have been or will be incurred by the Company to integrate the assets and operations of Aleris.
Three Months Ended September 30,
Six Months Ended September 30,
in millions 2020 2020
Net sales $ 2,979  $ 5,459 
Net income (loss) 17  (81)
The unaudited pro forma financial information reflects pro forma adjustments to present the combined pro forma results of operations as if the acquisition had occurred on April 1, 2019 to give effect to certain events the Company believes to be directly attributable to the acquisition. These pro forma adjustments primarily include:
the elimination of Aleris historical depreciation and amortization expense and the recognition of new depreciation and amortization expense;
an adjustment to interest expense to reflect (i) the additional borrowings of the Company in conjunction with the acquisition (ii) the repayment of Aleris’ historical debt in conjunction with the acquisition;
an adjustment to present acquisition-related transaction costs and other one-time costs directly attributable to the acquisition as if they were incurred in the earliest period presented; and
the related income tax effects of the adjustments noted above.
11

Novelis Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
3. DISCONTINUED OPERATIONS
On April 14, 2020, we closed the acquisition of Aleris for $2.8 billion. As a result of the antitrust review processes in the EU, the U.S., and China required for approval of the acquisition, we were obligated to divest Aleris' European and North American automotive assets, including the Duffel and Lewisport plants.
On September 30, 2020, we completed the sale of Duffel to Liberty House Group through its subsidiary, ALVANCE, the international aluminum business of the GFG Alliance. Upon closing, we received €210 million ($246 million as of September 30, 2020) in cash and a €100 million ($117 million as of September 30, 2020) receivable that was deemed to be contingent consideration. In addition, we recorded a €15 million ($18 million) receivable for net debt and working capital adjustments.
As of June 30, 2021, Novelis marked all outstanding receivables related to the sale of Duffel to an estimated fair value of €45 million ($53 million), which resulted in a loss of €51 million ($61 million) recorded in loss from discontinued operations, net of tax. As of September 30, 2021, there has been no change to this fair value. There is no assurance as to when we expect the post-closing arbitration process to conclude or whether we will receive any of the contingent consideration.
On November 8, 2020, we entered into a definitive agreement with American Industrial Partners for the sale of Lewisport and closed the sale on November 30, 2020. Upon closing, we received $180 million in cash proceeds. In addition, we have recorded a $17 million receivable for net working capital adjustments, which remains outstanding as of September 30, 2021.
In addition to the $61 million loss from discontinued operations, net of tax related to the fair value adjustment of Duffel receivables in the period, Novelis incurred $4 million of additional costs to sell primarily related to legal expenses. These costs are recorded within loss from discontinued operations, net of tax.
12

Novelis Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
4. RESTRUCTURING AND IMPAIRMENT
Restructuring and impairment expenses (reversal), net includes restructuring costs, impairments, and other related expenses or reversal of expenses. Restructuring and impairment expenses (reversal), net for the three months ended September 30, 2021 was a net zero expense primarily related to a partial release of certain restructuring liabilities as a result of changes in estimated costs, fully offset by expenses primarily related to reorganization activities resulting from the Aleris acquisition. Restructuring and impairment expenses (reversal), net for the six months ended September 30, 2021 totaled a net reversal of $2 million primarily related to a partial release of certain restructuring liabilities as a result of changes in estimated costs.
Restructuring and impairment expenses (reversal), net for the three and six months ended September 30, 2020 totaled $7 million and $8 million in expenses, respectively, primarily related to reorganization activities resulting from the Aleris acquisition.
The following table summarizes our restructuring liability activity.
in millions North America Europe Asia South America Other Operations Total
Restructuring liability balance as of March 31, 2020
$ 1  $ 21  $   $ 12  $   $ 34 
Restructuring and impairment expenses, net
3  1  —  —  4  8 
Cash payments (1) (13) —  (1) (1) (16)
Foreign currency and other —  1  —  (1) —   
Restructuring liability balance as of September 30, 2020
$ 3  $ 10  $   $ 10  $ 3  $ 26 
in millions North America Europe Asia South America Other Operations Total
Restructuring liability balance as of March 31, 2021
$ 3  $ 19  $   $ 9  $ 3  $ 34 
Restructuring and impairment expenses (reversal), net
1  (5) 2  —  —  (2)
Cash payments (2) (8) —  (1) (3) (14)
Foreign currency and other —  —  —  (1) —  (1)
Restructuring liability balance as of September 30, 2021(1)
$ 2  $ 6  $ 2  $ 7  $   $ 17 
____________________
(1)As of September 30, 2021, the restructuring liability totaled $17 million with $11 million included in accrued expenses and other current liabilities and the remaining is within other long–term liabilities on our accompanying condensed consolidated balance sheet.



13

Novelis Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
5. INVENTORIES
Inventories consists of the following. 
in millions September 30,
2021
March 31,
2021
Finished goods $ 595  $ 455 
Work in process 1,192  874 
Raw materials 629  407 
Supplies 207  192 
Inventories $ 2,623  $ 1,928 

14

Novelis Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
6. CONSOLIDATION
Variable Interest Entities
The entity that has a controlling financial interest in a VIE is referred to as the primary beneficiary and consolidates the VIE. An entity is deemed to have a controlling financial interest and is the primary beneficiary of a VIE if it has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.
Logan is a consolidated joint venture in which we hold 40% ownership. Our joint venture partner is Tri-Arrows. Logan processes metal received from Novelis and Tri-Arrows and charges the respective partner a fee to cover expenses. Logan is a thinly capitalized VIE that relies on the regular reimbursement of costs and expenses from Novelis and Tri-Arrows to fund its operations. Novelis is considered the primary beneficiary and consolidates Logan since it has the power to direct activities that most significantly impact Logan's economic performance, an obligation to absorb expected losses, and the right to receive benefits that could potentially be significant.
Other than the contractually required reimbursements, we do not provide other material support to Logan. Logan's creditors do not have recourse to our general credit. There are significant other assets used in the operations of Logan that are not part of the joint venture, as they are directly owned and consolidated by Novelis or Tri-Arrows.
The following table summarizes the carrying value and classification of assets and liabilities owned by the Logan joint venture and consolidated in our condensed consolidated balance sheets.
in millions September 30,
2021